COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This
COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated effective as of August
9,
2006 (the “Effective
Date”)
by and
between IsoRay, Inc., a Minnesota corporation with its principal office at
000
Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 (the “Company”),
and
the several purchasers identified from time to time in the attached Exhibit A
(individually, a “Purchaser”
and
collectively, the “Purchasers”).
Recitals
A. The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation
D”),
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended; and
B. Contemporaneous
with the sale of the Securities (as defined below), the parties hereto will
execute and deliver a Registration Rights Agreement, in the form attached hereto
as Exhibit
C
(the
“Registration
Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW,
THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as
follows:
1. Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
(a) “Additional
Shares”
shall
have the meaning given in Section 2.1(b).
(b) “Affiliate”
of
a
party means any corporation or other business entity controlled by, controlling
or under common control with such party. For this purpose “control”
shall
mean direct or indirect beneficial ownership of fifty percent (50%) or more
of the voting or income interest in such corporation or other business
entity.
(c) “Agreement”
means
this Common Stock and Warrant Purchase Agreement.
(d) “Closing”
shall
have the meaning given in Section 2.3.
(e) “Closing
Date”
means
the date of the sale and purchase of the Warrants and Common Stock acquired
hereunder.
(f) “Company’s
Knowledge”
means
the actual knowledge of the executive officers (as defined in Rule 405 under
the
Securities Act) of the Company, after due inquiry.
(g) “Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
(h) “Disclosure
Schedules”
has
the
meaning set forth in Section 3.
(i) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.
(j) “Excluded
Stock”
means
(1) all shares of Common Stock issued and outstanding as of the Effective Date,
and all shares of Common Stock issued after the Effective Date pursuant to
this
Agreement, and all shares of Common Stock issued or issuable upon the exercise
or conversion of any Purchase Rights outstanding as of the Effective Date
(provided that the terms of such Purchase Rights are not modified or changed
except as contemplated by this Agreement), and all shares of Common Stock issued
or issuable upon the exercise of the Warrants and all other Warrants issued
pursuant to this Agreement; (2) all shares of Common Stock or other securities
hereafter issued or issuable to officers, directors, employees, scientific
advisors, or consultants of the Company pursuant to any employee or consultant
option, stock offering, plan or arrangement approved by the majority of the
members of the Board of Directors of the Company; (3) all shares of Common
Stock
or other securities hereafter issued in connection with or as consideration
for
the acquisition or licensing of technology approved by the majority of the
members of the Board of Directors of the Company; and (4) all shares of Common
Stock or other securities issued in connection with equipment leasing or
equipment financing arrangements approved by the majority of the members of
the
Board of Directors of the Company.
(k) “GAAP”
shall
have the meaning set forth in Section 3.5.
(l) “Investor
Questionnaire”
shall
mean that Investor Questionnaire substantially in the form attached hereto
as
Appendix
F
submitted by each Investor in connection with the purchase of the
Securities.
(m) “Lead
Investor”
shall
mean MicroCapital Fund, LP.
(n) “Majority
Purchasers”
shall
mean Purchasers which, at any given time, hold greater than fifty
percent (50%) of the outstanding Securities that have not been resold
pursuant to an effective registration statement under the Securities Act or
Rule
144 under the Securities Act.
(o) “Material
Adverse Effect”
means
a
material adverse effect on (i) the results of operations, cash flow, business
prospects, customer, supplier or employee relations or financial condition
of
the Company and its Subsidiaries taken as a whole, or (ii) the ability of the
Company to perform its obligations under the Transaction Documents.
(p) “Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
2
(q) “Purchase
Price”
shall
have the meaning given in Section 2.1.
(r) “Purchase
Rights”
means
(i) warrants and options to purchase, or rights to subscribe for, Common Stock,
and (ii) securities by their terms convertible into or exchangeable for Common
Stock, and options to purchase, or rights to subscribe for, such convertible
and
exchangeable securities.
(s) “Registration
Rights Agreement”
shall
mean that certain Registration Rights Agreement, dated as of the date hereof,
among the Company and the Purchasers, in the form attached hereto as
Exhibit
C.
(t) “SEC”
shall
mean the Securities and Exchange Commission.
(u) “SEC
Documents”
shall
have the meaning given in Section 3.6.
(v) “Securities”
shall
have the meaning given in Section 2.2.
(w) “Securities
Act”
shall
mean the Securities Act of 1933, as amended, and all of the rules and
regulations promulgated thereunder.
(x) “Shares”
means
the shares of Common Stock being purchased by the Purchasers
hereunder.
(y) “Subsidiary”
means
with respect to any Person, any Person (i) of which the first Person owns
directly or indirectly 50% of more of the equity interest in the other Person,
(ii) of which the first Person or any Subsidiary of the first Person is a
general partner, or (iii) of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors
or
other persons performing similar functions with respect to the other Person
are
at the time owned by the first Person and/or one or more of the first Person’s
Subsidiaries.
