SECURITIES PURCHASE AGREEMENT
EXHIBIT
4.3
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”),
dated
as of January 22, 2007, is made by and among Matritech, Inc., a corporation
organized under the laws of the State of Delaware (the “Company”),
and
each of the purchasers (individually, a “Purchaser”
and
collectively the “Purchasers”)
set
forth on the execution pages hereof (each, an “Execution
Page”
and
collectively the “Execution
Pages”).
BACKGROUND
A. The
Company and each Purchaser are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation
D”),
as
promulgated by the United States Securities and Exchange Commission (the
“SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”).
B. Upon
the
terms and conditions stated in this Agreement, the Company desires to issue
and
sell to the Purchasers, and each Purchaser desires to purchase (i) a secured
convertible promissory note, in the form attached hereto as Exhibit
A
(collectively, including any note or notes issued upon transfer of the secured
convertible promissory notes, the “Series
B Notes”),
in
the principal face amount set forth on the Execution Pages hereof (for each
Purchaser, the “Subscription
Amount”),
which
Series B Notes shall initially be convertible into shares of the Company’s
common stock, par value $0.01 per share (the “Common
Stock”)
at the
conversion price set forth in the Series B Notes, and (ii) a warrant, in the
form attached hereto as Exhibit
B
(including any warrant or warrants issued upon transfer of the warrant, the
“Series
B Warrants”),
to
acquire a number of shares of Common Stock equal to 60% of the number of shares
of Common Stock such Purchaser would own if it converted its Series B Notes
on
the Closing Date (as defined below) in accordance with the terms of such Series
B Notes plus an additional number of shares that may become issuable thereunder
pursuant to Section 11(i) of such Series B Warrants. The shares of Common Stock
issuable upon conversion of or otherwise pursuant to the Series B Notes,
including shares of Common Stock issued as payment of interest under the Series
B Notes and shares paid upon amortization of the Series B Notes, are referred
to
herein as the “Conversion
Shares”
and
the
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Series B Warrants are referred to herein as the “Warrant
Shares.”
The
Series B Notes, the Series B Warrants, the Conversion Shares and the Warrant
Shares are collectively referenced herein as the “Securities”
and
each of them may individually be referred to herein as a “Security.”
C. In
connection with the Closing pursuant to this Agreement, the Company will execute
and deliver an Amended and Restated Security Agreement which amends and restates
the Security Agreement originally dated January 13, 2006, in the form attached
hereto as Exhibit
C
(together with the License Agreement and any other document securing the Series
B Notes, the “Security
Documents”),
in
favor of the Collateral Agent (as defined herein) for the benefit of all
of
the
Purchasers and the purchasers of the 15% Secured Convertible Promissory Notes
dated January 13, 2006 (the “Series
A Notes”),
pursuant to which the Company has agreed to grant a security interest in certain
collateral described in the Security Documents in order to secure its
obligations under the Series B Notes and the Series A Notes.
D. In
connection with the Closing pursuant to this Agreement, the parties hereto
will
execute and deliver a Registration Rights Agreement, pursuant to which the
Company has agreed to provide certain registration rights under the Securities
Act and the rules and regulations promulgated thereunder, and applicable state
securities laws, in the form attached hereto as Exhibit
D
(the
“Registration
Rights Agreement”).
In
addition, in connection with the Closing pursuant to this Agreement, the
Collateral Agent, for itself and the holders of the Series B Notes, will execute
and deliver an Amended and Restated Contingent License Agreement, which amends
and restates the Contingent License Agreement originally dated January 13,
2006,
pursuant to which the Company has agreed, under certain circumstances, to
provide a license to certain intellectual property rights to the Collateral
Agent for the benefit of the holders of the Series B Notes and the holders
of
the Series A Notes, in the form attached hereto as Exhibit
E
(the
“License
Agreement”).
This
Agreement, the Series B Warrants, the License Agreement, the Security Documents
and the Registration Rights Agreement are collectively referred to herein as
the
“Transaction
Documents.”
NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Company and the Purchasers, intending to
be
legally bound, hereby agree as follows:
1. PURCHASE
AND SALE OF SECURITIES.
(a) Purchase
and Sale of Securities.
Subject
to the terms and conditions hereof, at the Closing (as defined in Section 1(b)
below), the Company shall issue and sell to the Purchasers an aggregate
principal face amount of Securities of up to $4,500,000 and each Purchaser,
severally and not jointly, shall purchase from the Company, its respective
Subscription Amount.
(b) The
Closing.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7
below, the closing of the transactions contemplated hereby (the “Closing”)
shall
take place at the offices of Xxxxxx, Xxxx & Xxxxxxx LLP at Xxx Xxxxxxxxxxxxx
Xxxxx, Xxxxxx, XX 00000 at 10:00 a.m., Boston, Massachusetts time, on or before
January 22, 2007 or such other time or place as the Company and the Purchasers
may mutually agree (the “Closing
Date”).
2. PURCHASER’S
REPRESENTATIONS AND WARRANTIES.
Each
Purchaser severally, but not jointly, represents and warrants to the Company
as
follows:
(a) Purchase
for Own Account, Etc.
Such
Purchaser is purchasing the Securities for such Purchaser’s own account for
investment purposes only and not with a present view towards the public sale
or
distribution thereof, except pursuant to sales that are exempt from the
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registration
requirements of the Securities Act and/or sales registered under the Securities
Act. Such Purchaser understands that such Purchaser must bear the economic
risk
of this investment indefinitely, unless the Securities are registered pursuant
to the Securities Act and any applicable state securities or blue sky laws
or an
exemption from such registration is available, and that the Company has no
present intention of registering the resale of any such Securities other than
as
contemplated by the Registration Rights Agreement. Notwithstanding anything
in
this Section 2(a) to the contrary, by making the representations herein, such
Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time
in
accordance with or pursuant to a registration statement or an exemption from
the
registration requirements under the Securities Act.
(b) Accredited
Investor Status.
Such
Purchaser is an “Accredited
Investor”
as
that
term is defined in Rule 501(a) of Regulation D.
(c) Reliance
on Exemptions.
Such
Purchaser understands that the Securities are being offered and sold to such
Purchaser 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 such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine
the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Securities.
(d) Information.
Such
Purchaser and its counsel, if identified to the Company, have been furnished
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
specifically requested by such Purchaser or its counsel. Neither such inquiries
nor any other investigation conducted by such Purchaser or its counsel or any
of
its representatives shall modify, amend or affect such Purchaser’s right to rely
on the Company’s representations and warranties contained in Section 3 below.
Such Purchaser understands that such Purchaser’s investment in the Securities
involves a high degree of risk.
(e) Governmental
Review.
Such
Purchaser 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) Authorization;
Enforcement.
This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Purchaser and are valid
and
binding agreements of such Purchaser enforceable against such Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and general principles of
equity.
(g) Residency.
Such
Purchaser is a resident of the jurisdiction set forth under such Purchaser’s
name on the Execution Page hereto executed by such Purchaser.
(h) No
Trading in Securities.
Such
Purchaser has not offered to sell, solicited offers to buy, disposed of, loaned,
pledged or granted any right with respect to the Company’s
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Common
Stock since the date it agreed to learn the confidential terms of the
transactions contemplated by the Transaction Documents.
(i) Beneficial
Ownership.
Prior
to the Closing, such Purchaser with the exception of (i) SDS Capital Group
SPC,
Ltd. (“SDS”),
(ii)
H&Q Life Science Investors, and (iii) ProMed Partners, L.P., ProMed Partners
II, L.P., ProMed Offshore Fund, Ltd., ProMed Offshore Fund II, Ltd. and each
of
their respective affiliates is not a “beneficial owner” of more than 5% of the
Common Stock (as defined for purposes of Rule 13d-3 of the Exchange Act). Prior
to, and as a result of the purchase of the Series B Notes and the Series B
Warrants, at the Closing, such Purchaser with the exception of ProMed Partners,
L.P., ProMed Partners II, L.P., ProMed Offshore Fund, Ltd., ProMed Offshore
Fund
II, Ltd. and its affiliates is not, and will not be an “interested stockholder”
as defined in Section 203 of the Delaware General Corporation Law, as amended.
Each
Purchaser’s representations and warranties made in this Article 2 are made
solely for the purpose of permitting the Company to make a determination that
the offer and sale of the Securities pursuant to this Agreement comply with
applicable U.S. federal and state securities laws and not for any other purpose.
Accordingly, the Company may not rely on such representations and warranties
for
any other purpose. No Purchaser has made or hereby makes any other
representations or warranties, express or implied, to the Company in connection
with the transactions contemplated hereby.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
Except
as
set forth on a Disclosure Schedule executed and delivered by the Company to
each
Purchaser (the “Disclosure
Schedule”),
the
Company represents and warrants to each Purchaser as follows:
(a) Organization
and Qualification.
The
Company and each of its direct and indirect subsidiaries (collectively, the
“Subsidiaries”)
is a
corporation duly organized and existing in good standing under the laws of
the
jurisdiction in which it is incorporated or organized, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of 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 by it makes such qualification
necessary and where the failure so to qualify or be in good standing would
have
a Material Adverse Effect. For purposes of this Agreement, “Material
Adverse Effect”
means
any effect which, individually or in the aggregate with all other effects,
reasonably would be expected to be materially adverse to (i) the Securities;
(ii) the ability of the Company to perform its obligations under this Agreement
or the other Transaction Documents; or (iii) the business, operations,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole.
(b) Authorization;
Enforcement.
(i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and the other Transaction
Documents, to issue and sell the Series B Notes and Series B Warrants in
accordance with the terms hereof, to issue the Conversion Shares upon conversion
of the Series B Notes in accordance with the terms thereof and to issue the
Warrant Shares upon exercise of
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the
Series B Warrants in accordance with the terms thereof; (ii) the execution,
delivery and performance of this Agreement and the other Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Series
B
Notes and Series B Warrants and the issuance and reservation for issuance of
the
Conversion Shares and Warrant Shares) have been duly authorized by the Company’s
Board of Directors and, except for the approval of the Company’s stockholders
referenced in Sections 4(g) and 7(h) hereof, no further consent or authorization
of the Company, its Board of Directors, or any committee of the Board of
Directors is required; and (iii) this Agreement constitutes, and, upon execution
and delivery by the Company of the other Transaction Documents, such Transaction
Documents will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
(c) Capitalization.
