EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 2, 1998,
by and among Aastrom Biosciences, Inc., a Michigan corporation, with
headquarters located at 24 Xxxxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxx 00000
("COMPANY"), and each of the purchasers set forth on the signature pages hereto
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized two new series of preferred stock, one
designated as the 1998 Series I Convertible Preferred Stock (the "SERIES I
PREFERRED STOCK"), having the rights, preferences and privileges set forth in
the Certificate of Designations, Rights and Preferences attached hereto as
EXHIBIT "A-1" (the "SERIES I CERTIFICATE OF DESIGNATION") and the second as the
1998 Series II Convertible Preferred Stock (the "SERIES II PREFERRED STOCK" and,
collectively with the Series I Preferred Stock, the "PREFERRED STOCK"), having
the rights, preferences and privileges set forth in the Certificate of
Designations, Rights and Preferences attached hereto as EXHIBIT "A-2" (the
"SERIES II CERTIFICATE OF DESIGNATION" and, collectively with the Series I
Certificate of Designation, the "CERTIFICATE OF DESIGNATIONS");
C. The Preferred Stock is convertible into shares of common stock, no par
value, of the Company (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designation and
pursuant to the notice of conversion attached hereto as EXHIBIT "D";
D. The Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, an aggregate of Five
Thousand (5,000) shares of Series I Preferred Stock and Three Thousand (3,000)
shares of Series II Preferred Stock, for an aggregate purchase price of Eight
Million Dollars ($8,000,000).
E. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of shares of Preferred Stock is set forth immediately
below its name on the signature pages hereto;
F. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "B" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws; and
1
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
(a) Purchase of Preferred Shares. The Company shall issue and sell to
each Buyer and each Buyer severally agrees to purchase from the Company such
number of shares of Series I Preferred Stock (collectively, together with any
Series I Preferred Stock issued in replacement thereof or as a dividend thereon
or otherwise with respect thereto in accordance with the terms thereof, the
"SERIES I PREFERRED SHARES") and Series II Preferred Stock (collectively,
together with any Series II Preferred Stock issued in replacement thereof or as
a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the "SERIES II PREFERRED SHARES" and, collectively with the
Series I Preferred Shares, the "PREFERRED SHARES") for the aggregate purchase
price with respect to the First Closing (as defined below) and the Second
Closing (as defined below) (each, a "PURCHASE PRICE" and collectively, the
"PURCHASE PRICES") as is set forth immediately below such Buyer's name on the
signature pages hereto. The issuance sale and purchase of the Preferred Shares
shall take place at two (2) closings, the first of which is hereinafter referred
to as the "FIRST CLOSING" and the second of which is hereinafter referred to as
the "SECOND CLOSING." The aggregate number of Series I Preferred Shares to be
issued at the First Closing is Five Thousand (5,000), for an aggregate purchase
price of Five Million Dollars ($5,000,000) and the aggregate number of Series II
Preferred Shares to be issued at the Second Closing is three thousand (3,000),
for an aggregate purchase price of Three Million Dollars ($3,000,000). Subject
to the satisfaction (or waiver) of the conditions thereto set forth in Section 6
and Section 7 below, (i) at the First Closing, the Company shall issue and sell
to each Buyer and each Buyer shall purchase from the Company the number of
Series I Preferred Shares which such Buyer is purchasing hereunder and as set
forth below such Buyer's name on the signature pages hereto for the Purchase
Price to be paid by such Buyer in respect of the First Closing and (ii) at the
Second Closing, the Company shall issue and sell to each Buyer and each Buyer
shall purchase from the Company the number of Series II Preferred Shares which
such Buyer is purchasing hereunder and as set forth below such Buyer's name on
the signature pages hereto for the Purchase Price to be paid by such Buyer in
respect of the Second Closing.