(z) “Transaction
Documents”
means
this Agreement, the Warrants, the Registration Rights Agreement, and the
Subscription Agreement and Investor Questionnaire, entered into between the
Company and the Purchasers.
(aa) “Warrants”
has
the
meaning set forth in Section 2.1 of this Agreement.
(bb) “Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
2. Purchase
and Sale of Shares.
2.1 Purchase
and Sale.
(a)
Subject to and upon the terms and conditions set forth in this Agreement, the
Company agrees to issue and sell to the Purchasers (i) a minimum of 800,000
shares of the Company’s Common Stock, par value $0.001 per share (the
“Common
Stock”)
at a
purchase price of $2.50 per share and (ii) warrants to purchase a minimum of
800,000 shares of Common Stock (subject to adjustment) at a purchase price
of
$3.00 per share, in the form attached hereto as Exhibit
B (“Warrants”).
Each
Purchaser hereby agrees to purchase from the Company, at the Closing (as defined
below), the number of shares of Common Stock and Warrants set forth opposite
the
name of such Purchaser under the heading “Number
of Shares to be Purchased”
on
Exhibit A
hereto.
The total purchase price payable by each Purchaser for the Common Stock and
Warrants that such Purchaser is hereby agreeing to purchase (the “Purchase
Price”)
is set
forth opposite the name of such Purchaser under the heading “Purchase
Price”
on
Exhibit A
hereto.
3
(b) The
Company agrees that in the event the Company issues Purchase Rights or Common
Stock on or after the Effective Date for no consideration, or consideration
per
share equal to or less than $2.00, each Purchaser shall have the further right
to purchase, and the Company shall issue and deliver to each Purchaser,
additional shares of Common Stock in an amount equal to twenty-five (25%)
percent of the aggregate amount of shares of Common Stock purchased by each
Purchaser hereunder, for a purchase price of $0.001 per share (such shares,
“Additional
Shares”);
provided,
however,
that
(i) an issuance of Excluded Stock shall not give rise to any Purchaser right
to
Additional Shares under this paragraph, and (ii) an issuance of Additional
Shares hereunder shall not be deemed a “Dilutive Issuance” under the Warrant.
The Company shall promptly notify each Purchaser of any issuance that gives
rise
to a Purchaser right to Additional Shares under this paragraph.
2.2 The
shares of Common Stock sold to the Purchasers pursuant to this Agreement are
hereinafter referred to as the “Shares.”
The
Warrants to purchase Common Stock sold hereunder are hereinafter referred to
as
the “Warrants.”
The
total amount of Common Stock and other securities issuable upon conversion
of
the Warrants are hereinafter referred to as the “Warrant
Shares.”
The
Shares, the Warrants and the Warrant Shares are hereinafter collectively
referred to as the “Securities.”
2.3 Closing.
The
initial purchase and sale of the Shares and Warrants shall take place at the
offices of Xxxx Xxxxx, LLP Xxx Xxxxxxxxxxx, 00xx
Xxxxx,
Xxx Xxxxxxxxx, XX 00000 at 10:00 A.M. on August 16, 2006, or at such other
time
and place as the Company and the Purchasers acquiring at the Closing in the
aggregate more than half of such Shares sold pursuant to Section 2.1 mutually
agree upon, but in no event later than August 21, 2006 (which time and place
are
designated as the “Closing”).
Within five (5) business days after the Closing, the Company shall deliver
to
each Purchaser purchasing Shares and Warrants at the Closing a certificate
representing the Shares and a corresponding Warrant, registered in the name
of
such Purchaser, or in such nominee's or nominees' name(s) as designated by
such
Purchaser in writing in the Investor Questionnaire, which such Purchaser is
purchasing against delivery to the Company by such Purchaser of a cashier’s
check or wire transfer in the aggregate amount of the Purchase Price therefor
payable to the Company's order.
3. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchasers that, except as set
forth in the schedules delivered herewith (collectively, the “Disclosure
Schedules”):
3.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and to own its properties. Each of the Company
and
its Subsidiaries is duly qualified to do business as a foreign corporation
and
is in good standing in each jurisdiction in which the conduct of its business
or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify would have a Material Adverse Effect.
The Company’s Subsidiaries are listed on Schedule
3.1
attached
hereto.
4
3.2 Authorization.
The
Company has the corporate power and has taken all requisite action on the part
of the Company, its officers, directors and stockholders necessary for (i)
the
authorization, execution and delivery of the Transaction Documents, (ii) the
authorization of the performance of all obligations of the Company hereunder
or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities.
The
Transaction Documents constitute the legal, valid and binding obligations of
the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and
similar laws of general applicability, relating to or affecting creditors’
rights generally.