The
capitalization of the Company as of the date hereof, including the authorized
capital stock, the number of shares issued and outstanding, the number of shares
issuable and reserved for issuance pursuant to the Company’s stock option plans,
the number of shares issuable and reserved for issuance pursuant to securities
(other than the Series B Notes and the Series B Warrants) exercisable or
exchangeable for, or convertible into, any shares of capital stock and the
number of shares to be reserved for issuance upon conversion of the Series
B
Notes and exercise of the Series B Warrants is set forth in Section
3(c)
of the
Disclosure Schedule. All of such outstanding shares of capital stock have been,
or upon issuance in accordance with the terms of any such exercisable,
exchangeable or convertible securities will be, validly issued, fully paid
and
non-assessable. Except as set forth in Section
3(c)
of the
Disclosure Schedule, no shares of capital stock of the Company (including the
Conversion Shares and the Warrant Shares) are subject to preemptive rights
or
any other similar rights of the stockholders of the Company or any liens or
encumbrances. Except for the Securities and as set forth in Section
3(c)
of the
Disclosure Schedule, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by
which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
nor are any such issuances, contracts, commitments, understandings or
arrangements contemplated; (ii) there are no contracts, commitments,
understandings or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act (except the Registration Rights Agreement); (iii)
there
are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there
are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem or otherwise acquire
any security of the Company or any of its Subsidiaries; and (iv) the Company
does not have any shareholder rights plan, “poison pill” or other anti-takeover
plans or similar arrangements. Section
3(c)
of the
Disclosure Schedule sets forth all of the securities or instruments issued
by
the Company or any of its Subsidiaries that contain anti-dilution or similar
provisions, and, except as and to the extent set forth thereon, the sale and
issuance of the Securities will not trigger any anti-dilution adjustments to
any
such securities or instruments. The Company has furnished to each Purchaser
true
and correct copies of the Company’s Amended and Restated Certificate of
Incorporation as amended and as in effect on the date hereof (“Certificate
of Incorporation”),
the
Company’s Amended and Restated Bylaws as in effect on the date hereof
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(the
“Bylaws”),
and
all other instruments and agreements governing securities convertible into
or
exercisable or exchangeable for capital stock of the Company, all of which
instruments and agreements are set forth in Section
3(c)
of the
Disclosure Schedule. For purposes of all provisions of this Agreement, any
document publicly available on the SEC’s XXXXX system shall be considered to
have been validly “furnished,” “delivered” or “provided” to a Purchaser or its
counsel, as applicable. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or any such Subsidiary.
(d) Issuance
of Securities.
The
Series B Notes and Series B Warrants are duly authorized and, upon issuance
in
accordance with the terms of this Agreement, (i) will be validly issued, fully
paid and non-assessable and free from all taxes, liens, security interests,
claims and encumbrances (other than those imposed by the Transaction Documents);
(ii) will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person which have
not
been waived in connection herewith; and (iii) will not impose personal liability
on the holder thereof. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon conversion of the Series B
Notes
and exercise of the Series B Warrants in accordance with the terms thereof,
(x)
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances (other than those imposed by the Transaction
Documents), (y) will not be subject to preemptive rights, rights of first
refusal or other similar rights of stockholders of the Company or any other
person and (z) will not impose personal liability upon the holder
thereof.
(e) No
Conflicts; Consents.
The
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance
of
the Series B Notes and Series B Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares) will not (i) result in
a
violation of the Certificate of Incorporation or Bylaws; (ii) conflict with,
or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment (including, without limitation, the triggering of any anti-dilution
provisions), acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party; or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws, rules and
regulations and rules and regulations of any self-regulatory organizations
to
which either the Company or its securities are subject) 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, with respect
to
clauses (ii) and (iii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not, individually or
in
the aggregate, have a Material Adverse Effect). Except (w) as may be required
under the Securities Act in connection with the performance of the Company’s
obligations under the Registration Rights Agreement, (x) for the filing of
a
Form D with the SEC, (y) as may be required for compliance with applicable
state
securities or “blue sky” laws, or (z) as otherwise set forth in Section
3(e)
of the
Disclosure Schedule, the Company is not required to obtain any consent,
approval, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency
or
other third party (including,
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without
limitation, pursuant to any Material Contract (as defined in Section 3(g)
below)) in order for it to execute, deliver or perform any of its obligations
under this Agreement or any of the other Transaction Documents.
(f) Compliance.
The
Company is not in violation of its Certificate of Incorporation, Bylaws or
other
organizational documents and no Subsidiary is in violation of any of its
organizational documents. Except as set forth in Section
3(f)
of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
default (and no event has occurred that with notice or lapse of time or both
would put the Company or any of its Subsidiaries in default) under, nor, to
the
knowledge of the Company or any of its Subsidiaries, has there occurred any
event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is
a
party (including, without limitation, the Material Contracts), except for actual
or possible violations, defaults or rights that would not, individually or
in
the aggregate, have a Material Adverse Effect. The businesses of the Company
and
its Subsidiaries are not being conducted, and shall not be conducted so long
as
any Purchaser owns any of the Securities, in violation of any law, ordinance
or
regulation of any governmental entity, except for possible violations the
sanctions for which either individually or in the aggregate have not had and
would not have a Material Adverse Effect. Neither the Company, nor any of its
Subsidiaries has, nor, to the knowledge of the Company or any of its
Subsidiaries, has any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary, in the course of his actions for,
or
on behalf of, the Company or any Subsidiary, 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. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, provincial
or foreign regulatory authorities that are material to the conduct of its
business, and neither the Company nor any of its Subsidiaries has received
any
notice of proceeding relating to the revocation or modification of any such
certificate, authorization or permit.
(g) SEC
Documents, Financial Statements.
Since
December 31, 2001, the Company has timely filed (within applicable extension
periods) all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)
(all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, the “SEC
Documents”).
The
Company has delivered to each Purchaser true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, 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. None of the statements
made in any such SEC Documents is, or has
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been,
required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings made prior
to
the date hereof). 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 applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”),
consistently applied, during the periods involved (except as may be otherwise
indicated in such financial statements or the notes thereto or, 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, immaterial year-end audit adjustments). Except
as set forth in the financial statements of the Company included in the Select
SEC Documents (as defined below), the Company has no liabilities, contingent
or
otherwise, other than (i) liabilities incurred in the ordinary course of
business with non-affiliated third parties subsequent to the date of such
financial statements and (ii) obligations under contracts and commitments
incurred in the ordinary course of business with non-affiliated third parties
and not required under GAAP to be reflected in such financial statements, which
liabilities and obligations referred to in clauses (i) and (ii), individually
or
in the aggregate, are not material to the financial condition or operating
results of the Company. To the extent required by the rules and regulations
of
the SEC applicable thereto, the Select SEC Documents contain a complete and
accurate list of all material undischarged written or oral contracts,
agreements, leases or other instruments to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound or to which any
of
the properties or assets of the Company or any Subsidiary is subject (each,
a
“Material
Contract”).
Except as set forth in the Select SEC Documents, none of the Company, its
Subsidiaries or, to the best knowledge of the Company, any of the other parties
thereto is in breach or violation of any Material Contract, which breach or
violation would have a Material Adverse Effect. For purposes of this Agreement,
“Select
SEC Documents”
means
the Company’s (A) Proxy Statement for its Annual Meeting of Stockholders held in
connection with the December 31, 2005 fiscal year, (B) Annual Report on Form
10-K for the fiscal year ended December 31, 2005 (the “2005
Annual Report”),
(C)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2006,
June 30, 2006, and September 30, 2006, and (D) Current Reports on Form 8-K
filed
since December 31, 2005.
(h) Internal
Accounting Controls.
The
Company and each of its Subsidiaries maintains 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 GAAP 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. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15)
for
the Company and designed such disclosure controls and procedures to ensure
that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s
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Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is
being prepared. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of the end of the
period covered by the 2005 Annual Report and the Company’s most recently filed
Quarterly Report on Form 10-Q (each such date, an “Evaluation
Date”).
The
Company presented in the 2005 Annual Report and its most recently filed
Quarterly Report on Form 10-Q the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the respective Evaluation Date. Since the Evaluation Date
for
the 2005 Annual Report, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Exchange Act) or, to the Company’s knowledge, in other factors that
could significantly affect the Company’s internal controls.
(i) Absence
of Certain Changes.
Except
as set forth in the Select SEC Documents, since December 31, 2005, there has
been no material adverse change and no material adverse development in the
business, properties, operations, prospects, financial condition or results
of
operations of the Company and its Subsidiaries, taken as a whole. The Company
has not taken any steps, and does not currently expect to take any steps, to
seek protection pursuant to any bankruptcy or receivership law, nor does the
Company or any of its Subsidiaries have any knowledge or reason to believe
that
its creditors intend to initiate involuntary bankruptcy proceedings with respect
to the Company or any of its Subsidiaries.
(j) Transactions
With Affiliates.
Except
as set forth in the Select SEC Documents, or as set forth in Section
3(j)
of the
Disclosure Schedule, none of the officers, directors, or employees of the
Company or any of its Subsidiaries is presently a party to any transaction
with
the Company or any of its Subsidiaries (other than for ordinary course services
solely in their capacity as officers, directors or employees), 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 such officer, director or
employee or any corporation, partnership, trust or other entity in which any
such officer, director, or employee has an ownership interest of five percent
or
more or is an officer, director, trustee or partner.
(k) Absence
of Litigation.
Except
as disclosed in the Select SEC Documents, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body (including, without limitation,
the
SEC) pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, any of its Subsidiaries, or any
of
their respective directors or officers in their capacities as such. There are
no
facts which, if known by a potential claimant or governmental authority, could
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its Subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(l) Intellectual
Property.