(b) Form of Payment. On each Closing Date (as defined below), (i)
---------------
each Buyer shall pay the Purchase Price for the Preferred Shares to be issued
and sold to it at each Closing by wire transfer of immediately available funds
to the Company, in accordance with the Company's written wiring instructions,
against delivery of duly executed certificates representing such number of
Preferred Shares which such Buyer is purchasing and (ii) the Company shall
deliver such certificates duly executed on behalf of the Company, to the Buyer,
against delivery of such Purchase Price.
(c) Closing Date. Subject to the satisfaction (or waiver) of the
------------
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Preferred Shares pursuant to this Agreement (the
"CLOSING DATE") shall be (i) in the case of the First Closing, 12:00 noon
Eastern Standard Time on July 2, 1998 and (ii) in the case of the Second
Closing, 12:00 noon Eastern Standard Time as soon as practicable (but no less
than three
2
(3) business days) following the satisfaction (or waiver) of the conditions to
the Second Closing set forth in Sections 6(b) and 7(b) or, in each case, such
other mutually agreed upon time. Each Closing shall occur on each Closing Date
at the offices of Xxxxxx, Xxxxx & Bockius LLP, 0000 Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, or at such other location as may be agreed to
be the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not
--------------------------------------
jointly) represents and warrants to the Company solely as to such Buyer that:
(a) Investment Purpose. As of the date hereof, the Buyer is
------------------
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "CONVERSION SHARES" and, collectively with the Preferred
Shares, the "SECURITIES") for its own account for investment only and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the 1933 Act.
(b) Accredited Investor Status. The Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. The Buyer understands that the
----------------------
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. 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 investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer has reviewed the risk factors discussed
in the Company's SEC Documents (as defined below) and understands that its
investment in the Securities involves a significant degree of risk.
(e) Governmental Review. The Buyer understands that no United
-------------------
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Transfer or Resale. The Buyer understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the 1933 Act or any applicable state securities
laws, and may not be transferred unless (a) subsequently included in an
effective registration statement thereunder, (b) the Buyer shall have delivered
to the Company an opinion of counsel (which opinion shall be reasonably
acceptable to the Company) to the effect that the Securities to be sold or
transferred may be sold
3
or transferred pursuant to an exemption from such registration, (c) so long as
the Buyer otherwise complies with applicable securities laws, sold or
transferred to an "affiliate"(as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) ("RULE 144")) or (d) sold pursuant to Rule 144; (ii)
any sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such 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 defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement. Except for transfers
---- ----
by a Buyer (i) to its "affiliates" (as defined in Rule 144) or (ii) to the
holders of interests in a Buyer upon a liquidation of a Buyer's assets in
accordance with its governing documents, the Preferred Shares may be transferred
by a Buyer only with the prior written consent of the Company, which consent
will not be unreasonably withheld.
(g) Legends. The Buyer understands that the Preferred Shares and,
-------
until such time as the Conversion Shares have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, the Conversion Shares, may
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the certificates for such
Securities):
"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 sold,
transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or an
opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by applicable state securities
laws, (a) the resale of such Security is covered by an effective registration
statement filed under the 1933 Act, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act and such sale or transfer is
effected or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold. The Buyer
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been
4
removed, in compliance with applicable requirements for delivery of a prospectus
contained in an effective registration statement, if any.
(h) Authorization; Enforcement. This Agreement and the Registration
--------------------------
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their terms.
(i) Residency. The Buyer is a resident of the jurisdiction set forth
---------
immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
---------------------------------------------
represents and warrants to each Buyer that:
(a) Organization and Qualification. The Company is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company has no Subsidiaries (as defined below). The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company or
its Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "SUBSIDIARIES" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.
