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EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated as of July 10,
2001 by and among CHROMAVISION MEDICAL SYSTEMS, INC., a Delaware corporation
(the "COMPANY"), and each person or entity listed as a Purchaser on SCHEDULE I
attached to this Agreement (each individually a "PURCHASER" and collectively the
"PURCHASERS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Purchasers,
and the Purchasers, severally, but not jointly, wish to purchase from the
Company, for an aggregate purchase price of $12,500,000, (i) an aggregate of
12,500 shares (the "PREFERRED SHARES") of the Company's Series D 5% Cumulative
Convertible Preferred Stock, par value $.01 per share, which are convertible
into shares ("COMMON SHARES") of the Company's common stock, $.01 par value
("COMMON STOCK"), in accordance with the terms of a certain Certificate of
Designations (the "CERTIFICATE") attached hereto as Exhibit A, and (ii) 5-year
warrants (the "WARRANTS"), in the form attached hereto as Exhibit B, to purchase
an aggregate number of shares (the "WARRANT SHARES") of Common Stock equal to
25% of the aggregate purchase price hereunder divided by the Closing Price (as
defined in the Certificate), all on the terms and conditions described below;
and
WHEREAS, the Common Shares and the Warrant Shares (collectively,
the "REGISTRABLE SECURITIES") will carry registration rights pursuant to the
terms of that certain Registration Rights Agreement to be entered into between
the Company and the Purchasers substantially in the form annexed hereto as
Exhibit C (the "REGISTRATION RIGHTS AGREEMENT");
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
Section 1.1 Issuance of Preferred Shares and Warrants. Upon the
following terms and conditions, the Company shall issue and sell to each
Purchaser severally, and each Purchaser, severally and not jointly, shall
purchase from the Company the number of Preferred Shares and number of Warrants
indicated next to such Purchaser's name on Schedule I attached hereto.
(a) Purchase Price. The purchase price for the Preferred
Shares and Warrants to be acquired by each Purchaser (the "PURCHASE PRICE")
shall be the Purchase Price set forth next to each such Purchaser's name on
Schedule I.
(b) The Closing.
(i) The closing of the purchase and sale of the
Preferred Shares and Warrants (the "CLOSING") shall take place
at
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the offices of Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C. ("KKWC"),
on or about the date hereof (the "CLOSING DATE").
(ii) On the Closing Date, the Company shall deliver to
the Purchasers certificates evidencing the Preferred Shares and
the Warrants purchased hereunder, each registered in the name of
each such Purchaser or its nominee. On the Closing Date, each
Purchaser shall deliver its Purchase Price by wire transfer to an
account designated in writing by the Company. In addition, each
party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement
at or prior to the Closing. In addition, at the Closing, the
Company shall pay to KKWC its legal fees and disbursements set
forth in Section 3.4. At the option of the Purchasers, such fees
and disbursements may be reflected as a credit towards the
Purchase Price.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers as
of the date hereof and the Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries (defined as any entity
of which the Company owns, directly or indirectly, 50% or more of the equity or
voting power) other than the subsidiaries listed in the Pre-Agreement SEC
Documents (as defined herein). Except where specifically indicated to the
contrary, all references in this Agreement to subsidiaries shall be deemed to
refer to all direct and indirect subsidiaries of the Company. Except where
specifically indicated to the contrary, all references in this Article II to the
Company shall be deemed to refer to the Company and its consolidated
subsidiaries. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect on the business, operations, prospects, properties or condition
(financial or otherwise) of the Company or such other entity with respect to
which such term is used and which is (either alone or together with all other
adverse effects) material to the Company or such other entity and other entities
controlling or controlled by such entity taken as a whole, and any material
adverse effect on the transactions contemplated by, or the rights or remedies of
the Purchasers or obligations of the Company under, this Agreement, the
Certificate, the Registration Rights Agreement, the Warrants or any other
agreement or document contemplated hereby or thereby.
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(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Certificate, the Warrants and the Registration Rights Agreement
(the "TRANSACTION DOCUMENTS") and to issue the Preferred Shares and the Warrants
(collectively, the "SECURITIES") in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including the issuance of the Preferred Shares, Warrants, Common Shares
and Warrant Shares, have been duly authorized by all necessary corporate action,
and no further consent or authorization of the Company or its Board of Directors
(or any committee or subcommittee thereof) or stockholders is required, (iii)
the Transaction Documents have been duly executed and delivered by the Company,
and (iv) the Transaction Documents constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. Other than the Preferred Shares, the
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, 7,246,000 shares of Series A convertible preferred stock, 221,850 shares
of Series B convertible preferred stock, and 200,000 shares of Series C
convertible preferred stock, of which there are 20,113,303 shares of Common
Stock and no shares of preferred stock issued and outstanding. Except as set
forth on SCHEDULE 2.1(c), no shares of Common Stock and no shares of preferred
stock were reserved for issuance to persons other than the Purchasers. All of
the outstanding shares of the Company's Common Stock and preferred stock have
been validly issued and are fully paid and non-assessable. No shares of capital
stock are entitled to preemptive rights and, except as set forth on SCHEDULE
2.1(c), there are no outstanding options or outstanding warrants for shares of
Common Stock (excluding the Warrants). Except as set forth on SCHEDULE 2.1(c),
there are no other scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights exchangeable for or
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, or commitments to purchase or
acquire, any shares, or securities or rights convertible or exchangeable into
shares, of capital stock of the Company. The Company has furnished the
Purchasers with a true and correct copy of the Company's Certificate of
Incorporation (the "CHARTER"), as in effect on the date hereof, and a true and
correct copy of the Company's By-Laws, as in effect on the date hereof (the
"BY-LAWS").
(d) Issuance of Securities. The Preferred Shares, Common
Shares and Warrant Shares are duly authorized and reserved for issuance and,
upon issuance in accordance with the terms of this Agreement, the Certificate
and the Warrants, the Preferred Shares, Warrants, Common Shares and Warrant
Shares will be validly issued, fully paid and non-assessable, free and clear of
any and all liens, claims and encumbrances, and, subject to the registration of
such shares in accordance with the applicable provisions of the Securities Act
of 1933, as amended (the "SECURITIES ACT" or the "ACT"), the Common Shares and
Warrant Shares will be entitled to be quoted and/or listed on the Nasdaq
National Market, the American Stock Exchange, the New York Stock Exchange or
Nasdaq Small Cap Market (collectively, the "APPROVED MARKETS"), and the holders
of such Common Shares and Warrant Shares shall be
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entitled to all rights and preferences then accorded to a holder of Common
Stock. The outstanding shares of freely tradable Common Stock are currently
quoted on the Nasdaq National Market (the "PRINCIPAL MARKET").
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby and the issuance of the
Securities and the issuance of the Common Shares and Warrant Shares do not and
will not (i) result in a violation of the Company's Charter or By-Laws, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company or any of
its subsidiaries is a party (collectively, "COMPANY AGREEMENTS"), or (iii)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected, except (other than in the case of clause (i) above) where such
violation would not reasonably be expected to have a Material Adverse Effect.