3.3 Capitalization.
Schedule
3.3
sets
forth (a) the authorized capital stock of the Company on the date hereof; (b)
the number of shares of capital stock issued and outstanding; (c) the number
of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Shares and the Warrants) exercisable
for,
or convertible into or exchangeable for any shares of capital stock of the
Company. All of the issued and outstanding shares of the Company’s capital stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of pre-emptive rights and were issued in compliance in all material
respects with applicable state and federal securities law and any rights of
third parties. Except as described on Schedule
3.3,
all of
the issued and outstanding shares of capital stock of each Subsidiary have
been
duly authorized and validly issued and are fully paid, nonassessable and free
of
pre-emptive rights, were issued in compliance in all material respects with
applicable state and federal securities law and any rights of third parties
and
are owned by the Company, beneficially and of record, subject to no lien,
encumbrance or other adverse claim. Except as described on Schedule
3.3,
no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on
Schedule
3.3,
there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any
of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor
any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule
3.3
and
except for the Registration Rights Agreement, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the security holders of
the
Company relating to the securities of the Company held by them. Except as
described on Schedule
3.3
and
except as provided in the Registration Rights Agreement, no Person has the
right
to require the Company to register any securities of the Company under the
Securities Act, whether on a demand basis or in connection with the registration
of securities of the Company for its own account or for the account of any
other
Person.
5
Except
as
described on Schedule
3.3,
the
issuance and sale of the Securities hereunder will not obligate the Company
to
issue shares of Common Stock or other securities to any other Person (other
than
the Purchasers) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security. Except as
described on Schedule
3.3,
the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
any
equity interest in the Company upon the occurrence of certain
events.
3.4 Valid
Issuance of the Shares.
The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those created by the Purchasers), except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws. The Warrants have been duly and validly authorized. Upon the
due exercise of the Warrants, the Warrant Shares will be validly issued, fully
paid and non-assessable free and clear of all encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents
or
imposed by applicable securities laws and except for those created by the
Purchasers. The Company has reserved a sufficient number of shares of Common
Stock for issuance upon the exercise of the Warrants, free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth
in
the Transaction Documents or imposed by applicable securities laws and except
for those created by the Purchasers.
3.5 Financial
Statements.
The
financial statements included in each SEC filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown (subject, in the case of unaudited statements, to normal year-end audit
adjustments), and such financial statements have been prepared in conformity
with United States generally accepted accounting principles applied on a
consistent basis (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and, in the case
of
quarterly financial statements, as permitted by Form 10-QSB under the Exchange
Act). Except as set forth in the financial statements of the Company included
in
the SEC filings filed prior to the date hereof or as described on Schedule
3.5,
neither
the Company nor any of its Subsidiaries has incurred any liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of
such
financial statements, none of which, individually or in the aggregate, would
have a Material Adverse Effect.
3.6 SEC
Documents.
The
Company has filed all reports, schedules, forms, statements (collectively,
and
in each case including all exhibits, financial statements and schedules thereto
and documents incorporated by reference therein and including all registration
statements and prospectuses filed with the SEC) required to be filed by it
with
the SEC through the Closing Date, and the Company will file, on a timely basis,
all similar documents with the SEC during the period commencing on the date
hereof and ending on the Closing Date (all of the foregoing 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 Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents 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 made therein, in light of the circumstances
under which they were made, not misleading, as of their respective filing
dates.
6
3.7 Consents.
The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of, action
by or in respect of, or filing with, any Person, governmental body, agency,
or
official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable
time
periods. Subject to the accuracy of the representations and warranties of each
Purchaser set forth in Section 4 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Securities, (ii) the
issuance of the Warrant Shares upon due exercise of the Warrants, and (iii)
the
other transactions contemplated by the Transaction Documents from the provisions
of any stockholder rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute binding
on
the Company or to which the Company or any of its assets and properties may
be
subject and any provision of the Company’s Certificate of Incorporation or
Bylaws that is or could reasonably be expected to become applicable to the
Purchasers as a result of the transactions contemplated hereby, including
without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Purchasers or the exercise of
any
right granted to the Purchasers pursuant to this Agreement or the other
Transaction Documents.
3.8 No
Conflict.
Except
as disclosed in Schedule
3.8,
the
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result
in
a breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Certificate of Incorporation or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of which
have been made available to the Purchasers), or (ii)(a) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic
or
foreign, having jurisdiction over the Company, any Subsidiary or any of their
respective assets or properties, or (b) any agreement or instrument to which
the
Company or any Subsidiary is a party or by which the Company or a Subsidiary
is
bound or to which any of their respective assets or properties is subject,
except, in the case of clause (ii), for such breaches, violations or defaults
as
would not reasonably be expected to result in a Material Adverse
Effect.
3.9 Brokers
or Finders.
Except
as disclosed on Schedule
3.9,
the
Company has not dealt with any broker or finder in connection with the
transactions contemplated by this Agreement or incurred any liability for any
brokerage or finders' fees or agents commissions or any similar charges in
connection with this Agreement or any transaction contemplated
hereby.
3.10 No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Securities under the Securities Act.
7
3.11 Absence
of Litigation.