(b) Authorization; Enforcement. (i) The Company has all requisite
--------------------------
power and authority to file and perform its obligations under the Certificate of
Designations and to enter into and perform this Agreement and the Registration
Rights Agreement and to consummate the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Preferred Shares and the issuance and reservation for issuance of the
Conversion Shares issuable upon conversion thereof) have been duly authorized by
the Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered and the Series I Certificate of
Designation has been duly filed by the Company and, as of the Second Closing,
the Series II Certificate of Designation will be duly filed by the Company, and
(iv) each of this Agreement and the Series I Certificate of Designation
constitutes, and upon execution and delivery by the Company of the Registration
Rights Agreement and the filing of the Series II Certificate of Designation by
the Company such instrument will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
5
(c) Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company consists of (i) 40,000,000 shares of Common Stock of which
13,639,817 shares are issued and outstanding, 1,479,186 shares are reserved for
issuance pursuant to the Company's stock option plans, 2,705,544 shares are
reserved for issuance pursuant to securities (other than the Preferred Shares)
exercisable for, or convertible into or exchangeable for shares of Common Stock
and 2,712,000 shares are reserved for issuance upon conversion of the Series I
Preferred Shares and, prior to the Second Closing, if applicable, a number of
shares will be reserved equal to two (2) times the number of shares of Common
Stock then issuable upon conversion of the Series II Preferred Shares (in each
case subject to adjustment pursuant to the Company's covenant set forth in
Section 4(h) below); and (ii) 5,000,000 shares of preferred stock, 2,200,000 of
which shares are issued and outstanding. All of such outstanding shares of
capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. Except as disclosed on SCHEDULE 3(C), no shares of
capital stock of the Company are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company. Except as
disclosed in SCHEDULE 3(C), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company, or arrangements by which the Company is or may become
bound to issue additional shares of capital stock of the Company, (ii) there are
no agreements or arrangements under which the Company is obligated to register
the sale of any of its or their securities under the 1933 Act (except the
Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares or the Conversion Shares. The Company has
furnished to the Buyer true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.
(d) Issuance of Shares. The Preferred Shares and Conversion Shares
------------------
are duly authorized and, upon issuance in accordance with the terms of this
Agreement (including the issuance of the Conversion Shares upon conversion of
the Preferred Shares in accordance with the Certificate of Designations) will be
validly issued, fully paid and non-assessable, and free from all taxes, liens
and charges with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company. The
term Conversion Shares includes, without limitation, such additional shares, if
any, as are issuable as a result of the events described in Article V, Article
VII.E(b) or Article VII.F of the Certificate of Designations and Section 2(c) of
the Registration Rights Agreement. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares. The Company further acknowledges that its obligation to issue
Conversion Shares in accordance with this Agreement and the Certificate of
Designations is absolute and
6
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
(e) Series of Preferred Stock. The terms, designations, powers,
-------------------------
preferences and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of each series of preferred stock
of the Company (other than the Preferred Stock) are as stated in the Certificate
of Incorporation and the previous certificate of designation, filed on or prior
to the date hereof, and the Bylaws. The terms, designations, powers, preferences
and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of the Preferred Stock are as
stated in the Certificate of Designations.
(f) No Conflicts. The execution, delivery and performance of this
------------
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Designations
and the issuance and reservation for issuance of the Conversion Shares) will not
(i) conflict with or result in a violation of any provision of the Certificate
of Incorporation or By-laws or (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could 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 is a party, or result in
a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). The Company is not in violation of its Certificate of
Incorporation, By-laws or other organizational documents and the Company is not
in default (and no event has occurred which with notice or lapse of time or both
could put the Company in default) under, and the Company has not taken any
action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party or by which any property
or assets of the Company is bound or affected, except for possible defaults as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company is not being conducted, and shall not be conducted so
long as a Buyer owns any of the Securities, in violation of any law, ordinance
or regulation of any governmental entity, which violations individually or in
the aggregate would have a Material Adverse Effect. Except (i) as specifically
contemplated by this Agreement, (ii) as required under the 1933 Act and any
applicable state securities laws, (iii) for filings with Nasdaq, and (iv) for
filings with the Secretary of State of the State of Michigan, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. Except as disclosed in SCHEDULE
3(f), 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. The Company is not in
violation of the listing requirements of the Nasdaq National Market ("NASDAQ")
and does not reasonably
7
anticipate that the Common Stock will be delisted by Nasdaq in the foreseeable
future. Except for anticipated losses as described in the SEC Documents (as
defined below), the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing.