The business of the Company and its direct and indirect subsidiaries is being
conducted in material compliance with (i) its Charter and By-Laws, (ii) all
Company Agreements, and (iii) all applicable laws, ordinances or regulations of
any governmental authority, except (other than in the case of clause (i) above)
where such violation would not reasonably be expected to have a Material Adverse
Effect. Except for filings, consents and approvals required under applicable
state and federal securities laws, rules or regulations, or the rules and
regulations of the Approved Markets and covered by the Registration Rights
Agreement, the Company is not required under federal, state, local or foreign
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under the
Transaction Documents, or to issue and sell the Securities, except for the
registration provisions provided in the Registration Rights Agreement.
(f) SEC Documents; No Non-Public Information. The Common Stock
of the Company is registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the Company and its
subsidiaries have filed all reports, schedules, forms, statements and other
documents required to be filed by them with the Securities and Exchange
Commission ("SEC") since December 31, 1997 pursuant to the reporting
requirements of the Exchange Act, including all such proxy information,
solicitation statement and registration statements, and any amendments thereto
required to have been filed as of the Closing Date (all of the foregoing
including filings incorporated by reference therein, together with all
registration statements filed under the Securities Act, being referred to herein
as the "SEC DOCUMENTS"). The Company has not directly or indirectly provided,
and will not directly or indirectly provide, to the Purchasers any material
non-public information or any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue
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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. The SEC Documents
contain all material information concerning the Company and its subsidiaries
required to be disclosed therein as of the dates thereof, and no event or
circumstance has occurred prior to the date hereof or will have occurred on or
prior to the Closing Date which would require the Company to disclose such event
or circumstance in order to make the statements in the SEC Documents not
misleading but which has not, or will have not, been so disclosed.
(g) Financial Statements. The financial statements (including
any related notes) of the Company and its subsidiaries included in the SEC
Documents complied as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements were prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis 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, may be condensed or summary statements)
and fairly presented in all material respects the financial position of the
Company and its subsidiaries as of the respective dates thereof and the results
of operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(h) Principal Exchange/Market. The principal market on which
the Common Stock is currently quoted is the Principal Market. The Company is,
and will immediately following Closing be, in full compliance with the continued
listing requirements of the Principal Market, and is not aware of any event or
circumstance that would materially adversely effect the transactions
contemplated hereby.
(i) No Material Adverse Change. Except as disclosed in the
Pre-Agreement SEC Documents, since December 31, 2000, no Material Adverse Effect
has occurred or exists, and no event or circumstance has occurred that with
notice or the passage of time or both is reasonably likely to result in a
Material Adverse Effect with respect to the Company or its subsidiaries on a
consolidated basis.
(j) No Undisclosed Liabilities. The Company and its
subsidiaries have no liabilities or obligations not disclosed in the
Pre-Agreement SEC Documents (as defined below), other than those liabilities
incurred in the ordinary course of the Company's or its subsidiaries' respective
businesses since December 31, 2000, which liabilities, individually or in the
aggregate, do not have a Material Adverse Effect.
(k) No Undisclosed Events or Circumstances. To the best
knowledge of the Company, no material event or circumstance has occurred or
exists with respect to the Company or its direct or indirect subsidiaries or
their respective businesses, properties, prospects, operations or financial
condition, 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.
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(l) No General Solicitation. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their behalf
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Securities, the Common Shares or the Warrant Shares.
(m) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor to its knowledge any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of the Securities. The issuance of the Securities to the Purchasers
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 NASD or NASDAQ National Market System.
(n) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
for the transactions contemplated hereby under the Act and rules promulgated
thereunder.
(o) Intellectual Property. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, patent applications, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and confidential business
information, computer software, and all other proprietary or intellectual
property rights, and all goodwill associated with the foregoing (collectively,
"INTELLECTUAL PROPERTY") necessary or desirable to conduct their respective
businesses as now conducted or currently contemplated to be conducted in the
future except where the failure to do so will not have a Material Adverse
Effect. Except for such expirations and terminations that would not individually
or in the aggregate have a Material Adverse Effect, none of the Company's
Intellectual Property rights have expired or terminated, or are expected to
expire or terminate within three (3) years from the date of this Agreement.
Except as would not individually or in the aggregate have a Material Adverse
Effect, the Company and its subsidiaries do not have any knowledge of any
infringement, interference or misappropriation by the Company or its
subsidiaries of or with Intellectual Property or other similar rights of others,
or of any such development of similar or identical trade secrets or technical
information by others, and there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding Intellectual Property or other
infringement, interference or misappropriation. The Company and its subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their Intellectual Property. To the knowledge of the Company
or its subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Company or its subsidiaries, except for such interferences,
infringements, misappropriations or conflicts, if any, as would not individually
or in the aggregate have a Material Adverse Effect.
(p) Poison Pill Provisions. The Company is a party to a Rights
Agreement dated as of February 10, 1999 with Xxxxxx Trust Company of California,
as rights agent, as amended by amendments thereto dated June 21, 1999 and
September 28, 2000, a copy of which
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(with all amendments to date) has been provided to the Purchasers. None of the
acquisition of the Securities nor the deemed beneficial ownership of shares of
Common Stock prior to, or the acquisition of such shares pursuant to, the
conversion or exercise of the Preferred Shares or Warrants, respectively, will
trigger the poison pill provisions of any plan or agreement, unless the
beneficial owner of such Securities also beneficially owns additional securities
of the Company which causes its ownership of Common Stock to exceed 15% of the
Company's outstanding Common Stock at any one time.
(q) No Litigation. Except as set forth in the reports or
documents filed at least 5 Trading Days (as defined in the Certificate) prior to
the Closing Date by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act (the "PRE-AGREEMENT SEC DOCUMENTS"), no litigation or claim
(including those for unpaid taxes) against the Company or any of its
subsidiaries is pending or, to the Company's knowledge, threatened, and no other
event has occurred which, if determined adversely, could reasonably be expected
to have a Material Adverse Effect or could reasonably be expected to materially
and adversely affect the transactions contemplated hereby. There is no legal or
regulatory proceeding or inquiry described in the Pre-Agreement SEC Documents
that could reasonably be expected to have a Material Adverse Effect.
(r) Brokers. Except as set forth in Schedule 2.1(r), the
Company has taken no action which would give rise to any claim by any person or
entity for brokerage commissions, finder's fees or similar payments by the
Company or any Purchaser relating to this Agreement or the transactions
contemplated hereby. The Company shall be responsible for any payments to the
brokerage firms or others identified in Schedule 2.1(r).
(s) Other Purchasers. Except as set forth on SCHEDULE 2.1(s),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Securities Act. Except as set forth on SCHEDULE
2.1(s), there are no outstanding securities issued by the Company that are
directly or indirectly convertible into, exercisable into, or exchangeable for,
shares of Common Stock of the Company, or that have anti-dilution or similar
rights that would be affected by the issuance of any of the Securities.
(t) Certain Transactions. Except as disclosed in the
Pre-Agreement SEC Documents and except as disclosed on SCHEDULE 2.1(t), none of
the officers, directors, or key employees of the Company is presently a party to
any transaction with the Company or any of its subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any 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.