There
is no action, suit or proceeding or, to the Company's Knowledge, any
investigation, pending, or to the Company's Knowledge, threatened by or before
any court, governmental body or regulatory agency against the Company that
is
required to be disclosed in the SEC Documents and is not so disclosed. The
Company has not received any written or oral notification of, or request for
information in connection with, any formal or informal inquiry, investigation
or
proceeding from the SEC or the NASD. The foregoing includes, without limitation,
any such action, suit, proceeding or investigation that questions this Agreement
or the Registration Rights Agreement or the right of the Company to execute,
deliver and perform under same.
3.12 Intellectual
Property.
(a) To
the
Company’s Knowledge, the Company has ownership of or license or legal right to
use all patents, copyrights, trade secrets, trademarks, domain names, customer
lists, designs, manufacturing or other processes, computer software, systems,
data compilations, research results and other intellectual property or
proprietary rights (collectively, “Intellectual
Property”)
used
in the business of the Company and material to the Company. The Company knows
of
no reason why its patent applications do not or would not comply with any
statutory or legal requirements or would not issue into valid and enforceable
patents.
(b) To
the
Company’s Knowledge, there is no material default by the Company under any
material licenses or other material agreements under which (i) the Company
is
granted rights in Intellectual Property or (ii) the Company has granted rights
to others in Intellectual Property owned or licensed by the Company. There
are
no outstanding or threatened claims, disputes or disagreements with respect
to
any such licenses or agreements.
(c) To
the
Company’s Knowledge, the present business, activities and products of the
Company do not infringe or misappropriate any Intellectual Property of any
third
party. The Company has not been notified that any proceeding charging the
Company with infringement or misappropriation of any Intellectual Property
held
by any third party has been filed. To the Company's Knowledge, there exists
no
patent held by any third party which includes claims that would be infringed
by
the Company in the conduct of its business as currently conducted where such
infringement would have a Material Adverse Effect. To the Company’s Knowledge,
the Company is not making unauthorized use of any Confidential Information
of
any third party. Neither the Company nor, to the Company’s Knowledge, any of its
employees have any agreements or arrangements with any persons other than the
Company restricting the Company's or any such employee's engagement in business
activities that are material aspects of the Company's business as currently
conducted.
(d) None
of
the Intellectual Property owned or, to the Company's Knowledge, licensed by
the
Company that is used in the business of the Company and material to the Company,
is subject to any outstanding judgment or order, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand is
pending or, to the Company’s Knowledge, threatened, which challenges the
validity, enforceability, scope, use, or ownership of, or otherwise relates
to,
any such Intellectual Property anywhere in the world. None of the Company’s
patents has been or is now involved in any interference, reissue, reexamination,
opposition, or other proceeding.
8
(e) Except
as
set forth in Schedule
3.12(e),
each
employee of the Company has executed a confidential information and invention
assignment agreement in the form made available to Purchasers. No such employee
has excluded works or inventions made prior to his or her employment with the
Company from his or her assignment of inventions pursuant to such employee's
confidential information and invention assignment agreement, which works or
inventions are necessary to the business of the Company as it is proposed to
be
conducted. Each consultant to the Company has entered into an agreement
containing appropriate confidentiality and invention assignment provisions,
in
the form acceptable to Purchasers. Except as set forth in Schedule
3.12(e),
the
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior
to
their employment by the Company, except for inventions, trade secrets or
proprietary information that have been assigned to the Company.
3.13 Offering.
The
Company has not in the past nor will it hereafter take any action to sell,
offer
for sale or solicit offers to buy any securities of the Company which would
require the offer, issuance or sale of the Securities, as contemplated by this
Agreement, to be registered under Section 5 of the Securities Act. Neither
the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation
D) in
connection with the offer or sale of any of the Securities.
3.14 Private
Placement.
Assuming the accuracy of the representations and warranties of the Purchasers
contained in Section 4 hereof and compliance by the Purchasers with the terms
of
the Transaction Documents, the offer and sale of the Securities to the
Purchasers as contemplated hereby is exempt from the registration requirements
of the Securities Act.
3.15 Investment
Company.
The
Company is not and, after giving effect to the offering and sale of the Shares
and the Warrants, will not be required to register as, an “investment company”
as such term is defined in the Investment Company Act of 1940, as
amended.
3.16 No
Manipulation of Stock.
The
Company has not taken and will not in violation of applicable law take any
action designed to or that might reasonably be expected to cause or result
in
unlawful manipulation of the price of the Common Stock.
3.17 No
Violations.
The
Company is not in violation of its Certificate of Incorporation, Bylaws or
other
organizational documents, or in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, would be reasonably expected to have a Material Adverse Effect,
or is
not in default (and there exists no condition which, with the passage of time
or
otherwise, would constitute a default) in the performance of any material bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company is a party or by which the Company is bound or by which the property
of the Company is bound, which would be reasonably expected to have a Material
Adverse Effect.
9
3.18 Transactions
with Affiliates.
Except
as disclosed in the SEC filings or as disclosed on Schedule
3.18,
none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with
the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and 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 Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
3.19 Questionable
Payments.
Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers or
employees, has on behalf of the Company or any Subsidiary or in connection
with
their respective businesses: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the Company
or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.