(g) SEC Documents; Financial Statements. Since February 6, 1997,
-----------------------------------
the Company has timely 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 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 (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered or made available to
each Buyer true and complete copies of the SEC Documents, except for such
exhibits and incorporated 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 not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to June
30, 1997 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company.
(h) Absence of Certain Changes. Except for operating losses
--------------------------
incurred in the normal course of business, since June 30, 1997, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations or prospects of the Company.
(i) Absence of Litigation. There is no action, suit, claim,
---------------------
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, or its
officers or directors in their capacity as such, that could have a Material
Adverse Effect. SCHEDULE 3(i) contains a complete list and summary description
of any
8
pending or, to the Company's knowledge, threatened proceeding against or
affecting the Company, without regard to whether it would have a Material
Adverse Effect. Except as set forth on SCHEDULE 3(i), the Company is unaware of
any facts or circumstances which might give rise to any of the foregoing.
(j) Patents, Copyrights, etc. The Company and each of its
------------------------
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks, service
marks, service names, trade names and copyrights ("INTELLECTUAL PROPERTY")
necessary to enable it to conduct its business as now operated (and, except as
set forth in SCHEDULE 3(j) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, except as set forth in SCHEDULE 3(j)
hereof, to the best of the Company's knowledge, as presently contemplated to be
operated in the future); to the best of the Company's knowledge, the Company's
or its Subsidiaries, current and intended products, services and processes do
not infringe on any Intellectual Property or other rights held by any person;
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
(k) No Materially Adverse Contracts, Etc. The Company is not
------------------------------------
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Company's
officers has or is expected in the future to have a Material Adverse Effect.
Except as set forth on SCHEDULE 3(k), the Company is not a party to any contract
or agreement which in the judgment of the Company's officers has or is expected
to have a Material Adverse Effect.
(l) Tax Status. Except as set forth on SCHEDULE 3(l), the Company
----------
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and 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 in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(m) Certain Transactions. Except as set forth on SCHEDULE 3(m) 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 (other
9
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, 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.
(n) Disclosure. All information relating to or concerning the
----------
Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. Other than the transactions contemplated by this
Agreement, no event or circumstance has occurred or exists with respect to the
Company or its business, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purposes that the Company's reports
filed under the 1934 Act are being incorporated into an effective registration
statement filed by the Company under the 1933 Act).
(o) Acknowledgment Regarding Buyers' Purchase of Securities. The
-------------------------------------------------------
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
(p) 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 in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) which requires stockholder
approval under the rules of the Nasdaq.
(q) No 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 relating to this Agreement or the transactions contemplated
hereby, except for dealings with The Shemano Group, Inc., whose commissions and
fees will be paid for by the Company.
10
(r) Permits; Compliance. The Company is in possession of all
-------------------
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "COMPANY PERMITS"), except where the failure to
possess such Company Permit would not have a Material Adverse Effect, and there
is no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since June 30, 1997, the Company has not received any notification with respect
to possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
(s) Environmental Matters.
---------------------
(i) Except as set forth in SCHEDULE 3(s), there are, to the
Company's knowledge, with respect to the Company or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and the Company has not
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company's knowledge, threatened in connection with any of the
foregoing. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or disposed
of in compliance with applicable law, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by the Company, and no
Hazardous Materials were released on or about any real property previously
owned, leased or used by the Company during the period the property was owned,
leased or used by the Company, except in the normal course of the Company's
business.
(iii) To the Company's knowledge, there are no underground
storage tanks on or under any real property owned, leased or used by the Company
that are not in compliance with applicable law.
11
(t) Title to Property. The Company has 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, in each
case free and clear of all liens, encumbrances and defects except such as are
described in SCHEDULE 3(t) or such as would not have a Material Adverse Effect.