(u) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as reasonably prudent and customary in the
businesses in which the Company and its direct and indirect subsidiaries are
engaged. Neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such
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coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
(v) No Reliance on Purchasers. The Company acknowledges and
agrees that each Purchaser is acting solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
performance hereunder and thereunder and the transactions contemplated hereby
and thereby. The Company further represents to the Purchasers that the Company's
decision to enter into the Transaction Documents and the performance hereunder
and thereunder has been based solely on the independent evaluation by the
Company and its representatives.
(w) Foreign Corrupt Practices Act. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government or party official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(x) Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any anti-takeover provision contained in the Company's Charter or
By-Laws or Delaware law which is or could become applicable to the Purchasers as
a result of the transactions contemplated by the Transaction Documents,
including, without limitation, the Company's issuance of the Common Stock to the
Purchasers and the Purchasers' ownership of Common Stock.
(y) Acknowledgement of Dilution. The number of shares of
Common Stock issuable upon conversion of the Preferred Shares and exercise of
the Warrants may increase substantially in certain circumstances. The Company
acknowledges that its obligation to issue shares of Common Stock in accordance
with the Transaction Documents is absolute and unconditional, regardless of the
dilution that such issuance may have on other stockholders of the Company.
(z) Permits; Compliance. The Company and each of its
subsidiaries 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 failure to possess such Company Permits would not have a
Material Adverse Effect. There is no action pending or, to the knowledge of the
Company, threatened, regarding suspension or cancellation of any of the Company
Permits except for such Company Permits the failure of which to possess, or the
cancellation or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. To the best of its knowledge,
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neither the Company nor any of its subsidiaries is in material conflict with, or
in material default or material violation of, any of the Company Permits. Since
December 31, 1999, neither the Company nor any of its subsidiaries has received
any notification with respect to possible material conflicts, material defaults
or material violations of applicable laws.
(aa) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(bb) Environmental Matters. Except as otherwise disclosed in
the Pre-Agreement SEC Documents, the Company and each of its subsidiaries is in
compliance in all respects with all applicable state and federal environmental
laws except where any such non-compliance would not reasonably be expected to
have a Material Adverse Effect and no event or condition has occurred that may
interfere with the compliance by the Company or any of its subsidiaries with any
environmental law or that may give rise to any liability under any environmental
law that, individually or in the aggregate, would have a Material Adverse
Effect.
(cc) Solvency.
(i) Based on the financial condition of the
Company as of the Closing Date, the Company's fair saleable value
of its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they
mature.
(ii) Based on the financial condition of the
Company as of the Closing Date, including the receipt of the
proceeds of the sale of the Preferred Shares and Warrants as of
such date, the Company's assets do not constitute unreasonably
small capital to carry out its business for the year 2001 as now
conducted and as proposed to be conducted including the Company's
year 2001 capital needs taking into account the particular
capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). Based on the financial condition of the
Company as of the Closing Date, the current cash flow of the
Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the
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cash, would be sufficient to pay all amounts on or in respect of
its debt when such amounts are required to be paid.
(iv) Neither the Company nor any of its
subsidiaries is subject to any bankruptcy, insolvency or similar
proceeding.
(dd) Taxes. Except to an extent which would not have a Material
Adverse Effect, since December 31, 1999, all federal, state, city and other tax
returns, reports and declarations required to be filed or extended by or on
behalf of the Company and each of its subsidiaries have been filed or subject to
a valid extension and all such filed returns are complete and accurate in all
material respects, and disclose all taxes (whether based upon income,
operations, purchases, sales, payroll, licenses, compensation, business,
capital, properties or assets or otherwise) required to be paid in the periods
covered thereby. Except to an extent which would not have a Material Adverse
Effect, all taxes required to be withheld by or on behalf of the Company or any
such subsidiary in connection with amounts paid or owing to any employees,
independent contractor, creditor or other party have been withheld and such
withheld taxes have either been duly and timely paid to the proper governmental
authorities or set aside in accounts for such purposes.
(ee) Title to Properties; Encumbrances. Each of the Company and
its subsidiaries owns (with good and marketable title in the case of real
property, except for such imperfections of title as would not have a Material
Adverse Effect) all the properties and assets (whether real, personal, or mixed
and whether tangible or intangible ("COMPANY PROPERTY")) that it purports to
own.
(ff) MFN and Variable Rate Transactions. The Company has not
entered into any MFN Transaction or Variable Rate Transaction (other than
transactions entered into with the Purchasers), pursuant to which: (1)
securities or potential obligations to issue securities are still outstanding or
(2) the issuance, conversion or exercise, as the case may be, of the Preferred
Shares or the Warrants triggers, or may in the future trigger, an adjustment.
The term "MFN TRANSACTION" shall mean a transaction in which the Company issues
or sells any securities in a capital raising transaction or series of related
transactions (the "MFN OFFERING") which grants to a purchaser (the "MFN
PURCHASER") the right to receive additional shares (including without limitation
as a result of a lower conversion, exchange or exercise price but excluding
standard stock split anti-dilution protections) based upon subsequent
transactions of the Company on terms more favorable than those granted to such
MFN Purchaser in such MFN Offering. As used herein, term "VARIABLE RATE
TRANSACTION" shall mean a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include (pursuant to the terms of the securities or the
transaction documents pursuant to which such securities were issued) the right
to receive additional shares of, Common Stock either (x) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for the Common Stock at any time after the
initial issuance of such debt or equity securities, or (y) with a fixed
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business or actions of the Company or the market for the Common Stock
(but excluding standard stock split anti-dilution provisions), or (ii) any
securities of the Company
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pursuant to an "equity line" structure which provides for the sale, from time to
time, of securities of the Company which are registered for sale or resale under
the Securities Act.
Section 2.2 Representations and Warranties of the Purchasers. Each
Purchaser as to itself only, hereby makes the following representations and
warranties to the Company as of the date hereof and the Closing Date:
(a) Organization. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
(b) Authorization; Enforcement. (i) Such Purchaser has the
requisite power and authority to enter into and perform the Transaction
Documents and to purchase the Securities being sold to it hereunder, (ii) the
execution and delivery of the Transaction Documents by such Purchaser and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate or partnership action, and (iii) the
Transaction Documents constitute valid and binding obligations of such Purchaser
enforceable against such Purchaser in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of
the Transaction Documents and the consummation by such Purchaser of the
transactions contemplated thereby do not and will not (i) result in a violation
of such Purchaser's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Purchaser is a party, or (iii)
result in a material violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Purchaser.
(d) Purchase Representations.
(i) Access to Other Information. Such Purchaser
acknowledges that the Company has made available to such
Purchaser the opportunity to examine such additional documents
from the Company and to ask questions of, and receive full
answers from, the Company concerning, among other things, the
Company, its financial condition, its management, its prior
activities and any other information which such Purchaser
considers relevant or appropriate in connection with entering
into this Agreement.