Except
for those matters described in the Company’s SEC Documents or as otherwise set
forth in Section
3(l)
of the
Disclosure Schedule and except for other matters which are not material to
the
Company’s business taken as a whole:
-9-
| (i) |
No
“Intellectual
Property” (consisting
of patents, trademarks, service marks, trade dress, trade names and
corporate names, copyrights; and any registrations, applications
and
renewals for any of the foregoing) owned by the Company or its
Subsidiaries which is necessary for the conduct of the Company’s and each
of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted is now involved in any cancellation,
dispute or litigation, and, to the Company’s knowledge, no such action is
threatened.
|
| (ii) |
No
patent owned by the Company or its Subsidiaries is now involved in
any
interference, reissue, re-examination or opposition proceeding.
|
| (iii) |
To
the knowledge of the Company and its Subsidiaries, neither the Company
nor
any Subsidiary of the Company infringes or is in conflict with any
right
of any other person with respect to any third party Intellectual
Property.
|
| (iv) |
Neither
the Company nor any of its Subsidiaries has received written notice
of any
pending conflict with or infringement upon such third party Intellectual
Property.
|
| (v) |
Neither
the Company nor any of its Subsidiaries has entered into any consent
agreement, forbearance to xxx or settlement agreement with respect
to the
validity of the Company’s or its Subsidiaries’ ownership of or right to
use its Intellectual Property.
|
| (vi) |
The
Company and its Subsidiaries have complied, in all material respects,
with
their respective contractual obligations relating to the protection
of the
Intellectual Property used pursuant to licenses.
|
| (vii) |
To
the Company’s knowledge, no person is infringing on or violating the
Intellectual Property owned by the Company which is necessary for
the
conduct of Company’s and each of its Subsidiaries’ respective businesses
as currently conducted or as currently proposed to be
conducted.
|
(m) Title.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and merchantable title to all personal property owned
by
them that is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting
and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(n) Tax
Status.
Except
as set forth in the Select SEC Documents, the Company and each of its
Subsidiaries has made or filed all foreign, U.S. federal, state, provincial
and
local income and all other tax returns, reports and declarations required by
any
jurisdiction to which it
-10-
is
subject (unless and only to the extent that the Company and each of its
Subsidiaries 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. The Company has not executed a waiver with respect to any statute of
limitations relating to the assessment or collection of any foreign, federal,
state, provincial or local tax. None of the Company’s tax returns is presently
being audited by any taxing authority.
(o) Key
Employees.
Each of
the Company’s directors and officers and any Key Employee (as defined below) is
currently serving the Company in the capacity disclosed in the Select SEC
Documents. No Key Employee is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each Key Employee does not subject the Company or any of its Subsidiaries
to
any material liability with respect to any of the foregoing matters. No Key
Employee has, to the knowledge of the Company and its Subsidiaries, any
intention to terminate or limit his employment with, or services to, the Company
or any of its Subsidiaries, nor is any such Key Employee subject to any
constraints which would cause such employee to be unable to devote his full
time
and attention to such employment or services. For purposes of this Agreement,
“Key
Employee”
means
the persons listed in Section
3(o)
of the
Disclosure Schedule and any individual who assumes or performs any of the duties
of a Key Employee.
(p) Employee
Relations.
Neither
the Company nor any of its Subsidiaries is involved in any material union labor
dispute nor, to the knowledge of the Company or any of its Subsidiaries, is
any
such dispute threatened. The Company and its Subsidiaries believe that their
relations with their employees are good. No executive officer (as defined in
Rule 501(f) of the Securities Act) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer’s employment
with the Company. The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting employment
and
employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or
in
the aggregate, result in a Material Adverse Effect.
(q) Insurance.
The
Company and each Subsidiary maintains in full force and effect insurance
coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each
Subsidiary, and the Company reasonably believes such insurance coverage to
be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure. To the Company’s knowledge, no
default or event has occurred that could give rise to a default under any such
policy.
(r) Environmental
Matters.
Neither
the Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any
-11-
court,
domestic or foreign, relating to the use, disposal or release of hazardous
or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”);
owns
or, to the Company’s knowledge, operates any real property contaminated with any
substance that is subject to any Environmental Laws; is liable for any off-site
disposal or contamination pursuant to any Environmental Laws; or is subject
to
any claim relating to any Environmental Laws, which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or,
to
the Company’s knowledge, threatened investigation that might lead to such a
claim.
(s) Solvency.
Based
on the financial condition of the Company as of the Closing Date, and after
giving effect to the net proceeds of the transactions contemplated by this
Agreement, the Company’s fair saleable value of its assets exceeds the amount
that is currently required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities). 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).
(t) Listing.
The
Common Stock is currently listed for trading on the American Stock Exchange
(“AMEX”).
Except as set forth in Section
3(t)
of the
Disclosure Schedule, the Company is not in violation of the listing requirements
of AMEX and does not reasonably anticipate that the Common Stock will be
delisted by AMEX for the foreseeable future, and has not received any notice
other than as already publicly disclosed regarding the possible delisting of
the
Common Stock from AMEX.
(u) Form
S-3 Eligibility.
The
Company is eligible to register the resale of its Common Stock on a registration
statement on Form S-3 under the Securities Act. Except as set forth in
Section
3(u)
of the
Disclosure Schedule, there exist no facts or circumstances that would prohibit
or delay the preparation and filing of a registration statement on Form S-3
with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement). The Company has no basis to believe that its past or present
independent public auditors will withhold their consent to the inclusion, or
incorporation by reference, of their audit opinion concerning the Company’s
financial statements to be included in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2006 in the future Series B Registration
Statement, which may be required to be filed pursuant to the Registration Rights
Agreement.
(v) Anti-Takeover
Provisions.
The
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under its Certificate of Incorporation
or the laws of the state of its incorporation (including, without limitation,
Section 203 of the Delaware General Corporation Law, as amended) which is or
could become applicable to any Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any and all Purchaser’s ownership of the
Securities.
(w) Acknowledgment
Regarding Each Purchaser’s Purchase of the Securities.
Other
than as set forth in Section
3(w)
of the
Disclosure Schedule, the Company acknowledges and
-12-
agrees
that each Purchaser is acting solely in the capacity of arm’s length purchaser
with respect to this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, and that prior to the Closing
no
Purchaser is (i) an officer or director of the Company; (ii) an “affiliate” of
the Company (as defined in Rule 144 under the Securities Act (including any
successor rule, “Rule
144”));
or
(iii) a “beneficial owner” of more than 5% of the Common Stock (as defined for
purposes of Rule 13d-3 of the Exchange Act). 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 this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby,
and
any advice given by a Purchaser or any of its representatives or agents in
connection with this Agreement or the other Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Purchaser’s purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation by
the
Company and its representatives.
(x) No
General Solicitation or Integrated Offering.
Neither
the Company nor any distributor participating on the Company’s behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any “general solicitation” (as such term
is defined in Regulation D) with respect to any of the Securities being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting
on
its or their behalf, has directly or indirectly made any offers or sales of
any
security or solicited any offers to buy any security under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Company for purposes of the Securities
Act,
which result of such integration would require registration under the Securities
Act, or any applicable stockholder approval provisions.
(y) No
Brokers.
Other
than as set forth in Section
3(y)
of the
Disclosure Schedule, the Company has taken no action that would give rise to
any
claim by any person for brokerage commissions, finder’s fees or similar payments
by any Purchaser relating to this Agreement or the transactions contemplated
hereby.
(z) Acknowledgment
Regarding Securities.
The
number of Conversion Shares issuable upon conversion of the Series B Notes
and
the number of Warrant Shares issuable upon exercise of the Series B Warrants
may
increase in certain circumstances. The Company’s directors and executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Company acknowledges that its obligation to issue Conversion
Shares upon conversion of the Series B Notes in accordance with the terms
thereof and the Warrant Shares upon the exercise of the Series B Warrants in
accordance with the terms thereof is absolute and unconditional, regardless
of
the dilution that such issuance may have on the ownership interests of other
stockholders and the availability of remedies provided for in any of the
Transaction Documents relating to a failure or refusal to issue Conversion
Shares or Warrant Shares. Taking the foregoing into account, the Company’s Board
of Directors has determined in its good faith business judgment that the
issuance of the Series B Notes and Series B Warrants hereunder and the
consummation of the other transactions contemplated hereby are in the best
interests of the Company and its stockholders.
-13-
(aa) Disclosure.
All
information relating to or concerning the Company and/or any of its Subsidiaries
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof or 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. No event or circumstance has occurred or exists with respect to
the
Company or its Subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required
to be
disclosed by the Company in a registration statement filed on the date hereof
by
the Company under the Securities Act with respect to a primary issuance of
the
Company’s securities.
4. COVENANTS.
(a) Best
Efforts.
The
parties shall use their respective best efforts timely to satisfy each of the
conditions described in Sections 6 and 7 of this Agreement.
(b) Form
D; Blue Sky Laws.
The
Company shall file with the SEC a Form D with respect to the Securities as
required under Regulation D. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary to
qualify the Securities for sale to each Purchaser pursuant to this Agreement
under applicable securities or “blue sky” laws of the states of the United
States or obtain exemption therefrom. The Company shall issue a press release
(the “Press
Release”)
describing in reasonable detail the transactions contemplated hereby and such
other matters as had previously been discussed by the Purchasers and the
Company, as soon as practicable on or after the date hereof, but in no event
later than 8:30 a.m., New York, New York time, on the first trading day
following the date hereof. The Press Release shall be subject to prior review
and comment from the Purchasers. In addition, no later than the second business
day after the Closing Date, the Company shall file a Form 8-K with the SEC
concerning this Agreement and the transactions contemplated hereby, which Form
8-K shall attach this Agreement and its Exhibits as exhibits to such Form 8-K
(the “8-K
Filing”).
Except as set forth in Section
4(b)
to the
Disclosure Schedules, from and after the date of the Press Release, the Company
hereby acknowledges that no Purchaser shall be in possession of any material
nonpublic information received from the Company, any of its Subsidiaries or,
to
the best of the Company’s knowledge, any of its or their respective directors,
officers, employees, affiliates, stockholders, agents or representatives, that
is not disclosed in the Press Release. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective directors,
officers, employees, affiliates, stockholders, agents or representatives not
to,
provide any Purchaser with any material nonpublic information regarding the
Company or any of its Subsidiaries from and after the Press Release without
the
prior express written consent of such Purchaser; provided,
however,
that a
Purchaser that exercises its rights under Section 4(n) hereof shall be
deemed to have given such express written consent. In the event the covenant
in
the preceding sentence is breached for any reason, whether or not as a result
of
the fault or nonfeasance of the Company, the Company shall, as promptly as
practicable and in no event later than the first trading day after becoming
aware of such breach, disclose all such material nonpublic information to the
public in accordance with Regulation FD
-14-
promulgated
under the Exchange Act. Subject to the foregoing, neither the Company nor any
Purchaser shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided,
however,
that
the Company shall be entitled, without the prior approval of any Purchaser,
to
make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (provided that
(a)
the Required Holders (as defined herein) shall be consulted by the Company
in
connection with any such press release or other public disclosure prior to
its
release and (b) in no event will any Purchaser be identified by name in any
press release, including without limitation, the Press Release, or other public
disclosure (other than in a future Series B Registration Statement on Form
S-3
with respect to the Registrable Securities) without the express prior approval
of the Purchaser to be named).