Any real property and facilities held under lease by the Company is held by it
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
(u) Insurance. The Company is 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 is engaged. The Company has no 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 have a Material
Adverse Effect.
(v) Internal Accounting Controls. The Company maintains a system
----------------------------
of internal accounting controls sufficient, in the judgment of the Company's
board of directors, 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.
(w) Foreign Corrupt Practices. Neither the Company, nor any
-------------------------
director, officer, agent, employee or other person acting on behalf of the
Company has, in the course of his 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; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
4. COVENANTS.
---------
(a) Best Efforts. The parties shall use their best efforts to
------------
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
(b) Form D; Blue Sky Laws. 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 each Buyer promptly after such filing. The Company shall, on or
before the Closing Date with respect to the First Closing, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to the Buyers at the applicable closing pursuant to this Agreement
under applicable securities or "blue sky" laws of the states of the United
States (or to obtain an
12
exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date with respect to
the First Closing.
(c) Reporting Status; Eligibility to Use Form S-3. The Company's
---------------------------------------------
Common Stock is registered under Section 12(g) of the 1934 Act. So long as any
Buyer beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. The Company currently meets, and will take all
necessary action to continue to meet, the "registrant eligibility" requirements
set forth in the general instructions to Form S-3.
(d) Use of Proceeds. The Company shall use the proceeds from the
---------------
sale of the Preferred Shares in the manner set forth in SCHEDULE 4(d) attached
hereto and made a part hereof and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its currently existing
direct or indirect Subsidiaries).
(e) Additional Equity Capital; Right To Purchase. Subject to the
--------------------------------------------
exceptions described below, the Company will not, without the prior written
consent of RGC International Investors, LDC ("RGCI"), register any equity
financing (including debt financing with an equity component) or otherwise allow
any public resales of equity interests in the Company's securities, issued after
April 24, 1998, pursuant to Rule 144 or otherwise during the period (the "LOCK-
UP PERIOD") (i) beginning on the Closing Date with respect to the First Closing
and ending one hundred eighty (180) days from the date the Registration
Statement (as defined in the Registration Rights Agreement) is declared
effective (plus any trading days after the Registration Statement is declared
effective and prior to such 180th day during which sales cannot be made
thereunder) and (ii) beginning on the Closing Date with respect to the Second
Closing and ending sixty (60) days from the Closing Date with respect to the
Second Closing. In addition, subject to the exceptions described below, the
Company will not conduct any equity financing (including debt financing with an
equity component) ("FUTURE OFFERINGS") during the Lock-up Period, unless it
shall have first delivered to RGCI, at least fifteen (15) business days prior to
the closing of such Future Offering, written notice describing the proposed
Future Offering, including the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith, and
providing each Buyer an option during the ten (10) day period following delivery
of such notice to purchase at least the percentage equal to (a) the number of
outstanding shares of Preferred Stock at the time of the notice multiplied by
1,000, divided by (b) the Company's then current market capitalization, of the
securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS"). In the event the terms and conditions of a proposed
Future Offering are amended in any material respect after delivery of the notice
to RGCI concerning the proposed Future Offering, the Company shall deliver a new
notice to RGCI describing the amended terms and conditions of the proposed
Future Offering and RGCI thereafter shall have an option during the ten (10) day
period following delivery of such new notice to purchase at least the percentage
13
equal to (a) the number of outstanding shares of Preferred Stock at the time of
the notice multiplied by 1,000, divided by (b) the Company's then current market
capitalization, of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering during the Lock-Up Period. The Capital Raising
Limitations shall not apply to any transaction involving (i) issuances of
securities in a firm commitment underwritten public offering (excluding a
continuous offering pursuant to Rule 415 under the 0000 Xxx) or (ii) issuances
of securities as consideration for a merger, consolidation or purchase of
assets, or in connection with any strategic partnership or joint venture (the
primary purpose of which is not to raise equity capital), or in connection with
the disposition or acquisition of a business, product or license by the Company.