(ii) Risks of Investment. Such Purchaser acknowledges
that the Securities have not been registered under the Securities
Act. Such Purchaser is capable of assessing the risks of an
investment in the Securities and is fully aware of the economic
risks thereof.
(iii) Purchase Representation. Such Purchaser is
purchasing the Preferred Shares and Warrants, and may purchase
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the Common Shares and Warrant Shares, for its own account and not
with a view to distribution in violation of any securities laws;
provided, however, that by making the representations herein,
such Purchaser does not agree to hold the Securities, Common
Shares or Warrant Shares for any minimum or other specific term
and reserves the right to dispose of the Securities at any time
in accordance with federal and state securities laws applicable
to such disposition.
(iv) Restricted Securities. Such Purchaser acknowledges
and understands that the terms of issuance have not been reviewed
by the SEC or by any state securities authorities and that the
Securities have been issued in reliance on the certain exemptions
for non-public offerings under the Securities Act, which
exemptions depend upon, among other things, the representations
made and information furnished by such Purchaser.
(v) Ability to Bear Economic Risk. Such Purchaser is an
"accredited investor" as defined in Rule 501 of Regulation D, as
amended, under the Act, and that it (i) is able to bear the
economic risk of its investment in the Securities, (ii) is able
to hold the Securities for an indefinite period of time, and
(iii) can afford a complete loss of its investment in the
Securities.
(e) Brokers. Except for the broker's fee of and payable by the
Company, such Purchaser has taken no action which would give rise to any claim
by any person for brokerage commissions, finder's fees or similar payments by
the Company relating to the Transaction Documents or the transactions
contemplated thereby. All fees and amounts payable to the brokers or other
persons or entities listed in Section 2.1(r) shall be solely the responsibility
of the Company.
(f) States of Residence of Purchaser. Schedule 1 accurately
sets forth the state in which such Purchaser maintains its principal office.
ARTICLE III
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. For so
long as the Preferred Shares and Warrants are outstanding, the Company will
cause the Common Stock issuable upon the conversion or exercise thereof to
continue at all times to be registered under Section 12(b) or Section 12(g) of
the Exchange Act other than following a merger or other business combination as
a result of which the Company's Common Stock is no longer eligible for such
registration, will comply in all respects with its reporting and filing
obligations under the Exchange Act other than following a merger or other
business combination as a result of which the Company's Common Stock is no
longer eligible for such registration, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules thereunder)
to terminate or suspend such reporting and filing obligations except as a result
of any
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such merger or other business combination. Until such time as no Preferred
Shares or Warrants are outstanding, the Company shall continue the listing
and/or quoting of the Common Stock on the Principal Market or one of the other
Approved Markets and comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Approved Market on which
the Registrable Securities are listed and/or quoted, as the case may be, except
as a result of any such merger or other business combination. The Company shall
cause the Registrable Securities to be quoted on the Principal Market (or other
Approved Market on which the Common Stock is then traded) no later than the
registration of the Registrable Securities under the Securities Act, and at all
times shall continue such listing(s) and/or quoting on one of the Approved
Markets for as long as any Preferred Shares or Warrants remain outstanding. As
used herein and in the other Transaction Documents, the term "EFFECTIVE
REGISTRATION" shall mean: (i) the Company is in compliance with the Transaction
Documents; (ii) the resale of Registrable Securities (as defined in the
Registration Rights Agreement) is covered by an effective registration statement
and such registration statement (the "REGISTRATION STATEMENT") is not subject to
any suspension or stop orders; (iii) the resale of such securities may be
effected pursuant to a current and deliverable prospectus that is not subject to
any blackout or similar circumstance; (iv) such securities are listed on an
Approved Market and are not subject to any trading suspension; (v) no
Interfering Event (as described in the Registration Rights Agreement) then
exists; (vi) no Purchaser is identified as an underwriter in the Registration
Statement; and (vii) none of the Company or any direct or indirect material
subsidiary of the Company is subject to any bankruptcy, insolvency or similar
proceeding.
Section 3.2 Preferred Shares on Conversion and Warrants on Exercise.
(a) Subject to the book entry procedures set forth in the
Certificate, upon any conversion by a Purchaser (or then holder of Preferred
Shares) of the Preferred Shares pursuant to the terms thereof, the Company shall
issue and deliver to such Purchaser (or holder) within five (5) Trading Days of
the conversion date, a new certificate for the number of Preferred Shares which
such Purchaser (or holder) has not yet elected to convert but which is evidenced
in part by the certificate(s) submitted to the Company in connection with such
conversion (with the number of and denomination of such new Certificates
designated by such Purchaser or holder).
(b) Subject to the book-entry procedures set forth in the
Warrants, upon any partial exercise by a Purchaser (or then holder of the
Warrants) of the Warrants, the Company shall issue and deliver to such Purchaser
(or holder) within five (5) Trading Days of the date on which such Warrants are
exercised, a new Warrant or Warrants representing the number of adjusted Warrant
Shares in accordance with the terms of Section 3 of such Warrants.
Section 3.3 Replacement Preferred Share Certificates and Warrants.
(a) The Preferred Shares Certificates held by any Purchaser
(or then holder) may be exchanged by such Purchaser (or such holder) at any time
and from time to time for Certificates with different denominations of a minimum
of 100 shares representing an equal aggregate number of Preferred Shares, as
requested by such Purchaser (or such holder) upon surrendering the same. No
service charge will be made for such registration or transfer or exchange.
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(b) The Warrants will be exchangeable at the option of the
Purchaser (or then holder of the Warrants) at the office of the Company for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of Warrant Shares as are purchasable
under such Warrants. No service charge will be made for such transfer or
exchange.
Section 3.4 Expenses. The Company shall pay to KKWC in immediately
available funds, at the Closing and promptly upon receipt of any further
invoices relating to the same, all reasonable legal fees and expenses incurred
by the Purchasers in connection with the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Certificate and the Warrants,
provided that any such amounts in excess of $50,000 shall be paid by Purchasers.
At the Closing, the Company shall pay the amount due for such fees and expenses
(which may include fees and expenses reasonably estimated to be incurred for the
completion of the transaction, including post-closing matters), provided that
any such amounts in excess of $50,000 shall be paid by Purchasers. In lieu
thereof, the Purchasers may pay such amounts not in excess of $50,000 on behalf
of the Company due to KKWC, with the amount of such payment being credited
towards the payment of its Purchase Price. In the event any amount paid by or on
behalf of the Company is ultimately less than actual reasonable fees and
expenses, the Company shall (subject to the $50,000 cap) promptly pay such
deficiency to KKWC upon receipt of an invoice therefor.
Section 3.5 Securities Compliance. The Company shall take all action
necessary by applicable law, rule and regulation for the legal and valid
issuance of the Securities. Without limiting the foregoing, the Company shall,
within one (1) Trading Day following the Closing Date, issue a press release
describing in detail the transactions contemplated in the Transaction Documents,
and within two (2) Trading Days following the Closing Date, file a current
report on Form 8-K with the SEC concerning the transactions contemplated hereby
and attaching this Agreement, together with all Exhibits hereto (excluding the
Schedules and form of opinion), as exhibits to such Form 8-K. Such Form 8-K and
any other Form 8-K and/or press release or other publicity concerning the
Transaction Documents shall contain such information as reasonably requested by
the Purchaser and be reasonably approved by the Purchaser in writing prior to
issuance. If the Company fails to so file a Form 8-K or issue a press release as
required herein within the requisite time period, the Purchaser at any time may
issue a press release covering the transactions contemplated by the Transaction
Documents.