(c) Reporting
Status.
So long
as any Purchasers (or any of their respective affiliates) beneficially own
any
of the Securities, the Company shall timely file all reports required to be
filed with the SEC pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination. In addition, except as set forth in Section
4(c)
of the
Disclosure Schedule, the Company shall take all actions necessary to meet the
“registrant eligibility” requirements set forth in the general instructions to
Form S-3 or any successor form thereto, to continue to be eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under
the
Securities Act.
(d) Use
of
Proceeds.
The
Company shall use the proceeds from the sale and issuance of the Series B Notes
and Series B Warrants as set forth on Section
4(d)
of the
Disclosure Schedule. Except as set forth on Section
4(d)
of the
Disclosure Schedule such proceeds shall not be used to (i) pay dividends; (ii)
pay for any increase in executive compensation or make any loan or other
material advance to any officer, employee, shareholder, director or other
affiliate of the Company, without the express approval of the Board of Directors
acting in accordance with past practice; (iii) purchase debt or equity
securities of any entity (including redeeming the Company’s own securities, but
expressly excluding the scheduled monthly redemptions of the Series B Notes
and
the Series A Notes), except for (A) evidences of indebtedness issued or fully
guaranteed by the United States of America and having a maturity of not more
than one year from the date of acquisition, (B) certificates of deposit, notes,
acceptances and repurchase agreements having a maturity of not more than one
year from the date of acquisition issued by a bank organized in the United
States having capital, surplus and undivided profits of at least $500,000,000,
(C) the highest-rated commercial paper having a maturity of not more than one
year from the date of acquisition, and (D) “Money Market” fund shares, or money
market accounts fully insured by the Federal Deposit Insurance Corporation
and
sponsored by banks and other financial institutions, provided that the
investments consist principally of the types of investments described in clauses
(A), (B), or (C) above; or (iv) make any investment not directly related to
the
current business of the Company.
(e) Financial
Information.
So long
as any Purchasers (or any of their respective affiliates) beneficially own
any
of the Securities, the Company shall deliver the following reports to each
such
Purchaser: (i) within ten (10) days after the filing with the SEC, a copy of
its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any
-15-
Current
Reports on Form 8-K, and (ii) within one day after release, copies of all press
releases issued by the Company or any of its Subsidiaries.
(f) Reservation
of Shares.
The
Company currently has authorized and reserved for the purpose of issuance a
sufficient number of shares of Common Stock required to provide for the full
conversion of the Series B Notes (at the current conversion price) and issuance
of the Conversion Shares in connection therewith, the full exercise of the
Series B Warrants (at the current exercise price) and the issuance of the
Warrant Shares in connection therewith. The Company shall be obligated to
authorize and reserve for issuance a sufficient number of shares of Common
Stock
to provide for the full conversion of the Series B Notes, the issuance of the
Conversion Shares in connection therewith, the full exercise of the Series
B
Warrants and the issuance of the Warrant Shares in connection therewith
(including those shares issued pursuant to Section 11(i) of the Warrant)
(collectively, the “Issuance
Obligations”).
In
the event such number of shares becomes insufficient to satisfy the Issuance
Obligations, the Company shall take all necessary action to authorize and
reserve such additional shares of Common Stock necessary to satisfy the Issuance
Obligations.
(g) Listing;
Stockholder Meeting.
The
Company shall not without stockholder approval issue more than 11,709,703 shares
of Common Stock pursuant to the transactions contemplated hereby and in the
other Transaction Documents. The Company shall (i) prepare and file an
additional listing application with AMEX covering the Conversion Shares
initially issuable upon conversion of the Series B Notes (without giving effect
to any limitations on conversion contained in Article IX.A of the Series B
Notes) and the Warrant Shares initially issuable upon exercise of the Series
B
Warrants (without giving effect to any limitations on exercise contained in
Section 3(c) of the Series B Warrants); (ii) use its best efforts to cause
such
Conversion Shares and Warrant Shares to be approved for listing on AMEX as
soon
as possible thereafter; (iii) use its best efforts to maintain the listing
of
the Conversion Shares and Warrant Shares on AMEX, the NASDAQ Capital Market
(the
“Capital
Market”),
the
New York Stock Exchange (the “NYSE’),
the
NASDAQ Global Market (the “Global
Market”)
or the
NASDAQ Global Select Market (the “Global
Select Market”),
whichever is at the time the principal trading exchange or market for the Common
Stock. In addition, the Company shall, at a special meeting of stockholders,
to
be held no later than ninety (90) days after the Closing Date, offer proposals
(the “Stockholder
Proposals”)
for
stockholder approval (as required by the applicable rules and regulations of
AMEX) with respect to the transactions contemplated by the Transaction
Documents, including proposals approving (i) the issuance of shares upon
conversion of the Series B Notes, as payment of interest on the Series B Notes,
or upon the amortization of the Series B Notes, at a price below $0.63 (the
“Conversion
Floor Price”);
(ii)
the issuance of shares upon exercise of the Series B Warrants pursuant to the
full ratchet antidilution provisions in the Series B Warrants at a price below
$0.63 (the “Warrant
Floor Price”);
and
(iii) if the Company determines it is necessary in order to be able to satisfy
its obligations relative to the issuance of Conversion Shares and Warrant Shares
under the Series B Notes and Series B Warrants, an amendment to the Company’s
Certificate of Incorporation to increase the number of authorized shares of
Common Stock, with the recommendation of the Company’s Board of Directors that
such proposals be approved, and the Company shall use its best efforts to
solicit proxies from its stockholders in connection therewith in favor of such
proposals and all management-appointed proxyholders shall vote their proxies
in
favor of such proposals.
-16-
(h) [
** ]
Bonuses.
[ ** ]
The Company will not make any cash payments to senior level staff for bonuses
earned at any time during the 2006 fiscal year except for (i) cash bonuses
paid
to sales staff based on achievement of pre-established goals and (ii) a maximum
of $153,000 (not inclusive of any amounts paid pursuant to (i) above) will
be
paid to other senior level staff based on achievement of individual objectives.
(i) Corporate
Existence.
So long
as any Purchasers (or any of their respective affiliates) beneficially own
any
of the Securities, the Company shall maintain its corporate existence, and
in
the event of a merger, consolidation or sale of all or substantially all of
the
Company’s assets, the Company shall ensure that the surviving or successor
entity in such transaction (i) assumes the Company’s obligations under this
Agreement and the other Transaction Documents and the agreements and instruments
entered into in connection herewith and therewith regardless of whether or
not
the Company would have had a sufficient number of shares of Common Stock
authorized and available for issuance in order to effect the conversion of
all
the Series B Notes and exercise in full of all Series B Warrants outstanding
as
of the date of such transaction and (ii) except in the event of a merger,
consolidation of the Company into any other corporation, or the sale or
conveyance of all or substantially all of the assets of the Company where the
consideration consists solely of cash, the surviving or successor entity is
a
publicly traded corporation whose common stock is listed for trading on the
Capital Market, the Global Market, the Global Select Market, the NYSE or
AMEX.
(j) No
Integrated Offerings.
The
Company shall not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of the
Securities being offered or sold hereunder under the Securities Act or cause
this offering of the Securities to be integrated with any other offering of
securities by the Company for purposes of any stockholder approval provision
applicable to the Company or its securities.
(k) Legal
Compliance.
The
Company shall conduct its business and the business of its Subsidiaries in
compliance with all laws, ordinances or regulations of governmental entities
applicable to such businesses, except where the failure to do so would not
have
a Material Adverse Effect.
(l) Redemptions,
Dividends and Repayments of Indebtedness.
So long
as any Purchasers (or any of their respective affiliates) beneficially own
any
of the Series B Notes, the Company shall not, without first obtaining the
written approval of the holders of a majority of the aggregate principal face
amount of the Series B Notes then outstanding (which approval may be given
or
withheld by such holders in their sole and absolute discretion), repurchase,
redeem or declare or pay any cash dividend or distribution on any shares of
capital stock of the Company or repay or prepay any indebtedness of the Company
other than as expressly required pursuant to the terms of such indebtedness
as
in effect on the date hereof.
(m) Information.
So long
as any Purchasers (or any of their respective affiliates) beneficially own
any
of the Securities, the Company shall furnish to each such Purchaser the
information the Company must deliver to any holder or to any prospective
transferee of Securities in order to permit the sale or other transfer of such
Securities pursuant to Rule 144A of the SEC or any similar rule then in
effect.
-17-
The
Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
(n) Inspection
of Properties and Books.
So long
as any Purchasers (or any of their respective affiliates) beneficially own
any
of the Securities, each such Purchaser and its representatives and agents
(collectively, the “Inspectors”)
shall
have the right, at such Purchaser’s expense, to visit and inspect any of the
properties of the Company and of its Subsidiaries, to examine the books of
account and records of the Company and of its Subsidiaries, to make or be
provided with copies and extracts therefrom, to discuss the affairs, finances
and accounts of the Company and of its Subsidiaries with, and to be advised
as
to the same by, its and their officers, employees and independent public
accountants (and by this provision the Company authorizes such accountants
to
discuss such affairs, finances and accounts, whether or not a representative
of
the Company is present) all at such reasonable times and intervals and to such
reasonable extent as the Purchasers may desire; provided,
however,
that
each Inspector shall hold in confidence and shall not make any disclosure
(except to such Purchaser) of any such information which the Company determines
in good faith to be confidential, and of which determination the Inspectors
are
so notified, unless (i) the parties mutually determine on a reasonable basis
that the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement filed pursuant to the
Registration Rights Agreement, (ii) the release of such information is ordered
pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, or (iii) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. Each Purchaser agrees that it shall, upon learning that
disclosure of such information is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the information
deemed confidential.
(o) Stockholders
Rights Plan.
No
claim shall be made or enforced by the Company or any other person that any
Purchaser is an “Acquiring Person” under any stockholders rights plan or similar
plan or arrangement in effect or hereafter adopted by the Company, or that
any
Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under this Agreement or any
other
Transaction Documents or under any other agreement between the Company and
the
Purchasers.
(p) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by any
Purchaser in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Purchaser effecting a pledge of Securities shall
be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document. The Company shall execute and deliver such documentation as a pledgee
of the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by a Purchaser.
-18-
(q) Expenses.