The Capital Raising Limitations also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or to the grant
of additional options or warrants, or the issuance of additional securities,
under any Company stock option or stock purchase plan previously in effect or
approved by a majority of the Company's disinterested directors.
(f) Expenses. The Company shall reimburse Xxxx Xxxx Capital
--------
Management, L.P. ("RGC") for all expenses incurred by it in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith, including,
without limitation, attorneys' and consultants' fees and expenses. The Company's
obligation to reimburse RGC's expenses under this Section 4(f) and the
Registration Rights Agreement shall be limited to an aggregate of Twenty-Five
Thousand Dollars ($25,000) of which Five Thousand Dollars ($5,000) was advanced
previously.
(g) Financial Information. The Company agrees to send the following
---------------------
reports to each Buyer until such Buyer transfers, assigns, or sells all of the
Securities: (i) within one (1) day after release, copies of all press releases
issued by the Company or any of its Subsidiaries; and (ii) contemporaneously
with the making available or giving to the stockholders of the Company, copies
of any notices or other information the Company makes available or gives to such
stockholders.
(h) Reservation of Shares. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
(based on the Conversion Price of the Preferred Shares in effect from time to
time). The Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of Preferred Shares without the consent of
each Buyer. The Company shall use its best efforts at all times to maintain the
number of shares of Common Stock so reserved for issuance at no less than two
(2) times the number that is then actually issuable upon full conversion of the
Preferred Shares (based on the Conversion Price of the Preferred Shares in
effect from time to time). If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of Conversion Shares
issued and issuable upon conversion of the Preferred Shares (based on the
Conversion Price of the Preferred Shares then in effect), the Company will
promptly take all corporate action necessary to
14
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of shareholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case of
an insufficient number of authorized shares, and using its best efforts to
obtain shareholder approval of an increase in such authorized number of shares.
(i) Listing. The Company shall promptly, but no later than ten (10)
-------
days from each Closing Date, secure the listing of the Conversion Shares
issuable with respect to the Preferred Shares issued at each respective Closing
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Conversion Shares from time to time issuable
upon conversion of the Preferred Shares. The Company will obtain and maintain
the listing and trading of its Common Stock on Nasdaq, the Nasdaq SmallCap
Market ("NASDAQ SMALLCAP"), the New York Stock Exchange ("NYSE"), or the
American Stock Exchange ("AMEX") and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company shall promptly provide to each Buyer copies of any
notices it receives from Nasdaq and any other exchanges or quotation systems on
which the Common Stock is then listed regarding the continued eligibility of the
Common Stock for listing on such exchanges and quotation systems.
(j) Corporate Existence. Subject to the Company's right to
-------------------
exercise the right described in Article IV.B(i) of the Certificate of
Designations, so long as a Buyer beneficially owns any Preferred Shares, the
Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) if the consideration to be received for such
transaction is equity securities, is a publicly traded corporation whose Common
Stock is listed for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
(k) No Integration. The Company will not conduct any future
--------------
offering that will be integrated with the issuance of the Securities solely for
purposes of Rule 4460(i) of the Nasdaq Stock Market.
(l) Solvency. The Company (both before and after giving effect to
--------
the transactions contemplated by this Agreement) is solvent (i.e., its assets
----
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently subject to SCHEDULE 4(l), the Company has no information that would
lead it to reasonably conclude that the Company would not have, nor does it
intend to take any action that would impair, its ability to pay its debts from
time to time incurred in connection therewith as such debts mature. The Company
did not receive a qualified opinion from its auditors with respect to its most
recent fiscal year end and does not anticipate or know of any basis upon which
its auditors might issue a qualified opinion in respect of its current fiscal
year.
15
(m) Trading Restrictions. Each Buyer covenants and agrees that,
--------------------
during any Pricing Period (as defined in the Certificate of Designations) during
which a Conversion Price (as defined in the Certificate of Designations) is
computed, if a Buyer (or others acting on its behalf) engages in short sale
transactions or other hedging activities which involve, among other things,
sales of shares of Common Stock, such Buyer will place its sale orders for
Common Stock in the course of such activities so as not to complete or effect
any such sale on any trading day during such period at a price which is lower
than the lowest sale effected on such day by persons other than the Buyers (or
others acting on their behalf).