Section 3.6 Dividends or Distributions; Purchases of Equity Securities.
For so long as any Preferred Shares or Warrants remain outstanding, the Company
agrees that it shall not (a) declare or pay any dividends or make any
distributions to any holder or holders of Common Stock (other than dividends
payable in Common Stock) in their capacity as shareholders, (b) purchase or
otherwise acquire for value, directly or indirectly, any shares of Common Stock
or other equity security of the Company (other than Preferred Shares or
Warrants) or (c) issue any share of Series A or Series B convertible preferred
stock.
Section 3.7 Notices. The Company agrees to provide all holders of
Warrants with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Stock, contemporaneously with
the delivery of such notices or information to such Common Stock holders.
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Section 3.8 Use of Proceeds. The Company agrees that the proceeds
received by the Company from the sale of the Preferred Shares and Warrants
hereunder and the sale of the shares of Common Stock issuable upon exercise of
the Warrants shall be used only for legally permitted general corporate
purposes.
Section 3.9 Notification of Additional Financings; Adjustments. The
Company agrees that until the first anniversary of the Closing Date, the
Purchasers shall have a right of first refusal with respect to all non-public
capital raising transactions as set forth in this Section 3.9. The Company shall
give advance written notice to the Purchasers, together with detailed
information regarding such offer or proposed sale (including without limitation
any term sheets or proposed negotiation) or prior to any offer or sale of any of
debt or equity securities of the Company or of any subsidiary of the Company or
of any borrowings by the Company or any subsidiary in a non-public capital
raising transaction, including, without limitation, all private placements,
equity lines (whether or not sold off a shelf registration statement) and
private financings (each a "FINANCING TRANSACTION"). The Purchasers shall have
10 business days from receipt of such notice to deliver a written notice to the
Company that one or more of such Purchasers (or their designees) elects to
exercise its right of first refusal. If, subsequent to the Company giving notice
to the Purchasers hereunder, the terms and conditions of the proposed Financing
Transaction are materially changed such that the amount of capital being raised
is materially changed or the effective Per Share Selling Price (as defined in
the Certificate) ("NEW PRICE"), after accounting for all Convertible Securities
(as defined in the Certificate) to be issued in such Financing Transaction, is
more than two (2) percentage points below the effective Per Share Selling Price
under the prior terms and conditions ("OLD PRICE") as such Old Price and New
Price relate to the then applicable market price of the Common Stock on the
Principal Market (e.g., if the Old Price is 2% below the market price, then a
material change would be more than 4% below the market price), then the Company
shall be required to provide a new notice to the Purchasers hereunder and the
Purchasers shall have the right of refusal again to purchase all of the
securities in the offering on such changed terms and conditions as provided
hereunder, provided that such Purchasers shall be required to exercise that
right, if at all, within three business days of receipt of such new notice. In
such event, if such other Financing Transaction provides for non-cash
consideration, in whole or in part, from such other potential purchaser(s), the
Purchasers (or their designees) shall still have the right to participate in the
Financing Transaction as provided herein, provided that cash or cash equivalents
may be substituted by the Purchasers for such non-cash consideration. This right
of first refusal shall continue even if the Purchasers elect not to participate
in one or more Financing Transactions. The foregoing right of first refusal
shall be allocated pro-rata among the Purchasers based on the number of
Preferred Shares purchased. The right of first refusal may not be exercised
unless Purchasers provide in the aggregate all of the capital being raised in
the Financing Transaction.
Section 3.10 Reservation of Stock Issuable Upon Conversion of Preferred
Shares and Exercise of the Warrants. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of Preferred Shares and exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the full conversion of all Preferred Shares and the
full exercise of all the Warrants, and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the full
conversion of all Preferred Shares and the full exercise of the Warrants, the
Company will take
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such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including without limitation engaging in best efforts to
obtain the requisite shareholder approval. Without in any way limiting the
foregoing, the Company agrees to reserve and at all times keep available solely
for purposes of the conversion of Preferred Shares and exercise of the Warrants
such number of authorized but unissued shares of Common Stock that is at least
equal to 200% of the aggregate shares issuable upon full conversion of the
Preferred Shares, plus 200% of the number of shares of Common Stock issuable
upon exercise of the Warrants in full, which numbers shall be appropriately
adjusted for any stock split, reverse split, stock dividend or reclassification
of the Common Stock. If the Company falls below the reserves specified in the
immediately preceding sentence and does not cure such non-compliance within 60
days of its start, then the Purchasers will be entitled to the compensatory
payments specified in Section 2(b)(i) of the Registration Rights Agreement. If
at any time the number of authorized but unissued shares of Common Stock is not
sufficient to effect the full conversion of the Preferred Shares and the full
exercise of the Warrants, the Purchasers shall be entitled to, inter alia, the
premium price redemption rights provided in the Registration Rights Agreement.
All calculations pursuant to this paragraph shall be performed without regard to
any restrictions or limitations on beneficial ownership of Common Stock
contained in the Certificate or Warrants.
Section 3.11 Best Efforts. Each of the parties shall use its
commercially reasonable best efforts to satisfy timely each of the conditions to
be satisfied by it as described in Article IV of this Agreement.
Section 3.12 Limitations on Transfers. The Company shall not contribute
or transfer its assets to any of its subsidiaries, other than a subsidiary that
has delivered its guarantee to the Purchasers in form and substance reasonably
satisfactory to the Purchasers.
Section 3.13 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities, as required under Regulation D of the Act and to
provide a copy thereof to each Purchaser promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall have
reasonably determined is necessary to qualify the applicable Securities for sale
to the Purchasers at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Purchaser on or prior to the Closing Date.