At the
Closing, the Company shall pay to SDS reimbursement for the out-of-pocket
expenses reasonably incurred by SDS, its affiliates and its advisors in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, including, without limitation,
SDS’s and its respective affiliates’ and advisors’ reasonable due diligence and
attorneys’ fees and expenses (the “Expenses”);
provided,
however,
that
SDS shall be permitted, in its discretion, to deduct all of its Expenses from
the Subscription Amount payable by SDS hereunder.
(r) Participation
Right.
Subject
to the terms and conditions specified in this Section 4(r), until the third
anniversary of the date hereof (or such later date to which the maturity date
of
the Series B Notes is extended), Purchasers holding $250,000 or more of
aggregate principal face amount of the Series B Notes (each, a “Qualifying
Purchaser”)
shall
have a right to participate in any issuance by the Company of (a) equity or
equity-linked securities, or (b) debt which is convertible into equity or in
which there is an equity component (“Additional
Securities”)
on the
same terms and conditions as offered by the Company to the other purchasers
of
such Additional Securities. Each time the Company proposes to offer any
Additional Securities, the Company shall make an offering of such Additional
Securities to each such Purchaser in accordance with the following provisions:
(i) At
least
ten (10) trading days prior to the closing of the sale of Additional
Securities,
the
Company shall deliver to each Qualifying Purchaser a written notice of its
intention to effect a Subsequent Financing (“Pre-Notice”),
which
Pre-Notice shall ask such Qualifying Purchaser if it wants to review the details
of such financing (such additional notice, a “Subsequent
Financing Notice”).
Upon
the request of a Qualifying Purchaser, and only upon a request by such
Qualifying Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than five (5) trading days after such request, deliver
a
Subsequent Financing Notice to such Qualifying Purchaser.
The
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the person with whom such Subsequent Financing is proposed to be
effected (provided that the name of such person(s) is available), and attached
to which shall be a term sheet or similar document relating thereto. Each
Qualifying Purchaser shall notify the Company by 6:30 p.m. (New York City time)
on the fifth (5th)
trading
day after their receipt of the Subsequent Financing Notice of its willingness
to
provide the Subsequent Financing on the terms described in the Subsequent
Financing Notice, subject to completion of mutually acceptable documentation.
No
Purchaser shall offer to sell, solicit offers to buy, dispose of, loan, pledge
or grant any right with respect to the Company’s Common Stock (other than
pursuant to this Section 4(r)) from the time the Company delivers the Subsequent
Financing Notice until such time as the Purchaser is no longer in possession
of
material non-public information regarding the Company.
(ii) Each
Qualifying Purchaser agreeing to participate in the Subsequent Financing (the
“Participating
Purchasers”)
shall
have the right to purchase, at the price and on the terms specified in the
Notice, up to that portion of such Additional Securities that has a total
purchase price equal to fifty percent (50%) of the aggregate principal amount
of
Series B Notes then held by such Purchaser
(the
“Series
B Purchase Amount”) provided,
that
the
Purchasers eligible to participate in the offering of the Additional Securities
may only purchase in the
-19-
aggregate
up to 50% of the aggregate maximum dollar amount and/or other consideration
being offered in such offering (the
“Participating
Purchaser Allotment”)
(with
any
cutback required being allocated on a pro rata basis among the participating
Purchasers based upon percentage of aggregate principal amount of all such
participating Purchasers); provided
further, that
any
Holder as defined in the Series B Notes who has participation and exchange
rights under the transaction documents related to its purchase of the Company’s
Series A Notes may not exercise its participation and exchange rights hereunder
if it has exercised its rights under those Series A transaction documents and
further
provided that
the
limitations on the number of Additional Securities that a Participating
Purchaser may acquire pursuant to this Section 4(r) shall include all Additional
Securities that such Participating Purchaser may acquire pursuant to the
exchange right set forth in Article X of the Series B Notes.
Notwithstanding anything to the contrary contained herein, if the holders of
the
Series A Notes and the holders of the Series B Notes collectively have not
elected to participate pursuant to their Series A Participation and Series
B
Participation (each as defined below) in a Subsequent Financing up to the full
Participating Purchaser Allotment, the holders of the Series A Notes that
exercised their participation rights or exchange rights under the Series A
Notes
(the “Series
A Participation”)
may
elect to exercise their participation or exchange rights under the Series B
Notes (the “Series
B Participation”)
for
Additional Securities up to an amount equal to such Participating Purchaser’s
Series B Purchase Amount, and likewise holders of the Series B Notes that
elected their Series B Participation may elect their Series A Participation
for
Additional Securities up to an amount equal to 50% of such Participating
Purchasers aggregate principal value of the Series A Notes then held by such
Purchaser until the Participating Purchaser Allotment has been met (with any
cutback required being allocated on a pro rata basis among the Participating
Purchasers based upon percentage of aggregate principal amount outstanding
on
the Notes of all such participating Purchasers);
provided however, that in no case may the Participating Purchasers collectively
purchase Additional Securities pursuant to the Series A Participation and the
Series B Participation in an amount greater than the Participating Purchaser
Allotment.
(iii) If
all
Additional Securities which the eligible Purchasers are entitled to purchase
pursuant to this Section 4(r) are not purchased as provided herein, the Company
may, during the sixty (60) trading-day period following the expiration of the
five (5) trading-day period provided in clause (i), offer the remaining
unsubscribed portion of such Additional Securities to any person at a price
not
less than, and upon terms no more favorable to the offeree than, as specified
in
the Notice. If the Company does not consummate the sale of such Additional
Securities within such period, the right provided hereunder shall be deemed
to
be revived and such Additional Securities shall not be offered or sold unless
first reoffered to the Purchasers in accordance herewith.
(iv) Notwithstanding
the foregoing, the participation rights granted in this Section 4(r) shall
not
be applicable to: (A) the issuance of shares of Common Stock upon the exercise
or conversion of the Company’s options, warrants, convertible notes or otherwise
pursuant to the terms of convertible securities outstanding as of the date
hereof and disclosed in Section
3(c)
of the
Disclosure Schedule in accordance with the terms of such options, warrants
or
other securities as in effect on the date hereof; (B) the issuance of stock,
stock options or other stock rights pursuant to any stock or option plan duly
adopted by a majority of the non-employee members of the Board of Directors
of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose; (C) the issuance of securities pursuant
to
-20-
a
bona
fide underwritten public offering with gross proceeds of at least $25,000,000;
(D) the issuance of the Series B Notes, the Series B Warrants, the Conversion
Shares, the Warrant Shares and the Additional Warrant Shares (as defined in
the
Series B Warrants); (E) the issuance of securities in a bona fide business
acquisition the primary purpose of which, as determined in good faith by a
majority of the members of the Board of Directors of the Company, is not the
raising of capital; (F) the issuance of capital stock or convertible securities
in a joint venture, strategic partnership or licensing arrangement, the primary
purpose of which, as determined in good faith by a majority of the members
of
the Board of Directors of the Company, is not the raising of capital; and (G)
the issuance of shares of common stock by reason of a dividend, stock split
or
other distribution on shares of common stock (but only to the extent that such
a
dividend, split or distribution results in an adjustment in the conversion
price
of the Series B Notes and the exercise price and number of shares issuable
under
the Series B Warrants).
(s) Restriction
on Sales.
Until
such time that the Company issues the Press Release, or otherwise publicly
announces the transactions contemplated hereby, the Purchasers will not offer
to
sell, solicit offers to buy, dispose of, loan, pledge or grant any right with
respect to the Company’s Common Stock.
(t) Listing
of Additional Securities on AMEX.
Immediately following stockholder approval of the Stockholder Proposals, if
approved, the Company shall prepare and file with AMEX a listing application
covering all additional Conversion Shares issuable and not included in the
listing application referenced in Section 7(c) hereof, and, if necessary,
all additional Warrant Shares and shares of Common Stock issuable in connection
with the Warrants not included in the Company's AMEX listing application
referred to in Section 7(c) hereof.
(u) Dilutive
Issuances.
Until
such time as the Company has held a meeting of its stockholders at which the
Stockholder Proposals have been voted upon, the Company shall not issue any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, at an effective price below the
Conversion Floor Price, except for shares of Common Stock that would be excluded
from the participation right in clauses (A), (B) or (D) of Section 4(r)(iv)
above.
5. SECURITIES
TRANSFER MATTERS.
(a) Conversion
and Exercise.
Upon
conversion of the Series B Notes or exercise of the Series B Warrants by any
person, (i) if the DTC Transfer Conditions (as defined below) are satisfied,
the
Company shall cause its transfer agent to electronically transmit all Conversion
Shares and Warrant Shares by crediting the account of such person or its nominee
with the Depository Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission system; or (ii) if the DTC
Transfer Conditions are not satisfied, the Company shall issue and deliver,
or
instruct its transfer agent to issue and deliver, certificates (subject to
the
legend and other applicable provisions hereof and the Series B Notes and Series
B Warrants), registered in the name of such person or its nominee, physical
certificates representing the
-21-
Conversion
Shares and Warrant Shares, as applicable. Even if the DTC Transfer Conditions
are satisfied, any person effecting a conversion of Series B Notes or exercising
Series B Warrants may instruct the Company to deliver to such person or its
nominee physical certificates representing the Conversion Shares and Warrant
Shares, as applicable, in lieu of delivering such shares by way of DTC Transfer.
For purposes of this Agreement, “DTC
Transfer Conditions”
means
that (A) the Company’s transfer agent is participating in the DTC Fast Automated
Securities Transfer program and (B) the certificates for the Conversion Shares
or Warrant Shares required to be delivered do not bear a legend and the person
effecting such conversion or exercise is not then required to return such
certificate for the placement of a legend thereon.
(b) Transfer
or Resale.
Each
Purchaser understands that (i) except as provided in the Registration Rights
Agreement, the sale or resale of the Securities have not been and are not being
registered under the Securities Act or any state securities laws, and the
Securities may not be transferred unless (A) the transfer is made pursuant
to
and as set forth in an effective registration statement under the Securities
Act
covering the Securities; or (B) such Purchaser shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; or (C) sold under and in
compliance with Rule 144; or (D) sold or transferred to an affiliate of such
Purchaser that agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 5(b); and (ii) neither the
Company nor any other person is under any obligation to register such Securities
under the Securities Act or any state securities laws (other than pursuant
to
the terms of 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, provided such pledge is consistent with applicable laws, rules
and
regulations.
(c) Legends.