3.20 Taxes.
The
Company has filed all necessary federal, state and foreign income and franchise
tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be asserted
or threatened against it which would have a Material Adverse
Effect.
3.21 Title.
The
Company has good and marketable title to all real property and good and
marketable title to all personal property owned by it which is material to
the
business of the Company, in each case free and clear of all encumbrances and
defects, except such as do not have a Material Adverse Effect. Any facilities
and items of equipment held under lease by the Company are held by it 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
facilities and items of equipment by the Company. The Company is in compliance
with all material terms of each lease to which it is a party or is otherwise
bound.
3.22 Foreign
Corrupt Practices.
To the
Company’s Knowledge, neither the Company, nor any director, officer, agent,
employee or other person acting on behalf of the Company, has in the course
of
its actions for, or on behalf of, the Company, used any corporate funds for
any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; 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 made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
10
3.23 Employee
Relations.
The
Company is not involved in any union labor dispute, nor, to the Company’s
Knowledge, is any such dispute threatened. The Company is not a party to a
collective bargaining agreement, and the Company believes that its relations
with its employees are good. No executive officer (as defined in Rule 501(1)
of
the Securities Act) of the Company has notified the Company that such officer
intends to leave the employ of the Company or otherwise terminate such officer’s
employment with the Company. To the Company’s Knowledge, no employee of the
Company, as a consequence of his employment by the Company is, or is now
expected to be, in violation of any material term of any agreement, covenant
or
contract (including any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant with any previous employer),
and the continued employment of each such employee by the Company will not
subject the Company to any liability with respect to any of the foregoing
matters.
3.24 Internal
Accounting Controls.
Except
as otherwise disclosed on Schedule
3.24,
the
Company maintains a system of internal accounting controls (as such term is
defined in Rule 13a-14 and 15d-14 under the Exchange Act) 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.
3.25 Disclosure
Controls.
The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated subsidiaries,
if
any, is made known to the Company’s Chief Executive Officer and its Chief
Financial Officer by others within those entities, and such disclosure controls
and procedures are effective to perform the functions for which they were
established; the Company’s auditors and the Audit Committee of the Board of
Directors have been advised of: (i) any significant deficiencies in the design
or operation of internal controls which could adversely affect the Company’s
ability to record, process, summarize, and report financial data; and (ii)
any
fraud, whether or not material, that involves management or other employees
who
have a role in the Company’s internal controls; any material weaknesses in
internal controls have been identified for the Company’s auditors; since the
date of the most recent evaluation of such disclosure controls and procedures,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses; the
principal executive officers (or their equivalents) and principal financial
officers (or their equivalents) of the Company have made all certifications
required by the Sarbanes Oxley Act of 2002 (the “Sarbanes Oxley Act”) and any
related rules and regulations promulgated by the Commission, and the statements
contained in any such certification are complete and correct; and the Company
is
otherwise in compliance in all material respects with all applicable effective
provisions of the Sarbanes Oxley Act.
11
3.26 Disclosures.
Neither
the Company nor any Person acting on its behalf has provided the Purchasers
or
their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the fact that the
Company intends to enter into the transactions contemplated hereby and the
terms
hereof. The Company understands that the Purchasers will be relying on this
representation in effecting transactions in the Company’s
securities.
3.27 Completeness
of Disclosures.
Neither
the Transaction Documents, nor any of the schedules or exhibits thereto, nor
any
other document or certificate provided by the Company to the Purchasers contains
any untrue statement of a material fact or, when considered as a whole, omits
to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading.
3.28 Use
of
Proceeds.
The net
proceeds of the sale of the Shares and the Warrants hereunder shall be used
by
the Company for working capital and general corporate purposes.
3.29 Real
Property Holding Corporation.
The
Company is not a real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) and any
regulations promulgated thereunder.
4. Representations
and Warranties of the Purchasers.
Each
Purchaser severally for itself, and not jointly with the other Purchasers,
represents and warrants to the Company as follows:
4.1 Authorization.
All
action on the part of such Purchaser and, if applicable, its officers, directors
and shareholders necessary for the authorization, execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions contemplated therein has been taken. When executed and delivered
by
the Company and such Purchaser, each of the Transaction Documents will
constitute the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as
such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles. Such Purchaser
has all requisite power to enter into each of the Transaction Documents and
to
carry out and perform its obligations under the terms of the Transaction
Documents.
4.2 Purchase
Entirely for Own Account.
The
Securities to be received by such Purchaser hereunder will be acquired for
such
Purchaser’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the Securities Act,
and such Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of the
Securities Act
without
prejudice, however, to such Purchaser’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws.
Nothing
contained herein shall be deemed a representation or warranty by such Purchaser
to hold the Securities for any period of time. Such
Purchaser is not a broker-dealer registered with the SEC under the Exchange
Act
or an entity engaged in a business that would require it to be so registered.
12
4.3 Investor
Status; Etc.