Section 3.14 Nasdaq Rule. Notwithstanding anything contained herein, the
Preferred Shares and Warrants shall not be convertible and exercisable nor shall
dividends be issuable upon the Preferred Shares in shares of Common Stock to the
extent that in excess of 4,020,649 shares of Common Stock (19.99% of the Common
Stock issued and outstanding on the date hereof, which number shall be subject
to readjustment for any stock split, stock dividend or reclassification of the
Common Stock) (the "20% CAP") would be issued thereon, unless the Company
receives stockholder approval for such issuance. Each Purchaser shall be
entitled to receive the number of Registrable Securities equal to such
Purchaser's pro rata share of the 20% Cap (based upon its Purchase Price
compared to the aggregate Purchase Price hereunder). Once a Purchaser has
received its total pro rata share upon conversion of its Preferred Shares and
exercise of its Warrants, and if the Company shall not have complied with its
obligations to
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obtain the stockholder approval described below by the date set forth below, it
shall have the right to compel the Company to redeem its remaining Preferred
Shares and Warrants at a price equal to the Premium Redemption Price (as defined
in the Registration Rights Agreement). If a Purchaser has converted and
exercised all of its Preferred Shares and Warrants, but has not depleted the
total number of pro rata shares allocated to it, its remaining pro rata shares
shall be reallocated amongst the Purchasers still holding Preferred Shares and
Warrants on a pro rata basis. The Company agrees that if at any point in time
(the "Trigger Date") the number of Common Shares issuable upon full conversion
of all the Preferred Shares and full exercise of all the Warrants then
outstanding (without regard to any limitations on beneficial ownership contained
in the Certificate or Warrants), together with the number of Common Shares
already issued by the Company upon conversion of Preferred Shares and exercise
of Warrants, would exceed 85% of the 20% Cap, then the Company shall promptly
call a shareholders meeting to obtain shareholder approval for the issuance of
Common Shares and Warrant Shares in excess of the 20% Cap. If such shareholder
approval is not obtained within 60 days of the Trigger Date, then each holder of
Preferred Shares and Warrants shall have the right to sell to the Company such
number of Preferred Shares and/or Warrants which cannot be converted or
exercised due to such 20% Cap limitation at a redemption price equal to the
Premium Redemption Price. Subject to any consent or approval rights of the
Purchasers hereunder, in the event the Company contemplates an offering of its
equity or debt securities within six months of the date hereof, excluding
offerings pursuant to duly adopted employee, officer and director equity
compensation plans and programs or to consultants as reasonable compensation for
services actually rendered to the Company, the Company agrees that, upon the
reasonable request of at least 75% of the Purchasers, the Company shall first
disclose the terms and conditions and other relevant facts of such proposed
transaction to Nasdaq and seek to obtain from Nasdaq its assurance that such
transaction will not be integrated with the offering which is the subject of
this Agreement for purposes of the Nasdaq rules requiring shareholder approval
of the issuance of 20% or more of an issuer's outstanding common stock. In the
event that (i) the Company fails to seek such assurances, or (ii) the Company
proceeds with such other transaction after not receiving a response from Nasdaq
and such other transaction is integrated with this offering, then, at the
election of a Purchaser, the Company shall redeem within five (5) days at the
Premium Redemption Price any and all Preferred Shares and/or Warrants which
cannot be converted or exercised due to the 20% Cap, provided that if such
integration adversely affects the exemption from registration under the
Securities Act for the private placement hereunder, then, at the election of any
Purchaser, the Company shall redeem within five (5) days any or all of the
Securities then held by such Purchaser at the Premium Redemption Price.
Section 3.15 Transactions With Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 3.16 Press Release. Purchasers shall have the opportunity to
review any press release in connection with the transactions contemplated hereby
prior to its issuance.
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Section 3.17 Reporting Lack of Effective Registration. The Company shall
promptly notify each Purchaser in writing if there shall ever be a lack of
Effective Registration, as well as when Effective Registration is
re-established.
Section 3.18 Rule 144. With a view to making available to the Purchasers
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at any time permit the Purchasers
to sell securities of the Company to the public without registration ("RULE
144"), the Company agrees, until such time as all of the Securities may be
freely sold to the public under Rule 144(k) (or any successor thereto), to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit any of the Company's other obligations under
this Agreement and the filing of such reports and other documents as required
for the applicable provisions of Rule 144); and
(c) furnish to each Purchaser so long as such Purchaser owns
Securities or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Purchasers to sell such securities pursuant
to Rule 144 without registration.
ARTICLE IV
CONDITIONS TO CLOSINGS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell. The obligation hereunder of the Company to issue and/or sell the Preferred
Shares and Warrants to the Purchasers at the Closing is subject to the
satisfaction at or before the Closing of each of the applicable conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of the Purchasers will be true
and correct as of the date when made and as of the Closing Date.
(b) Performance by the Purchasers. The Purchasers shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Purchasers at or prior to the Closing including payment of
the applicable purchase price.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or
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governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase. The obligation hereunder of the Purchasers to acquire and pay for the
Preferred Shares and Warrants at the Closing is subject to the satisfaction, at
or before the Closing, of each of the applicable conditions set forth below.
These conditions are for the Purchasers' benefit and may be waived by the
Purchasers at any time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties expressly as of an earlier date,
which shall be true and correct in all material respects as of such date).
(b) Performance by the Company. The Company shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the Closing, including, without
limitation, delivery of the Preferred Shares and Warrants.
(c) Trading and/or Quotation. Trading in and/or quotation of
the Company's Common Stock shall not have been suspended by the SEC or any
Approved Market and trading in securities generally as reported by the Principal
Market (or other Approved Market) shall not have been suspended or limited, and
the Common Stock shall be listed on an Approved Market.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by Transaction Documents. The NASD shall not have objected or
indicated that it may object to the consummation of any of the transactions
contemplated by this Agreement.
(e) Opinion of Counsel. The Purchasers shall have received an
opinion of counsel to the Company in the applicable form attached hereto as
EXHIBIT 4.2(e) and such other opinions, certificates and documents as the
Purchasers or their counsel shall reasonably require incident to the closing.
(f) Registration Rights Agreement. The Company and the
Purchasers shall have executed and delivered the Registration Rights Agreement
in the form and substance of EXHIBIT C attached hereto.
(g) Officer's Certificate. The Company shall have delivered to
the Purchasers a certificate in form and substance satisfactory to the
Purchasers and the Purchasers' counsel, executed by an officer of the Company,
certifying as to satisfaction of applicable closing conditions, incumbency of
signing officers, and the true, correct and complete nature of the Charter,
By-laws, good standing and authorizing resolutions of the Company.
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(h) Filed Certificate. The Company shall have delivered to the
Purchasers a copy of the filed Certificate stamped by the Secretary of State's
office of the State of Delaware.
(i) Diligence. The Purchasers shall have completed their
business, financial and legal due diligence to their sole satisfaction.
(j) Miscellaneous. The Company shall have delivered to the
Purchasers such other documents relating to the transactions contemplated by
this Agreement as the Purchasers or their counsel may reasonable request.
Section 4.3 Closing Date Deliveries.
(a) On the Closing Date, the Company shall deliver to the
Purchaser:
(i) Copy of the duly filed Certificate in the form of
Exhibit A;
(ii) Certificates evidencing the Preferred Shares;
(iii) Warrants in the form attached as Exhibit B and
Annex C;
(iv) The certificate referred to in Section 4.2(g)
above;
(v) The executed Registration Rights Agreement in the
form attached as Exhibit C; and
(vi) The opinion of counsel referred to in Section
4.2(e) above.
(b) On the Closing Date, the Purchasers shall deliver to the
Company:
(i) The Purchase Price set forth on Schedule I hereto;
and
(ii) The executed Registration Rights Agreement.
