SECURITIES PURCHASE
AGREEMENT
DATED AS OF DECEMBER 30, 2003
AMONG
AXM PHARMA, INC.
AND
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
PAGE
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ARTICLE I Purchase and Sale of Preferred Stock and Warrants............................1
Section 1.1 Purchase and Sale of Preferred Stock and Warrants..................1
Section 1.2 Purchase Price and Closing.........................................1
Section 1.3 Warrants...........................................................2
Section 1.4 Conversion Shares and Warrant Shares...............................2
ARTICLE II Representations and Warranties...............................................2
Section 2.1 Representations and Warranties of the Company......................2
Section 2.2 Representations and Warranties of the Purchasers..................12
ARTICLE III Covenants...................................................................14
Section 3.1 Disclosure of Transactions and Other Material Information.........14
Section 3.2 Registration and Listing..........................................15
Section 3.3 Inspection Rights.................................................15
Section 3.4 Complaince with Laws..............................................15
Section 3.5 Keeping of Records and Books of Account...........................15
Section 3.6 Other Agreements..................................................16
Section 3.7 Reservation of Shares.............................................16
Section 3.8 Non-public Information............................................16
Section 3.9 Premptive Rights..................................................16
Section 3.10 Lock-Up...........................................................18
ARTICLE IV Conditions..................................................................18
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Shares and Warrants.........................18
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Shares and Warrants.....................19
ARTICLE V Certificate of Legend.......................................................21
Section 5.1 Legend............................................................21
ARTICLE VI Termination.................................................................22
Section 6.1 Termination by Mutual Consent.....................................22
Section 6.2 Effect of Termination.............................................22
ARTICLE VII Indemnification.............................................................23
Section 7.1 General Indemnity.................................................23
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Table of Contents
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(continued)
Section 7.2 Indemnification Procedure.........................................23
ARTICLE VIII Miscellaneous...............................................................24
Section 8.1 Fees and Expenses.................................................24
Section 8.2 Specific Enforcement; Consent to Jurisdiction.....................24
Section 8.3 Entire Agreement; Amendment.......................................25
Section 8.4 Notices...........................................................25
Section 8.5 Waivers...........................................................26
Section 8.6 Headings..........................................................26
Section 8.7 Successors and Assigns............................................26
Section 8.8 No Third Party Beneficiaries......................................26
Section 8.9 Governing Law.....................................................26
Section 8.10 Survival..........................................................27
Section 8.11 Counterparts......................................................27
Section 8.12 Publicity.........................................................27
Section 8.13 Severability......................................................27
Section 8.14. Further Assurances................................................27
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT this ("Agreement"), dated as of
December 30, 2003, by and among AXM Pharma, Inc., a Nevada corporation (the
"Company"), and the entities listed on Exhibit A hereto (each a "Purchaser" and
collectively, the "Purchasers"), for the purchase and sale to the Purchasers of
shares of the Company's Series B Convertible Preferred Stock, par value $.001
per share (the "Preferred Stock"), and warrants to purchase shares of the
Company's common stock, par value $.001 per share (the "Common Stock").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
Section 1.1 Purchase and Sale of Preferred Stock and Warrants. Upon the
following terms and conditions, the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, 860,000 shares
of Preferred Stock (the "Shares") at a price per share of $2.25 for an aggregate
purchase price of $1,935,000 (the "Purchase Price"), and warrants to purchase
shares of Common Stock, in substantially the form attached hereto as Exhibit B
(the "Warrants"). The Company and the Purchasers are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), including Regulation D ("Regulation D"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
The Preferred Stock shall have such powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, as set forth in the
Certificate of Designation of Rights and Preferences of Series A Preferred Stock
attached hereto as Exhibit D, subject to the applicable terms and conditions of
this Agreement and the Registration Rights Agreement (as defined below).