Each
Purchaser understands that the Series B Notes and Series B Warrants and, until
such time as the Conversion Shares and Warrant Shares have been registered
under
the Securities Act (including registration pursuant to Rule 416 thereunder)
as
contemplated by the Registration Rights Agreement or otherwise may be sold
by
such Purchaser under Rule 144, the certificates for the Conversion Shares and
Warrant Shares may bear a restrictive legend in substantially the following
form:
The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or the securities laws of any state of
the
United States or in any other jurisdiction. The securities represented hereby
may not be offered, sold or transferred in the absence of an effective
registration statement for the securities under applicable securities laws
unless offered, sold or transferred pursuant to an available exemption from
the
registration requirements of those laws.
For
so
long as the Conversion Shares and Warrant Shares (i) have been registered for
resale under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or (ii)
otherwise may be sold by such Purchaser under Rule 144(k), the Company shall
instruct the transfer agent that, in connection with the issuance of the
Conversion Shares and Warrant Shares, certificates representing such Conversion
Shares and Warrant Shares shall be issued without the restrictive legend above,
-22-
provided
that, in the case of clause (i), the Company shall have received an undertaking
from the holder that such Conversion Shares and Warrant Shares will be sold
or
transferred pursuant to the prospectus contained in such registration statement
referred to in clause (i), including the prospectus delivery requirements if
any, in accordance with the plan of distribution included in the registration
statement.
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 state securities laws, (i) the sale
of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder); (ii) such holder provides the Company with
an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act;
or
(iii) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144(k). In the event the above legend is removed
from any Security and thereafter the effectiveness of a registration statement
covering such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance written notice to such Purchaser the Company may require
that
the above legend be placed on any such Security that cannot then be sold
pursuant to an effective registration statement or under Rule 144 and such
Purchaser shall cooperate in the replacement of such legend. Such legend shall
thereafter be removed when such Security may again be sold pursuant to an
effective registration statement or under Rule 144(k).
(d) Transfer
Agent Instruction.
Upon
compliance by any Purchaser with the provisions of this Section 5 with respect
to the transfer of any Securities, the Company shall permit the transfer of
such
Securities and, in the case of the transfer of Conversion Shares or Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
(or effect a DTC Transfer) in such name and in such denominations as specified
by such Purchaser. The Company shall not give any instructions to its transfer
agent with respect to the Securities, other than any permissible or required
instructions provided in this Section 5, and the Securities shall otherwise
be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Series B Notes and
Series B Warrants to each Purchaser hereunder is subject to the satisfaction,
at
or before the Closing Date, of each of the following conditions as to such
Purchaser, provided that such conditions are for the Company’s sole benefit and
may be waived by the Company at any time in its sole discretion:
(a) Execution
of Transaction Documents.
Each
Purchaser shall have executed such Purchaser’s Execution Page to this Agreement
and each other Transaction Document to which such Purchaser is a party and
delivered the same to the Company.
(b) Payment
of Purchase Price.
Each
Purchaser shall have delivered the full amount of such Purchaser’s Subscription
Amount to the Company by wire transfer in accordance with
-23-
the
Company’s written wiring instructions (except for SDS to the extent that it may
offset its expenses against the Subscription Amount pursuant to Section 4(q)
hereof).
(c) Representations
and Warranties True; Covenants Performed.
The
representations and warranties of each Purchaser 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 that speak as of a specific date,
which representations and warranties shall be true and correct as of such date),
and such Purchaser shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or prior to the Closing
Date.
(d) No
Legal Prohibition.
No
statute, rule, regulation, executive order, decree, ruling, injunction, action
or proceeding shall have been enacted, entered, promulgated or endorsed by
any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS
TO EACH PURCHASER’S OBLIGATION TO PURCHASE.
The
obligation of each Purchaser hereunder to purchase the Series B Notes and Series
B Warrants for which it is subscribing from the Company hereunder is subject
to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that such conditions are for each Purchaser’s individual
and sole benefit and may be waived by any Purchaser as to such Purchaser at
any
time in such Purchaser’s sole discretion:
(a) Execution
of Transaction Documents.
The
Company shall have executed such Purchaser’s Execution Page to this Agreement
and each Transaction Document to which the Company is a party and delivered
executed originals of the same to such Purchaser. All other parties to the
Transaction Documents (other than such Purchaser) shall have executed such
Transaction Documents to which they are a party.
(b) Delivery
of Securities.
The
Company shall have delivered to such Purchaser a duly executed Series B Note
and
Series B Warrant for the Subscription Amount being purchased by such Purchaser,
registered in such Purchaser’s name.
(c) AMEX
Listing.
The
Company shall: (i) prepare and file with AMEX a listing application covering
the
Conversion Shares initially issuable upon conversion of the Notes (without
giving effect to any limitations on conversion contained in Article IX.A of
the
Series B Notes) and the Warrant Shares initially issuable upon exercise of
the
Series B Warrants (without giving effect to any limitations on exercise
contained in Section 3(c) of the Series B Warrants), (ii) use its best efforts
to take all steps necessary to cause such shares to be approved for listing
on
AMEX as soon as possible thereafter, (iii) notify the Purchasers upon such
listing, and (iv) use its best efforts to maintain the listing of the Common
Stock on AMEX, the Capital Market, the Global Market, the Global Select Market
or the NYSE.
(d) Representations
and Warranties True; Covenants Performed.
The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the
-24-
Closing
Date as though made at that time (except for representations and warranties
that
speak as of a specific date, which representations and warranties shall be
true
and correct as of such date) and the Company shall have performed, satisfied
and
complied with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
prior
to the Closing Date. Such Purchaser shall have received a certificate, executed
by the Chief Executive Officer of the Company after reasonable investigation,
dated as of the Closing Date to the foregoing effect and as to such other
matters as may reasonably be requested by such Purchaser.
(e) No
Legal Prohibition.
No
statute, rule, regulation, executive order, decree, ruling, injunction, action
or proceeding shall have been enacted, entered, promulgated or endorsed by
any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of, any of the transactions contemplated
by this Agreement.
(f) Legal
Opinion.
Such
Purchaser shall have received an opinion of the Company’s counsel dated as of
the Closing Date in substantially the form approved by the Purchasers prior
to
the Closing.
(g) No
Material Adverse Change.
There
shall have been no material adverse changes and no material adverse developments
in the business, properties, operations, prospects, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole, since the date hereof, and no information that is materially adverse
to the Company and of which such Purchaser is not currently aware shall come
to
the attention of such Purchaser.
(h) Corporate
Approvals.
Such
Purchaser shall have received (i) a copy of resolutions, duly adopted by the
Board of Directors of the Company, which shall be in full force and effect
at
the time of the Closing, authorizing the execution, delivery and performance
by
the Company of this Agreement and the other Transaction Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
and providing a determination as to whether any Purchasers are or will be an
“interested stockholder” as defined in Section 203 of the Delaware General
Corporation Law, as amended, as a result of the transactions contemplated
hereby, certified as such by the Secretary or Assistant Secretary of the
Company; (ii) consents of the holders of at least 75% of the outstanding face
amount of the Company's Series A Preferred Stock for the incurrence of aggregate
debt of up to $12,000,000 since March 4, 2005 and a copy of any amendment filed
by the Company to its Certificate of Incorporation in connection therewith,
certified as such by the Secretary or Assistant Secretary of the Company; (iii)
consents of the holders of a majority of outstanding principal balance of the
Series A Notes to the incurrence by the Company of additional debt, including
the issuance of the Series B Notes, and to the pari
passu
position
of the Series B Notes to the Series A Notes as to repayment and security; (iv)
consents by holders of the Series A Notes who are entitled to exchange or
participation rights under Article X of the Series A Notes or Section 4(q)
of
the Securities Purchase Agreement, dated January 13, 2006, by and among the
Company and the purchasers party thereto (the “Series
A Purchase Agreement”)
to
waive their rights thereto; (v) an amendment of the Series A Notes to remove
volume trading limitations under the Stock Payment Conditions (as defined in
Article XI.T of the Series A Notes) to allow interest and principal
-25-
payments
on the Series A Notes to be payable in stock through December 13, 2007; and
(vi)
such other documents as it reasonably requests in connection with the
Closing.
(i) Staff
Reductions.
The
Company shall have reduced the Company’s overall headcount by the equivalent of
five (5) full-time employees, with planned annual savings between $645,000
and
$655,000. The Company shall have offered severance payments to departing or
released employees only as is consistent with contractual obligations and/or
historical practice.
8. COLLATERAL
AGENCY PROVISIONS.
(a) Appointment
of Collateral Agent.
The
Purchasers hereby appoint SDS to act as collateral agent (the “Collateral
Agent”)
and
SDS agrees to act as Collateral Agent for the Purchasers, as contemplated herein
and in the Security Documents.
(b) Collateral
Agent Authorized to Enter into Collateral Documents.
Each of
the Purchasers authorizes the Collateral Agent to enter into the Security
Documents on its behalf.
(c) Amendment
to Security Documents.
The
Purchasers holding a majority of the total outstanding principal balance of
the
Series B Notes (the “Required
Holders”)
shall
have the right to direct the Collateral Agent, from time to time, to consent
to
any amendment, modification or supplement to or waiver of any provision of
any
Security Document and to release any Collateral (as defined in the Security
Documents) from any lien or security interest held by the Collateral Agent;
provided,
however,
that
(i) no such direction shall require the Collateral Agent to consent to the
modification of any provision or portion thereof which (in the sole judgment
of
the Collateral Agent) is intended to benefit the Collateral Agent; (ii) the
Collateral Agent shall have the right to decline to follow any such direction
if
the Collateral Agent shall determine in good faith that the directed action
is
not permitted by the terms of any Security Document or may not lawfully be
taken; and (iii) no such direction shall waive or modify any provision of any
Security Document the waiver or modification of which expressly requires the
consent of all of the Purchasers unless all Purchasers consent thereto. The
Collateral Agent may rely on any such direction given to it by the Required
Holders and shall be fully protected in relying thereon, and shall under no
circumstances be liable, except in circumstances involving the Collateral
Agent's gross negligence or willful misconduct as shall have been determined
in
a final nonappealable judgment of a court of competent jurisdiction, to any
holder of the Series B Notes or any other person or entity for taking or
refraining from taking action in accordance with any direction or otherwise
in
accordance with any of the Security Documents.
(d) Duties
of Collateral Agent.
(i) Powers.
The
Collateral Agent shall have and may exercise such powers under the Security
Documents as are specifically delegated to the Collateral Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. The Collateral Agent shall not have any implied duties or any
obligations to take any action under the Security Documents except any action
specifically provided by the Security Documents to be taken by the Collateral
Agent.
-26-
(ii) Reliance
on Instructions of Required Holders.