ARTICLE V
LEGEND AND STOCK
The Preferred Shares and Warrants issued hereunder shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID
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ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Preferred Shares and reissue
Warrants, as the case may be, without the legend set forth above at such time as
(i) the holder thereof is permitted to dispose of such Preferred Shares and/or
Warrants pursuant to Rule 144 under the Securities Act, or (ii) such Preferred
Shares and/or Warrants are sold to a purchaser or purchasers who (in the opinion
of counsel to the seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and its counsel) are able to dispose of such shares
publicly pursuant to an effective registration or exemption.
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, or Rule 144 becoming
available, any Common Shares issued pursuant to conversion of Preferred Shares
or Warrant Shares issued upon exercise of the Warrants shall bear a legend in
the same form as the legend indicated above. Upon such Registration Statement
becoming effective, or Rule 144 under the Act becoming available, the Company
agrees to promptly, but no later than three (3) Trading Days thereafter, issue
new certificates representing such Common Shares and Warrant Shares without such
legend. Any Common Shares issued pursuant to conversion of Preferred Shares or
shares of Common Stock issued upon exercise of the Warrants after the
Registration Statement has become effective shall be free and clear of any
legends, transfer restrictions and stop orders. Notwithstanding the removal of
such legend, each Purchaser agrees to sell the Common Shares and Warrant Shares
represented by the new certificates in accordance with the applicable prospectus
delivery requirements (if copies of a current prospectus are provided to such
Purchaser by the Company) or in accordance with an exemption from the
registration requirements of the Securities Act.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement
entered into in compliance with law, including applicable securities laws.
ARTICLE VI
INDEMNIFICATION
In consideration of the Purchasers' execution and delivery of
this Agreement and the Registration Rights Agreement and in addition to all of
the Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless the Purchasers and all of
their partners, officers, directors, employees, members and direct or indirect
investors and any of the foregoing persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate or document
21
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contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate or document contemplated hereby or thereby, (c) any cause of action,
suit or claim brought or made against such Indemnitee by a third party and
arising out of or resulting from (i) the execution, delivery, performance,
breach by the Company or enforcement against the Company of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
(iii) the status of the Purchaser or holder of the Securities or Warrants as
Purchasers in the Company (except if such Indemnified Liability is solely due to
an act, omission or fault of such Purchaser), and (d) the enforcement of this
Section.
ARTICLE VII
GOVERNING LAW; MISCELLANEOUS.
Section 7.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS TO BE EXECUTED AND PERFORMED EXCLUSIVELY IN NEW YORK. EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH
PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY HEREBY WAIVES ALL
RIGHTS TO TRIAL BY JURY.
Section 7.2 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
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Section 7.3 Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 7.4 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 7.5 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Purchasers, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Purchaser, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. Any Purchaser
may at any time elect, by notice to the Company, to waive (whether permanently
or temporarily, and subject to such conditions, if any, as such Purchaser may
specify in such notice) any of their respective rights (but not obligations)
under any of the Transaction Documents to acquire shares of Common Stock from
the Company, in which event such waiver shall be binding against such Purchaser
in accordance with its terms.
Section 7.6 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Chromavision Medical Systems, Inc.
00000 Xxxxx Xxxxxxx
Xxx Xxxx Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: (000) 000-0000
Attention: Financial Officer
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx X. Xxxxxxx, Esq.
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If to the Purchasers:
To each Purchaser at the address and/or fax number set
forth in Schedule I of this Agreement.
with a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxx X. Xxxxxxx, Esq.
Each party shall provide five (5) days prior written notice to
the other party of any change in address, telephone number or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
Section 7.7 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. A Purchaser may assign some or all of
its rights hereunder without the consent of the Company in connection with any
sale or transfer of all or any portion of the Securities held by such Purchaser.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers, except in
connection with a transfer of its business substantially or as a whole, whether
by merger, consolidation, sale of assets or otherwise and provided that (1) the
assignee assumes in writing all obligations hereunder and (2) the Company
remains liable to the extent still existing.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 7.9 Survival. The representations, warranties and agreements of
the Company and the Purchasers contained in the Agreement shall survive the
Closing.
Section 7.10 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.
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Section 7.11 Remedies. Each Purchaser and each permitted assignee shall
have all rights and remedies set forth in this Agreement, the Certificate, the
Warrants and the Registration Rights Agreement and all rights and remedies which
such holders have been granted at any time under any other agreement or contract
and all of the rights which such holders have under any law. Any person having
any rights under any provision of this Agreement shall be entitled to enforce
such rights specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Each Purchaser and each permitted assignee without prejudice may withdraw,
revoke or suspend its pursuit of any remedy at any time prior to its complete
recovery as a result of such remedy.
Section 7.12 Days. Unless the context refers to "business days" or
"trading days," all references herein to "days" shall mean calendar days.
Section 7.13 Rescission and Withdrawal Right. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, wherever the Purchasers exercise a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Purchasers may rescind or withdraw, in their sole discretion from time to time
upon written notice to the Company, any such notice, demand or election in whole
or in part without prejudice to its future actions and rights.
Section 7.14 Obligations Absolute. The Company's obligations under the
Transaction Documents are unconditional (except as provided in Article IV) and
absolute and not subject to any right of set off, counterclaim, delay or
reduction.
Section 7.15 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Purchaser
without the express written agreement of such Purchaser, unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. The Company agrees that it will deliver a copy of
any public announcement regarding the matters covered by this Agreement or any
agreement and document executed herewith to each Purchaser and any public
announcement including the name of an Purchaser to such Purchaser, reasonably in
advance of the release of such announcements.
Section 7.16 Like Treatment of Purchasers and Holders. Neither the
Company nor any of its affiliates shall, directly or indirectly, pay or cause to
be paid any consideration (immediate or contingent), whether by way of interest,
fee, payment for the redemption, conversion of Preferred Shares or exercise of
the Warrants, or otherwise, to any Purchaser or holder of Securities, for or as
an inducement to, or in connection with the solicitation of, any consent, waiver
or amendment of any terms or provisions of the Transaction Documents, unless
such consideration is required to be paid to all Purchasers or holders of
Securities bound by such consent, waiver or amendment. The Company shall not,
directly or indirectly, redeem any Securities unless such offer of redemption is
made pro rata to all Purchasers or holders of Securities, as the case may be, on
identical terms.
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Section 7.17 Actions of Purchasers. Notwithstanding anything herein to
the contrary, the actions and obligations of the Purchasers hereunder shall at
all times be considered several and not joint, and the Purchasers are not, under
any circumstances, agreeing to act jointly with respect to the Securities or any
of their actions or obligations under the Transaction Documents.
* * * * *
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed as of the date and year first
above written.
CHROMAVISION MEDICAL SYSTEMS, INC.
By: /s/ XXXXX X. X'XXXXX
-------------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Executive Vice President,
Operations Chief Financial
Officer
PURCHASERS:
HALIFAX FUND, L.P.
By: /s/ XXXXXXX XXXXXXX
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel, The Palladin
Group, X.X.
XXXXXXXX CAPITAL MANAGEMENT, INC.