Section 1.2 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares and Warrants set forth opposite their respective names on Exhibit A. The
closing of the purchase and sale of the Shares and Warrants to be acquired by
the Purchasers from the Company under this Agreement shall take place at the
offices of the Company located at 0000 Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000 (the "Closing") at 10:00 a.m., Pacific Time (i) on or before
December 31, 2003, provided, that all of the conditions set forth in Article IV
hereof and applicable to the Closing shall have been fulfilled or waived in
accordance herewith, or (ii) at such other time and place or on such date as the
Purchasers and the Company may agree upon (the "Closing Date").
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Section 1.3 Warrants. At the Closing, the Company shall issue to the
Purchasers Warrants to purchase an aggregate of 1,000,000 shares of Common
Stock. The Warrants shall be exercisable for five (5) years from the date of
issuance and shall have an exercise price equal to $3.00 per share.
Section 1.4 Conversion Shares and Warrant Shares. The Company has
authorized and reserved and covenants to continue to reserve, free of preemptive
rights and other similar contractual rights of stockholders, out of its
authorized but unissued Common Stock or its Common Stock held in treasury, a
number of shares of Common Stock equal to the aggregate number of shares of
Common Stock necessary to effect the conversion of the Shares and the exercise
of the Warrants. The Company shall, from time to time, in accordance with the
Nevada Corporation Law, increase the authorized amount of its Common Stock if at
any time the authorized amount of its Common Stock remaining unissued shall not
be sufficient to permit the conversion of all Shares at the time outstanding,
subject, however, to stockholder approval. If any shares of Common Stock
required to be reserved for issuance upon conversion of the Shares or exercise
of the Warrants hereunder require registration with or approval of any
governmental authority under any federal or state law before the shares may be
issued, the Company will cause the shares to be so registered and approved. All
shares of Common Stock delivered upon conversion of the Shares or exercise of
the Warrants shall, upon delivery, be duly authorized and validly issued, fully
paid and nonassessable, free from all taxes, liens and charges with respect to
the issue thereof. Any shares of Common Stock issuable upon conversion of the
Shares (and such shares when issued) are herein referred to as the "Conversion
Shares". Any shares of Common Stock issuable upon exercise of the Warrants (and
such shares when issued) are herein referred to as the "Warrant Shares". The
Shares, the Conversion Shares, the Warrants and the Warrant Shares are sometimes
collectively referred to herein as the "Securities".
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. In order to
induce the Purchasers to enter into this Agreement and to purchase the Shares
and Warrants, the Company hereby makes the following representations and
warranties to the Purchasers:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Nevada and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined in Section
2.1(g)) or own securities of any kind in any other entity, except as set forth
on Schedule 2.1(g) hereto. The Company and each such Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement, "Material
Adverse Effect" means any adverse effect on the business, operations, assets,
prospects or financial condition of the Company or its Subsidiaries and which is
material to such entity or other entities controlling or controlled by such
2
entity or the Company or which is likely to materially hinder the performance by
the Company of its obligations hereunder and under the other Transaction
Documents (as defined in Section 2.1(b) hereof).
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Registration
Rights Agreement, the Warrants, and the other agreements and documents
contemplated hereby and thereby and executed by the Company or to which the
Company is party (collectively, the "Transaction Documents"), and to issue and
sell the Shares and the Warrants in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action, and, except as
set forth in Schedule 2.1(b), no further consent or authorization of the Company
or its Board of Directors or stockholders is required. This Agreement has been
duly executed and delivered by the Company. The other Transaction Documents will
have been duly executed and delivered by the Company at the Closing. Each of the
Transaction Documents constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by equitable
principles or remedies of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding as of December 1, 2003 are set
forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Company's
Common Stock and any other security of the Company have been duly and validly
authorized. Except as set forth on Schedule 2.1(c), no shares of Common Stock or
any other security of the Company are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth on Schedule 2.1(c) hereto or in any
Commission Documents (as defined in Section 2.1(f) below) and except for the
Transaction Documents, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c) hereto and
except as in any Commission Documents, the Company is not a party to or bound by
any agreement or understanding granting registration or anti-dilution rights to
any person with respect to any of its equity or debt securities. Except as set
forth on Schedule 2.1(c) or disclosed in any Commission Documents, the Company
is not a party to, and it has no knowledge of, any agreement or understanding
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth on Schedule 2.1(c) hereto or disclosed in any
Commission Documents, the offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable federal and state securities laws, and to
the best knowledge of the Company, no holder of such securities has a right of
rescission or has made or threatened to make a claim for rescission or damages
3
with respect thereto which could have a Material Adverse Effect. The Company has
furnished or made available to the Purchasers true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Certificate"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").