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
---------------------------
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares in such amounts as
specified from time to time by each Buyer to the Company upon conversion of the
Preferred Shares in accordance with the terms thereof (the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the Conversion Shares
under the 1933 Act), will be given by the Company to its transfer agent and that
the Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares. If a Buyer provides the Company with an opinion of counsel,
reasonably satisfactory to the Company in form, substance and scope, that
registration of a resale by such Buyer of any of the Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyers shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the
----------------------------------------------
Company hereunder to issue and sell the Preferred Shares to a Buyer at each of
the First Closing and Second Closing, as applicable, is subject to the
satisfaction, at or before the Closing Date in respect of such closing, of each
of the following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
16
(a) With respect to the First Closing and the Second Closing:
(i) the applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
(ii) The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
(iii) The Series I Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Michigan.
(iv) The representations and warranties of the applicable Buyer shall
be true and correct in all material respects as of the date when made and as of
each Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to each Closing
Date.
(v) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(b) With respect to the Second Closing:
(i) The Series II Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Michigan, and a
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
(ii) At any time on or after the 90th day following the Closing Date
in respect of the First Closing, the Closing Bid Price of the Common Stock is
greater than $6.00 for any twenty (20) consecutive Trading Days and the Company
provides notice to the Buyers to that effect.
(iii) The Closing Bid Price (as defined in the Certificate of
Designation) of the Common Stock on the Trading Day (as defined in the
Certificate of Designation) immediately preceding the Closing Date with respect
to the Second Closing is greater than $6.00.
(iv) Ninety (90) days shall have elapsed since the Closing Date with
respect to the First Closing and no more than one (1) year shall have elapsed
since the Closing Date with respect to the First Closing.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation
-------------------------------------------------
of each Buyer hereunder to purchase the Preferred Shares at each of the First
Closing
17
and Second Closing, as applicable, is subject to the satisfaction, at or before
the Closing Date in respect of such closing of each of the following conditions,
provided that these conditions are for such Buyer's sole benefit and may be
waived by such Buyer at any time in its sole discretion:
(a) With respect to the First Closing and the Second Closing:
(i) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
(ii) The Company shall have delivered to such Buyer duly executed
certificates (in such denominations as the Buyer shall request) representing the
Preferred Shares in accordance with Section 1(b) above.
(iii) The Series I Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Michigan, and a copy
thereof certified by such Secretary of State shall have been delivered to such
Buyer.
(iv) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have
been delivered to and acknowledged in writing by the Company's Transfer Agent.
(v) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of each
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date and in each case subject to the
schedules referred to in such representations and warranties provided by the
Company as of each Closing Date) and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Closing Date. The Buyer shall have
received a certificate or certificates, executed on behalf of the Company by the
chief executive officer of the Company, dated as of each Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, but not limited to, those matters described in Section
3(c) above, and certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating to the
transactions contemplated hereby.
(vi) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(vii) Trading in the Common Stock on Nasdaq shall not have been
suspended by the SEC or Nasdaq.
18
(viii) The Buyer shall have received opinions of the Company's
counsel, dated as of each Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "C-1"
and EXHIBIT "C-2" attached hereto.
(ix) The Company shall have obtained waivers of any preemptive
rights and pari passu limitations in respect of the sale of the Preferred Shares
to be issued at each Closing from the holders of shares of any other existing
series of the Company's preferred stock.
(b) With respect to the Second Closing:
(i) The Series II Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Michigan, and a
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
(ii) At any time on or after the 90th day following the Closing Date
in respect of the First Closing, the Closing Bid Price of the Common Stock is
greater than $6.00 for any twenty (20) consecutive Trading Days and the Company
provides notice to the Buyers to that effect.