The
Collateral Agent shall be required to act or to refrain from acting (and shall
be fully protected in so acting or refraining from acting) upon the written
instructions of the Required Holders, subject to Section 8(c) hereof, and such
instructions shall be binding upon all the Purchasers; provided,
however,
that the
Collateral Agent shall not be required to take any action which the Collateral
Agent in good faith believes (A) could reasonably be expected to expose it
to
personal liability or (B) is contrary to this Agreement, the Security Documents
and applicable law. Notwithstanding anything to the contrary contained herein,
if the holders of the Series A Notes give the Collateral Agent any
direction, as provided in Section 8 of the Series A Purchase
Agreement, the Purchasers party hereto acknowledge and agree
that (i) such direction shall be deemed to be an instruction
from both the holders of the Series A Notes and the holders of the Series B
Notes acting jointly; (ii) the holders of the Series B Notes shall not give
a conflicting instruction to the Collateral Agent pursuant to the
provisions of this Agreement; and (iii) if the Collateral Agent receives
conflicting or inconsistent instructions from the holders of the Series A Notes
and the holders of the Series B Notes, the Collateral Agent shall honor the
instructions given by the holders of the Series A Notes and disregard the
instructions given by the holders of the Series B Notes.
(iii) Action
Without Instructions After Event of Default.
Absent
written instructions from the Required Holders at a time when an Event of
Default shall have occurred and be continuing, the Collateral Agent may take,
but shall have no obligation to take, any and all actions under the Security
Documents or any of them or otherwise as it shall deem to be in the best
interests of the Purchasers; provided,
however,
that in
the absence of written instructions from the Required Holders, the Collateral
Agent shall not exercise remedies available to it under any Security Document
with respect to the Collateral or any part thereof (other than preserving,
collecting and protecting the Collateral and the proceeds thereof).
(iv) Independent
Right of Each Purchaser to Instruct Collateral Agent.
The
right of each Purchaser to instruct the Collateral Agent is the separate and
individual property of such Purchaser and may be exercised as such Purchaser
sees fit in its sole discretion and with no liability to any other such
Purchaser for the exercise or non-exercise thereof. Without limiting the
foregoing, the Required Holders shall not be liable under any circumstances
to
any other Purchaser for any action taken or omitted to be taken hereunder by
the
Collateral Agent upon written instructions from the Required
Holders.
(v) Relationship
Between Collateral Agent and Purchasers.
The
relationship between the Collateral Agent and the Purchasers is and shall be
only to the extent explicitly provided for herein that of agent and principal
and nothing herein contained shall be construed to constitute the Collateral
Agent a trustee for any Purchaser or to impose on the Collateral Agent duties
and obligations other than those expressly provided for herein. Without limiting
the generality of the foregoing, neither the Collateral Agent nor any of its
directors, officers, employees, partners or agents shall:
(A) be
responsible to the other Purchasers for any recitals, representations or
warranties contained in, or for the execution, validity, genuineness,
perfection, effectiveness or enforceability of, the Security Documents (it
being
expressly understood that any determination of the foregoing is the
responsibility of each Purchaser),
-27-
(B) be
responsible to the other Purchasers for the validity, genuineness, perfection,
effectiveness, enforceability, existence, value or enforcement of any security
interest in the Collateral (it being expressly understood that any determination
of the foregoing is the responsibility of each Purchaser),
(C) be
under
any duty to inquire into or pass upon any of the foregoing matters, or to make
any inquiry concerning the performance by any person or entity of its or their
obligations under any Security Document (it being expressly understood that
any
determination of the foregoing is the responsibility of each
Purchaser),
(D) be
deemed
to have knowledge of the occurrence of an Event of Default (as defined in the
Series B Notes), or any event, condition or circumstance the occurrence of
which
would, with the giving of notice or the passage of time or both, constitute
an
Event of Default,
(E) be
responsible or liable to the Purchasers for any shortage, discrepancy, damage,
loss or destruction of any part of the Collateral wherever the same may be
located regardless of the cause thereof unless the same shall happen solely
through the gross negligence or willful misconduct of the Collateral Agent
as
shall have been determined in a final nonappealable judgment of a court of
competent jurisdiction,
(F) have
any
liability to the Purchasers for any error or omission or action or failure
to
act of any kind made in the settlement, collection or payment in connection
with
any of the Security Documents or any of the Collateral or any instrument
received in payment therefor or for any damage resulting therefrom other than
as
a sole result of its own gross negligence or willful misconduct as shall have
been determined in a final nonappealable judgment of a court of competent
jurisdiction, or
(G) in
any
event, be liable to the Purchasers as such for any action taken or omitted
by
it, absent its gross negligence or willful misconduct as shall have been
determined in a final nonappealable judgment of a court of competent
jurisdiction.
(e) Standard
of Care.
Each
Purchaser agrees with all other Purchasers and the Collateral Agent that nothing
contained in this Agreement shall be construed to give rise to, nor shall such
Purchaser have, any claims whatsoever against the Collateral Agent on account
of
any act or omission to act in connection with the exercise of any right or
remedy of the Collateral Agent with respect to the Security Documents or the
Collateral in the absence of gross negligence or willful misconduct of the
Collateral Agent as shall have been determined in a final nonappealable judgment
of a court of competent jurisdiction.
(f) Collateral
In Possession of Collateral Agent.
The
Collateral Agent shall be at liberty to place any of the Collateral, this
Agreement, the Security Documents and any other instruments, documents or deeds
delivered to it pursuant to or in connection with any of such documents in
any
safe deposit box, safe or receptacle selected by it or with any bank, any
company whose business includes undertaking the safe custody of documents or
any
firm of lawyers of good repute and the Collateral Agent shall not be responsible
for any loss thereby incurred unless such loss is solely the result of the
Collateral Agent’s gross negligence or willful
-28-
misconduct
as shall have been determined in a final nonappealable judgment of a court
of
competent jurisdiction. The Collateral Agent’s books and records shall at all
times show that the Collateral is held by the Collateral Agent subject to the
pledge and lien of the Security Documents.
(g) Agents,
Officers and Employees of Collateral Agent.
The
Collateral Agent may execute any of its duties under the Security Documents
by
or through its agents, officers or employees. Neither the Collateral Agent
nor
any of its agents, officers or employees shall be liable for any action taken
or
omitted to be taken by it or them in good faith, be responsible for the
consequence of any oversight or error of judgment or answerable for any loss
unless any of the foregoing shall happen through its or their gross negligence
or willful misconduct as shall have been determined in a final nonappealable
judgment of a court of competent jurisdiction.
(h) Appointment
of Co-Agent.
Whenever the Collateral Agent shall deem it necessary or prudent in order either
to conform to any law of any jurisdiction in which all or any part of the
Collateral shall be situated or to make any claim or bring any suit with respect
to the Collateral or the Security Documents, or in the event that the Collateral
Agent shall have been requested to do so by or on behalf of the Required
Holders, the Collateral Agent shall execute and deliver a supplemental agreement
and all other instruments and agreements necessary or proper to constitute
a
bank or trust company, or one or more other persons or entities approved by
the
Collateral Agent, either to act as co-agent or co-agents with respect to all
or
any part of the Collateral or with respect to the Security Documents, jointly
with the Collateral Agent or any successor or successors, or to act as separate
agent or agents of any such property, in any such case with such powers as
may
be provided in such supplemental agreement, and to vest in such bank, trust
company or other persons or entities as such co-agent or separate agent, as
the
case may be, any property, title, right or power of the Collateral Agent deemed
necessary or advisable by the Required Holders or the Collateral
Agent.
(i) Reliance
on Certain Documents.
The
Collateral Agent shall be entitled to rely on any communication, instrument
or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or entity, and with respect to all legal matters
shall
be entitled to rely on the advice of legal advisors selected by it concerning
all matters relating to the Security Documents and its duties hereunder and
thereunder and otherwise shall rely on such experts as it deems necessary or
desirable, and shall not be liable to any Purchaser or any other person or
entity for the consequences of such reliance in the absence of gross negligence
or willful misconduct as shall have been determined in a final nonappealable
judgment of a court of competent jurisdiction.
(j) Collateral
Agent May Have Separate Relationship with Parties.
The
Collateral Agent (or any affiliate of the Collateral Agent) may, notwithstanding
the fact that it is the Collateral Agent, act as a lender to the Company and
lend money to, and generally engage in any kind of business with such party
in
the same manner and to the same effect as though it were not the Collateral
Agent; and such business shall not constitute a breach of any obligation of
the
Collateral Agent to the other Purchasers.
(k) Indemnification
of Collateral Agent.
Each of
the Purchasers, ratably on the basis of the respective principal amounts of
the
Series B Notes outstanding at the time of the
-29-
occurrence
giving rise to the below liabilities, losses, etc., agrees to indemnify the
Collateral Agent for any and all liabilities, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever that may be imposed on, incurred by or asserted against the
Collateral Agent in its capacity as the Collateral Agent, in any way relating
to
or arising out of the Security Documents or the transactions contemplated hereby
or thereby or the enforcement of any of the terms hereof or thereof, provided
that neither the Company nor any Purchaser shall be liable for any of the
foregoing to the extent they arise from gross negligence or willful misconduct
on the part of the Collateral Agent as shall have been determined in a final
nonappealable judgment of a court of competent jurisdiction. This Section 8(k)
shall survive the termination of this Agreement. Prior to taking any action
hereunder as Collateral Agent, the Collateral Agent may require each Purchaser
to deposit with it sufficient sums as it determines in good faith is necessary
to protect the Collateral Agent for costs and expenses associated with taking
such action, and the Collateral Agent shall have no liability hereunder for
failure to take such action unless the Purchasers promptly deposit such
sums.
(l) Resignation.
The
Collateral Agent at any time may resign, upon thirty (30) days’ prior written
notice, by an instrument addressed and delivered to the Purchasers and the
Company and may be removed at any time with or without cause upon thirty (30)
days’ prior written notice, by an instrument in writing duly executed by duly
authorized signatories of the Required Holders. The Required Holders shall
also
have the right to appoint a successor to the Collateral Agent upon any such
resignation or removal, by instrument of substitution complying with the
requirements of applicable law, or, in the absence of any such requirement,
without any formality other than appointment and designation in writing, a
copy
of which instrument or writing shall be sent to each Purchaser. Upon the making
of such appointment and delivery to such successor Collateral Agent of the
Collateral then held by the retiring Collateral Agent, such successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties conferred hereby and by the Security Documents upon the
Collateral Agent named herein, and one or more such appointments and
designations shall not exhaust the right to appoint and designate further
successor Collateral Agents hereunder. The retiring Collateral Agent shall
not
be discharged from its duties and obligations hereunder until, and the retiring
Collateral Agent shall be so discharged when, all the Collateral held by the
retiring Collateral Agent has been delivered to the successor Collateral Agent
and such successor Collateral Agent shall execute, acknowledge and deliver
to
each holder of the Series B Notes and to the Company an instrument accepting
such appointment. If no successor shall be appointed and approved on or prior
to
the date of any such resignation, the resigning Collateral Agent may apply
to
any court of competent jurisdiction to appoint a successor to act until a
successor shall have been appointed by the Required Holders as above
provided.