Such
Purchaser certifies and represents to the Company that it is an “Accredited
Investor” as defined in Rule 501 of Regulation D promulgated under the
Securities Act and was not organized for the purpose of acquiring the
Securities. Such Purchaser’s financial condition is such that it is able to bear
the risk of holding the Securities for an indefinite period of time and the
risk
of loss of its entire investment. Subject to the truth and accuracy of the
representations and warranties of the Company set forth in Section 3 of this
Agreement (as modified by the Disclosure Schedules), such Purchaser has
received, reviewed and considered all information it deems necessary, including
but not limited to the Company’s Form SB-2 Registration Statement effective June
8, 2006, in making an informed decision to make an investment in the Securities
and has been afforded the opportunity to ask questions of and receive answers
from the management of the Company concerning this investment and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company’s stage of development so as to be able to evaluate the
risks and merits of its investment in the Company.
4.4 Confidential
Information.
Each
Purchaser understands that any information, other than the SEC Documents,
provided to such Purchaser by the Company, including, without limitation, the
existence and nature of all discussions and presentations, if any, regarding
this offering and the Transaction Documents, is strictly confidential and
proprietary to the Company and is being submitted to the Purchaser solely for
such Purchaser’s confidential use in connection with its investment decision
regarding the Securities. Such Purchaser agrees to use such information for
the
sole purpose of evaluating a possible investment in the Securities and such
Purchaser hereby acknowledges that it is prohibited from reproducing or
distributing such information, the Transaction Documents, or any other offering
materials, in whole or in part, or divulging or discussing any of their contents
except for use internally and by its legal counsel and except as required by
law
or legal process. Such Purchaser understands that the federal securities laws
prohibit any person who possesses material nonpublic information about a company
from trading in securities of such company.
4.5 Securities
Not Registered.
Such
Purchaser understands that the Securities have not been registered under the
Securities Act, by reason of their issuance by the Company in a transaction
exempt from the registration requirements of the Securities Act, and that the
Securities must continue to be held by such Purchaser unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration. The Purchaser understands that the exemptions from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
4.6 No
Conflict.
The
execution and delivery of the Transaction Documents by such Purchaser and the
consummation of the transactions contemplated thereby will not conflict with
or
result in any violation of or default by such Purchaser (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the organizational documents of such
Purchaser, (ii) any material agreement or instrument, permit, franchise, or
license or (iii) any judgment, order, statute, law, ordinance, rule or
regulations, applicable to such Purchaser or its respective properties or
assets.
13
4.7 Brokers.
Except
as disclosed to the Company in writing, such Purchaser has not retained,
utilized or been represented by any broker or finder in connection with the
transactions contemplated by this Agreement.
4.8 Consents.
All
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated herein have
been
obtained and are effective as of the Closing Date.
4.9 No
Intent to Effect a Change of Control.
Such
Purchaser has no present intent to change or influence the control of the
Company within the meaning of Rule 13d-1 of the Exchange Act.
5. Conditions
Precedent.
5.1 Conditions
to the Obligation of the Purchasers to Consummate the Closing.
The
obligation of each Purchaser to consummate the Closing and to purchase and
pay
for the Securities being purchased by it pursuant to this Agreement is subject
to the fulfillment to such Purchaser’s satisfaction, on or prior to the Closing
Date, of the following conditions, any of which may be waived by such Purchaser
(as to itself only):
(a) The
representations and warranties made by the Company in Section 3 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date, and, the representations
and
warranties made by the Company in Section 3 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as
of such earlier date. The Company shall have performed in all material respects
all obligations and covenants herein required to be performed by it on or prior
to the Closing Date.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall
be in
full force and effect.
(c) The
Registration Rights Agreement and respective Warrant shall have been executed
and delivered by the Company.
(d) No
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted before any court, arbitrator or governmental body, agency
or official and shall be pending.
(e) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
14
(f) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (d) and (e) of this Section 5.1.
(g) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Certificate of Incorporation
and Bylaws of the Company and certifying as to the signatures and authority
of
persons signing the Transaction Documents and related documents on behalf of
the
Company.
(h) The
Purchasers shall have received an opinion from legal counsel for the Company,
dated as of the Closing Date, in form and substance reasonably acceptable to
the
Purchasers and addressing such legal matters as the Purchasers may reasonably
request.
5.2 Conditions
to the Obligation of the Company to Consummate the Closing.
The
obligation of the Company to consummate the Closing and to issue and sell the
Securities at the Closing is subject to the satisfaction of the following
conditions precedent, any of which may be waived by the Company:
(a) The
representations and warranties contained herein of such Purchaser shall be
true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by
the
Company that, in the case of any representation and warranty of each Purchaser
contained herein which is not hereinabove qualified by application thereto
of a
materiality standard, such representation and warranty need be true and correct
only in all material respects in order to satisfy as to such representation
or
warranty the condition precedent set forth in the foregoing provisions of this
Section 5.2(a)).
(b) The
Registration Rights Agreement and respective Warrant shall have been executed
and delivered by each Purchaser.