(iii) The Closing Bid Price (as defined in the Certificate of
Designation) of the Common Stock on the Trading Day (as defined in the
Certificate of Designation) immediately preceding the Closing Date with respect
to the Second Closing is greater than $6.00.
(iv) Ninety (90) days shall have elapsed since the Closing Date with
respect to the First Closing and no more than one (1) year shall have elapsed
since the Closing Date with respect to the First Closing.
(v) The registration statement(s) filed by the Company pursuant to
Section 2(a) of the Registration Rights Agreement covering the resale of the
Registrable Securities (as defined in the Registration Rights Agreement)
underlying the Preferred Shares issued or issuable at the First Closing and the
Second Closing and shall be effective and no stop order shall have been issued
in respect thereof.
(vi) If Section 4(e) is not then in effect, the Company shall not,
prior to the Closing Date with respect to the Second Closing, have obtained any
equity financing (including debt financing with an equity component) that would
otherwise be covered by Section 4(e) had such section been in effect.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
(a) Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Michigan without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in Delaware
with respect to any dispute arising under this Agreement, the
19
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby.
(b) Counterparts; Signatures by Facsimile. This Agreement may be
-------------------------------------
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(c) Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the instruments
----------------------------
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(f) Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Company:
Aastrom Biosciences, Inc.
24 Xxxxx Xxxxx Xxxxxx Xxxxx
X.X. Xxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: R. Xxxxxxx Xxxxxxxxx
President & Chief Executive Officer
Facsimile: (000) 000-0000
20
With copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change
in address.
(g) Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
(h) Third Party Beneficiaries. This Agreement is intended for
-------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival. The representations and warranties of the
--------
Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive each Closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers.
(j) Publicity. The Company and each of the Buyers shall have
---------
the right to review a reasonable period of time before issuance of any press
releases, SEC, Nasdaq or NASD filings, 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 each of the Buyers, to
make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
(k) Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
21
(l) No Strict Construction. The language used in this Agreement
----------------------
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
AASTROM BIOSCIENCES, INC.
By: _____________________________________________
R. Xxxxxxx Xxxxxxxxx, Ph.D.
President & Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: _____________________________________________
Xxxx Xxxx Capital Management, L.P.,
Investment Manager
By: _____________________________________________
RGC General Partner Corp., as General Partner
By: _____________________________________________
Xxxxx X. Xxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Xxxx Xxxx Capital Management, L.P.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
00
XXXXXXXXX XXXXXXXXXXXX XXXXXX:
First Closing
-------------
Number of Shares of Series I Preferred Stock:5,000
Aggregate Purchase Price:$5,000,000
Second Closing
--------------
Number of Shares of Series II Preferred Stock:3,000
Aggregate Purchase Price:$3,000,000
24
EXHIBIT D
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the 1998 Series I Preferred Stock)
The undersigned hereby irrevocably elects to convert ______ shares of 1998
Series I Preferred Stock, represented by stock certificate No(s). __________
(the "PREFERRED STOCK CERTIFICATES") into shares of common stock ("COMMON
STOCK") of Aastrom Biosciences, Inc. (the "CORPORATION") according to the
conditions of the Certificate of Designation of 1998 Series I Preferred Stock,
as of the date written below. If securities are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
1998 Series I Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "ACT"), or pursuant
to an exemption from registration under the Act and that it is in compliance
with covenants set forth in Section 4(m) of the Securities Purchase Agreement.
Date of Conversion:____________________________
Applicable Conversion Price:___________________
Market Price Days:_____________________________
Number of Shares of Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_________________________________________
Address:______________________________________
* The Corporation is not required to issue shares of Common Stock until the
original 1998 Series I Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted are received by the Corporation or
its Transfer Agent. The Corporation shall issue and deliver shares of Common
Stock to an overnight courier not later than two (2) business days following
receipt of the original Preferred Stock Certificate(s) to be converted, and
shall make payments pursuant to the Certificate of Designation for the number
of business days such issuance and delivery is late.
25