By: /s/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: President
CASTLE CREEK HEALTH CARE PARTNERS, LLC
By: CASTLE CREEK PARTNERS, LLC, its
Investment Manager
By: /s/ XXXXXXX XXXXXX
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
27
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CCL FUND, LLC
By: CASTLE CREEK LIFESCIENCE
PARTNERS, LLC, its Manager
By: /s/ XXXXXX XXXX
----------------------------------
Name: Xxxxxx Xxxx
Title: Member
VELOCITY INVESTMENT PARTNERS LTD.
By: Velocity Asset Management LLC
Its: Investment Manager
By: /s/ XXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President
CARTMORE ENTERPRISES, INC.
By: /s/ XXXXXXX X. XXXXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxxxx
Attorney-in-Fact
SAFEGUARD DELAWARE, INC.
By: /s/ N. XXXXXXX XXXXXXX
-------------------------------------
Name: N. Xxxxxxx Xxxxxxx
Title: X.X.
00
00
LIST OF SCHEDULES
Schedule I List of Purchasers
Schedule 2.1(c) Reservation of Common Shares and Preemptive Rights;
Convertible Securities
Schedule 2.1(o) Intellectual Property
Schedule 2.1(r) Brokers
Schedule 2.1(s) Outstanding securities entitled to registration rights
or affected by the issuance of Securities
Schedule 2.1(t) Certain Transactions
LIST OF EXHIBITS
Exhibit 4.2(e) Opinion of Counsel
EXHIBITS
Exhibit A Certificate of Designations
Exhibit B Warrant
Exhibit C Registration Rights Agreement
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SCHEDULE I
JURISDICTION OF NUMBER OF NUMBER OF
PURCHASER ADDRESS PRINCIPAL OFFICE PREFERRED SHARES WARRANTS PURCHASE PRICE
--------- ------- ---------------- ---------------- -------- --------------
HALIFAX FUND, L.P. x/x Xxx Xxxxxxxx Xxxxx, X.X. Xxxxxx Xxxxxxx $
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
XXXXXXXX CAPITAL 00 Xxxxxxx Xxxxxx Xxx Xxxx
MANAGEMENT, INC. Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
(000) 000-0000
Telephone: (000) 000-0000
(000) 000-0000
XXXXXX XXXXX x/x Xxxxxx Xxxxx Xxxxxxxx
HEALTHCARE PARTNERS Partners LLC
LLC 000 Xxxx Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
CCL FUND, LLC x/x Xxxxxx Xxxxx Xxxxxxxx
LifeScience Partners, LLC
000 Xxxx Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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JURISDICTION OF NUMBER OF NUMBER OF
PURCHASER ADDRESS PRINCIPAL OFFICE PREFERRED SHARES WARRANTS PURCHASE PRICE
--------- ------- ---------------- ---------------- -------- --------------
Velocity Investment c/o Velocity Asset Cayman Islands
Partners, Ltd. Management LLC
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Cartmore Enterprises x/x Xxxxxxxx, Xxxx & Xxxxxx Xxxxxx Xxxxxxx 1,000 43,729 $1,000,000
Inc. (BVI)
Wickharns Cay I
P.O. Box 873
Xxxxxxxxxx Plaza
Road town, Tortola
British Virgin Islands
with a copy to: Xxxxx Xxxxxxxxx Xxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxxx,
Esq.
Facsimile: (000) 000-0000
Safeguard Delaware, 000 Xxxxxxxx Xxxxxxxx Xxxxxxxx 000 21,865 $ 500,000
Inc. 0000 Xxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Attn: Chief Financial
Officer
with a copy to: Safeguard Scientifics
000 Xxxxx Xxxx Xxxxx
000 Xxxxxxxx
Xxxxx, XX 00000
Attn: General Counsel
Facsimile: (000) 000-0000
Phone: (000) 000-0000
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SCHEDULES
TO THE
SECURITIES PURCHASE AGREEMENT
DATED AS OF JULY 10, 2001
33
SCHEDULE 2.1(c)
CAPITALIZATION
The following shares are reserved for issuance:
1. 3,478,332 shares of Common Stock for issuance upon exercise of options
granted and to be granted under the Company's 1996 Equity Compensation
Plan.
2. 1,000,000 shares of Common Stock for issuance pursuant to the Company's
Employee Stock Purchase Plan.
3. 56,070 shares of Common Stock for issuance upon exercise of warrants issued
to a wholly-owned subsidiary of Safeguard Scientifics, Inc. and to
VennWorks LLC on September 28, 2001.
4. 657,142 shares of Common Stock for issuance to VennWorks pursuant to the
equity line of credit established under the Stock Purchase Agreement made
as of January 31, 2001, as amended by an Amendment thereto made as of April
18, 2001.
5. 200,000 shares of Series C Preferred Stock.
The Company has also issued rights pursuant to a Rights Agreement between
the Company and Xxxxxx Trust Company of California which can become exercisable
to receive shares of the Company's Series C Preferred or Common Stock. The
Series C Preferred Stock is also convertible into Common Stock. The number of
shares of Series C Preferred Stock and Common Stock so issuable cannot presently
be determined.
34
SCHEDULE 2.1(r)
BROKERS
UBS Warburg LLC
Prudential Vector Healthcare Group, a unit of Prudential Securities Incorporated
35
SCHEDULE 2.1(s)
OTHER PURCHASERS
An aggregate of 560,693 shares of Common Stock and warrants to purchase an
aggregate of 56,070 shares of Common Stock were issued to a wholly owned
subsidiary of Safeguard Scientifics, Inc. and to VennWorks LLC (formerly named
incuVest LLC) on September 28, 2000. The holders of these shares are entitled to
the registration rights provided in the Registration Rights Agreement between
the Company and the purchasers dated September 28, 2001.
The Company entered into a Stock Purchase Agreement with VennWorks LLC made
as of January 31, 2001, as amended by an Amendment thereto made as of April 18,
2001, providing for the issuance of shares of Common Stock of the Company having
an aggregate purchase price of $5,000,000 but to be issued at varying prices not
less than $7 per share and not more than $14 per share. An aggregate of 56,957
shares of Common Stock were issued to VennWorks LLC during the period from April
23, 2001 and May 16, 2001 under that agreement. The holders of shares issued
under that agreement are entitled to the registration rights provided in the
Registration Rights Agreement with VennWorks LLC entered into as of January 31,
2001.
See Schedule 2.1(c) for information regarding outstanding securities issued
by the Company that are directly or indirectly convertible into, exercisable
into, or exchangeable for, shares of Common Stock of the Company. Schedule
2.1(c) is hereby incorporated by reference into this Schedule 2.1(s).
36
SCHEDULE 2.1(t)
CERTAIN TRANSACTIONS
Schedule 2.1(s) is incorporated into this Schedule 2.1(t) by this
reference. Safeguard Scientifics, Inc. beneficially owns approximately 31% of
the outstanding shares of common stock of the Company, and Xxxxxxx Xxxx, Vice
president of Operations and Management Services of Safeguard Scientifics, Inc.,
is a director of the Company. VennWorks LLC beneficially owns outstanding shares
of common stock of the Company constituting less than 5% of the number
outstanding, and Xxxxxxx X. X. Xxxxxx, Chief Executive officer of VennWorks LLC,
is a director of the Company.