-30-
(m) Rights
with Respect to Collateral.
(i) Each
Purchaser agrees with all other Purchasers (A) that it shall not, and shall
not
attempt to, exercise any rights with respect to its security interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the
Collateral Agent or any of the other Purchasers in respect of the Collateral
or
its rights hereunder (other than any such action arising from the breach of
this
Agreement) and (B) that such Purchaser has no other rights with respect to
the
Collateral other than as set forth in this Agreement and the Security
Documents.
(ii) Each
Purchaser agrees with all other Purchasers and the Collateral Agent that nothing
contained in this Section 8 shall be construed to give rise to, nor shall such
Purchaser have, any claims whatsoever against any other Purchaser or the
Collateral Agent on account of any act or omission to act in connection with
the
exercise of any right or remedy of the Collateral Agent or any other Purchaser
with respect to the Collateral in the absence of gross negligence or willful
misconduct of such other Purchaser or Collateral Agent, as applicable, as shall
have been determined in a final nonappealable judgment of a court of competent
jurisdiction.
9. GOVERNING
LAW; MISCELLANEOUS.
(a) Governing
Law; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware applicable to contracts made and to be performed in the State
of Delaware. The Company and each Purchaser irrevocably consent to the exclusive
jurisdiction of the United States federal courts and the state courts located
in
the County of New Castle, State of Delaware, in any suit or proceeding based
on
or arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims between the parties in respect of such suit
or
proceeding may be determined in such courts. The Company and each Purchaser
irrevocably waive the defense of an inconvenient forum to the maintenance of
such suit or proceeding in such forum. The Company and each Purchaser further
agree that service of process upon the Company or any Purchaser mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company or such Purchaser, as the case may be, in any such suit or
proceeding. Nothing herein shall affect the right of the Company or any
Purchaser to serve process in any other manner permitted by law. The Company
and
each Purchaser agree that a final non-appealable judgment in any such suit
or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
(b) Counterparts.
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 parties
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement. In the event any signature
is delivered by facsimile transmission, the party using such means of delivery
shall cause the manually executed execution page(s) hereof to be physically
delivered to the other party within five (5) days of the execution hereof,
provided that the failure to so deliver
-31-
any
manually executed execution page shall not affect the validity or enforceability
of this Agreement.
(c) Construction.
Whenever the context requires, the gender of any word used in this Agreement
includes the masculine, feminine or neuter, and the number of any word includes
the singular or plural. Unless the context otherwise requires, all references
to
articles and sections refer to articles and sections of this Agreement, and
all
references to schedules are to schedules attached hereto, each of which is
made
a part hereof for all purposes. The descriptive headings of the several articles
and sections of this Agreement are inserted for purposes of reference only,
and
shall not affect the meaning or construction of any of the provisions
hereof.
(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 other Transaction Documents (including any schedules and
exhibits hereto and thereto) contain the entire understanding of the Purchasers,
the Company, their affiliates and persons acting on their behalf with respect
to
the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement, and no provision
of
this Agreement may be amended other than by an instrument in writing signed
by
the Company and the Required Holders.
(f) Notices.
Any
notices required or permitted to be given under the terms of this Agreement
shall be in writing and sent by certified or registered mail (return receipt
requested) or delivered personally, by nationally recognized overnight carrier
or by confirmed facsimile transmission, and shall be effective five (5) days
after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by nationally recognized overnight carrier
or confirmed facsimile transmission, in each case addressed to a party as
provided herein. The initial addresses for such communications shall be as
follows, and each party shall provide notice to the other parties of any change
in such party’s address:
(i) If
to the
Company:
Matritech,
Inc.
000
Xxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Chief Executive Officer
-32-
with
a
copy simultaneously transmitted by like means (which transmittal shall not
constitute notice hereunder) to:
Xxxxxx,
Xxxx & Xxxxxxx LLP
Xxx
Xxxxxxxxxxxxx Xxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxx
(ii) If
to any
Purchaser, to the address set forth under such Purchaser’s name on the Execution
Page hereto executed by such Purchaser.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Except as provided herein, the Company shall
not
assign this Agreement or any rights or obligations hereunder. Any Purchaser
may
assign or transfer the Securities pursuant to the terms of this Agreement and
of
such Securities, or assign such Purchaser’s rights hereunder to any other person
or entity.
(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; provided,
however,
that
Section 4(r) may be enforced by any Purchaser’s affiliates and its or their
advisors to the extent the same is entitled to reimbursement of Expenses
pursuant thereto.
(i) Survival.
The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 3, 4, 5, 8 and 9 hereof shall survive the Closing
notwithstanding any due diligence investigation conducted by or on behalf of
any
Purchaser. Moreover, none of the representations and warranties made by the
Company herein shall act as a waiver of any rights or remedies any Purchaser
may
have under applicable U.S. federal or state securities laws.
(j) Publicity.
The
Company and each Purchaser shall have the right to approve before issuance
any
press releases or SEC 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 the Purchasers,
to
make any press release, SEC filings or, to the extent applicable, AMEX filings
with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release prior to its release, and the Purchasers
shall be provided with a copy thereof and must provide specific consent to
the
use of a Purchaser’s name in connection therewith).
(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
-33-
in
order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Indemnification.
In
consideration of each Purchaser’s execution and delivery of this Agreement and
the other Transaction Documents and purchase of the Securities hereunder, and
in
addition to all of the Company’s other obligations under this Agreement and the
other Transaction Documents, from and after the Closing, the Company shall
defend, protect, indemnify and hold harmless each Purchaser and each other
holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees 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
(i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, any other Transaction Document or any other
certificate, instrument or document contemplated hereby or thereby; (ii) any
breach of any covenant, agreement or obligation of the Company contained in
this
Agreement, any other Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby; or (iii) any cause of action, suit,
claim, order, proceeding or process brought or made against such Indemnitee
by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (A) the execution,
delivery, performance or enforcement of this Agreement, any other Transaction
Document or any other certificate, instrument or document contemplated hereby
or
thereby, (B) any disclosure made by such Purchaser pursuant to Section 4(b)
or
4(n) hereof, or (C) the status of such Purchaser or holder of the Securities
as
an investor in the Company; provided,
however,
that
with respect to clause (iii) above, excluding any Indemnified Liabilities (a)
resulting from the Indemnitee’s or the Purchaser’s own acts of fraud or willful
misconduct and (b) resulting from any cause of action, suit, claim, order,
proceeding or process brought or asserted against any Indemnified Party by
any
investor in or partner, shareholder, member, employee or agent of said
Indemnified Party. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise
set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(l) shall be the same as those set forth in
Section 6(c) of the Registration Rights Agreement.
(m) Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser hereunder
or pursuant to any of the other Transaction Documents or any Purchaser enforces
or exercises its rights hereunder or thereunder, and such payment or payments
or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any
law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such
restoration
-34-
the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made
or
such enforcement or setoff had not occurred.
(n) Joint
Participation in Drafting.
Each
party to this Agreement has participated in the negotiation and drafting of
this
Agreement and the other Transaction Documents. As such, the language used herein
and therein shall be deemed to be the language chosen by the parties hereto
to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement.
(o) Remedies.
No
provision of this Agreement or any other Transaction Document providing for
any
remedy to a Purchaser shall limit any other remedy which would otherwise be
available to such Purchaser at law, in equity or otherwise. Nothing in this
Agreement or any other Transaction Document shall limit any rights any Purchaser
may have under any applicable federal or state securities laws with respect
to
the investment contemplated hereby. The Company acknowledges that a breach
by it
of its obligations hereunder will cause irreparable harm to the Purchasers
by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach
or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that each
Purchaser shall be entitled, in addition to all other available remedies, to
an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
(p) Knowledge.
As used
in this Agreement, the term “knowledge” of any person or entity shall mean and
include such person’s or entity’s or, with respect to the Company, the Company’s
executive officers’ actual knowledge and that knowledge which a reasonably
prudent business person could have obtained in the management of his or her
business affairs after making due inquiry and exercising due diligence which
a
prudent business person should have made or exercised, as applicable, with
respect thereto.
(q) Exculpation
Among Purchasers; No “Group”.
Each
Purchaser acknowledges that it has independently evaluated the merits of the
transactions contemplated by this Agreement and the other Transaction Documents,
that it has independently determined to enter into the transactions contemplated
hereby and thereby, that it is not relying on any advice from or evaluation
by
any other Purchaser, and that it is not acting in concert with any other
Purchaser in making its purchase of securities hereunder or in monitoring its
investment in the Company. The Purchasers and, to its knowledge, the Company
agree that the Purchasers have not taken any actions that would deem such
Purchasers to be members of a “group” for purposes of Section 13(d) of the
Exchange Act, and the Purchasers have not agreed to act together for the purpose
of acquiring, holding, voting or disposing of equity securities of the Company.
Each Purchaser further acknowledges that SDS has retained Drinker Xxxxxx &
Xxxxx LLP (“DB&R”)
to act
as its counsel in connection with the transactions contemplated by this
Agreement and the other Transaction Documents and that DB&R has not acted as
counsel for any of the other Purchasers
-35-
in
connection therewith and none of the other Purchasers have the status of a
client of DB&R for conflict of interest or other purposes as a result
thereof.
[REMAINDER
OF PAGE LEFT BLANK INTENTIONALLY]
-36-
IN
WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first above
written.
MATRITECH,
INC.
By:
___________________________________
Name: Xxxxxxx
X. Xxxxx
Title: Chief
Executive Officer
PURCHASER:
___________________________
(Print
or
Type Name of Purchaser)
By:
___________________________________
Name:
Title:
RESIDENCE:
____________________________
ADDRESS:
_____________________________
Telephone:
Facsimile:
Attention:
SUBSCRIPTION
AMOUNT:
Aggregate
Face Amount of Note: $___________