(c) The
Purchase Price shall have been paid into the account of an escrow agent
designated by the Company, as set forth in Appendix
E.
(d) Each
such
Purchaser shall have executed and delivered to the Company an Investor
Questionnaire, in the form attached hereto as Appendix
F,
pursuant to which such Purchaser shall provide information necessary to confirm
each such Purchaser’s status as an “accredited investor” (as such term is
defined in Rule 501 promulgated under the Securities Act) and to enable the
Company to comply with the Registration Rights Agreement.
15
6. Transfer,
Legends.
6.1 Securities
Law Transfer Restrictions.
(a) Restricted
Securities.
Such
Purchaser understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances.
(b) Each
Purchaser understands that the Securities have not been registered under the
Securities Act or any state securities laws. In that connection, such Purchaser
is aware of Rule 144 under the Securities Act and the restrictions imposed
thereby. Such Purchaser will not engage in hedging or other similar transactions
which would include, without limitation, effecting any short sale or having
in
effect any short position (whether or not such sale or position is against
the
box and regardless of when such position was entered into) or any purchase,
sale
or grant of any right (including, without limitation, any put or call option)
with respect to the Securities or with respect to any security (other than
a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the Common Stock of the Company.
6.2 Legends.
It is
understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:
(a) “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii)
the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities
Act
of 1933, as amended, or qualification under applicable state securities
laws.”
(b) If
required by the authorities of any state in connection with the issuance of
sale
of the Securities, the legend required by such state authority.
6.3 Removal
of Legends.
Upon
the earlier of (i) the resale of the Shares or Warrant Shares pursuant to a
registration statement in accordance with the plan of distribution contained
therein, delivery to the Company’s transfer agent and registrar (or any
successor thereto, the “Transfer Agent”) (with a copy to the Company) of the
certificate representing the shares of Common Stock sold and receipt by the
Company and the Transfer Agent of a certificate of subsequent sale in the form
of Exhibit
D
attached
hereto or (ii) Rule 144(k) becoming available, delivery to the Transfer Agent
(with a copy to the Company) of the certificate representing the shares of
Common Stock and the delivery to the Company and the Transfer Agent of a
representation letter from the Purchaser in customary form that Rule 144(k)
applies to the shares of Common Stock represented thereby, the Company shall
promptly cause the Transfer Agent to issue a certificate representing the shares
of Common Stock which does not bear such restrictive legends.
16
7. Termination;
Liabilities Consequent Thereon.
This
Agreement may be terminated and the transactions contemplated hereunder
abandoned at any time prior to the Closing only as follows:
(a) at
any
time by mutual agreement of the Company and the Majority Purchasers;
or
(b) by
the
Majority Purchasers, if there has been any breach of any representation or
warranty or any material breach of any covenant of the Company contained herein
and the same has not been cured within 15 days after notice thereof (it being
understood and agreed by each Purchaser that, in the case of any representation
or warranty of the Company contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation or
warranty will be deemed to have been breached for purposes of this Section
7(b)
only if such representation or warranty was not true and correct in all material
respects at the time such representation or warranty was made by the Company);
or
(c) by
the
Company with respect to a certain Purchaser, if there has been any breach of
any
representation, warranty or any material breach of any covenant of such
Purchaser contained herein and the same has not been cured within 15 days after
notice thereof (it being understood and agreed by the Company that, in the
case
of any representation and warranty of such Purchaser contained herein which
is
not hereinabove qualified by application thereto of a materiality standard,
such
representation or warranty will be deemed to have been breached for purposes
of
this Section 7(c) only if such representation or warranty was not true and
correct in all material respects at the time such representation or warranty
was
made by such Purchaser).
Any
termination pursuant to this Section 7 shall be without liability on the part
of
any party, unless such termination is the result of a material breach of this
Agreement by a party to this Agreement in which case such breaching party shall
remain liable for such breach notwithstanding any termination of this
Agreement.
8. Survival
and Indemnification.
8.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement; provided, however, that any claim for Losses arising out of a breach
of representation or warranty must be made, if at all, within two (2) years
of
the Closing Date.
8.2 Indemnification.
The
Company agrees to indemnify and hold harmless each Purchaser and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”) to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to
be
performed on the part of the Company under the Transaction Documents, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.
17
8.3 Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to Section
8.2, such Indemnified Person shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person, and shall assume
the
payment of all fees and expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the
fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed
to
the retention of such counsel; or (ii) in the reasonable judgment of counsel
to
such Indemnified Person representation of both parties by the same counsel
would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Person, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
9. Miscellaneous
Provisions.
9.1 Public
Announcements.
Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the
Purchasers without the prior consent of the Company (in the case of a release
or
announcement by the Purchasers) or the Lead Investor (in the case of a release
or announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or
the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Lead Investor, as the case may be, shall allow
the Lead Investor or the Company, as applicable, to the extent reasonably
practicable in the circumstances, reasonable time to comment on such release
or
announcement in advance of such issuance. By 8:30 a.m. (New York City time)
on
the trading day immediately following the Closing Date, the Company shall issue
a press release disclosing the consummation of the transactions contemplated
by
this Agreement. No later than the third trading day following the Closing Date,
the Company will file a Current Report on Form 8-K attaching the press release
described in the foregoing sentence as well as copies of the Transaction
Documents. In addition, the Company will make such other filings and notices
in
the manner and time required by the SEC.
9.2 Further
Assurances.
Each
party agrees to cooperate fully with the other party and to execute such further
instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by the other party to better evidence
and reflect the transactions described herein and contemplated hereby, and
to
carry into effect the intents and purposes of this Agreement.
18
9.3 Rights
Cumulative.
Each
and all of the various rights, powers and remedies of the parties shall be
considered to be cumulative with and in addition to any other rights, powers
and
remedies which such parties may have at law or in equity in the event of the
breach of any of the terms of this Agreement. The exercise or partial exercise
of any right, power or remedy shall neither constitute the exclusive election
thereof nor the waiver of any other right, power or remedy available to such
party.
9.4 Pronouns.
All
pronouns or any variation thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person, persons,
entity or entities may require.
9.5 Notices.
Any
notices, reports or other correspondence (hereinafter collectively referred
to
as “correspondence”) required or permitted to be given hereunder shall be in
writing and shall be sent by postage prepaid first class mail, courier or
telecopy or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder, and shall be deemed sufficient
upon
receipt when delivered personally or by courier, overnight delivery service
or
confirmed facsimile, or three (3) business days after being deposited in the
regular mail as certified or registered mail (airmail if sent internationally)
with postage prepaid, if such notice is addressed to the party to be notified
at
such party's address or facsimile number as set forth below:
(a) All
correspondence to the Company shall be addressed as follows:
000
Xxxxx
Xxxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000
Attention:
Xxxxx
Xxxxxx, CEO
with
a
copy to:
Xxxxxxx
X. Xxxxxxxxxx, Esq.
Xxxxxx
Xxxxxxxx, PLC
0000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
(b) All
correspondence to any Purchaser shall be sent to such Purchaser at the address
set forth in Exhibit A.
(c) Any
entity may change the address to which correspondence to it is to be addressed
by written notification as provided for herein.
9.6 Captions.
The
captions and paragraph headings of this Agreement are solely for the convenience
of reference and shall not affect its interpretation.
19
9.7 Severability.
Should
any part or provision of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such
part
or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.
9.8 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum.
9.9 Amendments.
This
Agreement may be amended or modified only pursuant to an instrument in writing
signed by the Company and the Majority Purchasers.
9.10 Waiver.
No
waiver of any term, provision or condition of this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or be
construed as, a further or continuing waiver of any such term, provision or
condition or as a waiver of any other term, provision or condition of this
Agreement.
9.11 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 Securities pursuant to the Transaction Documents has been made by
such
Purchaser independently of any other Purchaser. 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 Documents.
Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Securities or enforcing its rights under the
Transaction Documents. 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. The Company acknowledges that each of the
Purchasers has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Purchasers and not because it was
required or requested to do so by any Purchaser.
20
9.12 Assignment.
The
rights and obligations of the parties hereto shall inure to the benefit of
and
shall be binding upon the authorized successors and permitted assigns of each
party. Neither party may assign its rights or obligations under this Agreement
or designate another person (i) to perform all or part of its obligations under
this Agreement or (ii) to have all or part of its rights and benefits under
this
Agreement, in each case without the prior written consent of the other party,
provided, however, that a Purchaser may assign its rights hereunder with respect
to any Securities transferred in accordance with the Registration Rights
Agreement. In the event of any assignment in accordance with the terms of this
Agreement, the assignee shall specifically assume and be bound by the provisions
of the Agreement by executing and agreeing to an assumption agreement reasonably
acceptable to the other party.
9.13 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith,
except that if the Closing occurs, the Company shall reimburse the Lead Investor
for the legal fees and disbursements of their counsel incurred in connection
with the negotiation of the Transaction Documents up to $25,000 in the aggregate
upon presentation of appropriate invoices.
9.14 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one
instrument.
9.15 Entire
Agreement.
This
Agreement, the Warrants and the Registration Rights Agreement constitute the
entire agreement between the parties hereto respecting the subject matter hereof
and supersede all prior agreements, negotiations, understandings,
representations and statements respecting the subject matter hereof, whether
written or oral. No modification, alteration, waiver or change in any of the
terms of this Agreement shall be valid or binding upon the parties hereto unless
made in writing and duly executed by the Company and the Majority Purchasers.
[Signature
Page to Follow]
21
IN
WITNESS WHEREOF, the parties hereto have executed this Common Stock and Warrant
Purchase Agreement as of the day and year first above written.
|
By:
/s/
Xxxxx X.
Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
CEO
|
THE
PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED AS OF THE CLOSING
SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS COMMON STOCK AND WARRANT
PURCHASE AGREEMENT.
22