(d) Issuance of Securities. The Shares and the Warrants to be issued at
the Closing have been duly authorized by all necessary corporate action and,
when paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable and free and clear
of all liens, encumbrances and rights of first refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of Preferred Stock.
When the Conversion Shares are issued in accordance with the terms of the
Preferred Stock, such shares will be duly authorized by all necessary corporate
action and validly issued and outstanding, fully paid and nonassessable, free
and clear of all liens, encumbrances and rights of first refusal of any kind and
the holders shall be entitled to all rights accorded to a holder of Common
Stock. When the Warrant Shares are issued and paid for in accordance with the
terms of this Agreement and as set forth in the Warrants, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind and the holders shall be
entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Certificate or Bylaws or any Subsidiary's comparable charter
documents, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries'
respective properties or assets are bound, (iii) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property
or asset of the Company or any of its Subsidiaries under any agreement or any
commitment to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or by which any of their
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected, except, in all
cases other than violations pursuant to clauses (i) or (iv) (with respect to
federal and state securities laws) above, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in violation
of any laws, ordinances or regulations of any governmental entity, except for
possible violations which singularly or in the aggregate do not and will not
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is required under federal, state, foreign or local law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under the Transaction Documents or
4
issue and sell the Shares, the Conversion Shares, the Warrants or the Warrant
Shares in accordance with the terms hereof or thereof (other than any filings
which may be required to be made by the Company with the Securities and Exchange
Commission (the "Commission") or state securities administrators subsequent to
the Closing, or any registration statement which may be filed pursuant hereto or
thereto).
(f) Commission Documents; Commission Filings; Financial Statements. The
Common Stock is not currently registered pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), but,
except as disclosed on Schedule 2.1(f) hereto, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing, including filings incorporated by reference therein,
being referred to herein as the "Commission Documents"). The Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. At
the time of its filing, the Company's Form 10-QSB for the fiscal quarter ended
September 30, 2003 (the "Form 10-Q") complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and the Form 10-Q did not contain 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. At the
time of its filing, the Company's Form 10-KSB/A for the fiscal year ended
September 30, 2002 (the "Form 10-K") complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and the Form 10-K did not contain any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the Notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its Subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of
the Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
5
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Except
as set forth on Schedule 2.1(g) hereto, neither the Company nor any Subsidiary
is party to, nor has any knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of any Subsidiary.
(h) No Material Adverse Change. Since September 30, 2003, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i)
hereto, neither the Company nor any of its Subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those set
forth on the balance sheet included in the Form 10-Q or incurred in the ordinary
course of the Company's or its Subsidiaries respective businesses since
September 30, 2003, and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company or its Subsidiaries.
(j) No Undisclosed Events or Circumstances. Since September 30, 2003,
except as disclosed on Schedule 2.1(j) hereto, 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 condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments, which
Indebtedness is not disclosed in any Commission Documents. For the purposes of
this Agreement, "Indebtedness" shall mean (i) any liabilities for borrowed money
in excess of $100,000 (other than trade accounts payable incurred in the
ordinary course of business), (ii) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others in excess of
$100,000, whether or not the same are or should be reflected in the Company's
balance sheet (or the Notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, and (iii) the present value of any lease payments
in excess of $100,000 due under leases required to be capitalized in accordance
6
with GAAP. Except as disclosed on Schedule 2.1(k) or in any Commission
Documents, neither the Company nor any Subsidiary is in default with respect to
any Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has good
and marketable title to all of its real and personal property, free and clear of
any mortgages, pledges, charges, liens, security interests or other encumbrances
of any nature whatsoever, except for those indicated on Schedule 2.1(l) hereto
or disclosed in any Commission Documents or such that, individually or in the
aggregate, do not have a Material Adverse Effect. All material leases of the
Company and each of its Subsidiaries are valid and subsisting and in full force
and effect.
(m) Actions Pending. Except as set forth in the Commission Documents or
Schedule 2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in any Commission Document or on Schedule 2.1(m) hereto: (i) there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any of their
respective properties or assets, which individually or in the aggregate, would
have a Material Adverse Effect, and (ii) there are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any
officers or directors of the Company or any Subsidiary in their capacities as
such, which individually, or in the aggregate, would have a Material Adverse
Effect.
(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(n) hereto or such that, individually or in the aggregate, the noncompliance
therewith would not have a Material Adverse Effect. The Company and each of its
Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto or in the
Commission Documents, the Company and each of the Subsidiaries has accurately
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the Subsidiaries
for all current taxes and other charges to which the Company or any Subsidiary
is subject and which are not currently due and payable. Except as disclosed on
Schedule 2.1(o) hereto, none of the federal income tax returns of the Company or
any Subsidiary have been audited by the Internal Revenue Service. Except as
disclosed in the Commission Documents, the Company has no knowledge of any
7
additional assessments, adjustments or contingent tax liability (whether federal
or state) of any nature whatsoever, whether pending or threatened against the
Company or any Subsidiary for any period, nor of any basis for any such
assessment, adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement nor any other documents, certificates or instruments furnished to the
Purchasers by or on behalf of the Company or any Subsidiary in connection with
the transactions contemplated by this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(r) Intellectual Property. Schedule 2.1(r) contains a complete and
correct list of all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations, and all rights with
respect to the foregoing held by the Company or any of its Subsidiaries
(collectively, the "Proprietary Rights"). The Company and each of the
Subsidiaries owns or possesses all the Proprietary Rights which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others. Except as disclosed in the Commission Documents or Schedule
2.1(r) hereto, (i) as of the date of this Agreement, neither the Company nor any
of its Subsidiaries has received any written notice that any Proprietary Rights
have been declared unenforceable or otherwise invalid by any court or
governmental agency, and (ii) as of the date of this Agreement, there is, to the
knowledge of the Company, no material existing infringement, misuse or
misappropriation of any Proprietary Rights by others that could have a Material
Adverse Effect. From September 30, 2003, to the date of this Agreement, neither
the Company nor any of its Subsidiaries has received any written notice alleging
that the operation of the business of the Company or any of its Subsidiaries
infringes in any material respect upon the intellectual property rights of
others.
(s) Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto or the Commission Documents, the Company and each of its Subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. Schedule 2.1(s) hereto sets forth all material permits, licenses and other
authorizations issued under any Environmental Laws to the Company or its
Subsidiaries. "Environmental Laws" shall mean all U.S. Federal or state laws
applicable to the Company or any of its Subsidiaries relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
8
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries, except for such instances as would not
individually or in the aggregate have a Material Adverse Effect. The Company and
each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws where non-compliance could have
a Material Adverse Effect. Except for such instances as would not individually
or in the aggregate have a Material Adverse Effect or as disclosed in the
Commission Documents, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate any
Environmental Law after the Closing or that may give rise to any Environmental
Liabilities, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation (i) under any Environmental Law, or
(ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including, without limitation, underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance. "Environmental Liabilities" means
all liabilities of a person (whether such liabilities are owed by such person to
governmental authorities, third parties or otherwise) currently in existence or
arising hereafter and which arise under or relate to any Environmental Law.
(t) Books and Records; Internal Accounting Controls. The books, records
and documents of the Company and its Subsidiaries accurately reflect in all
material respects the information relating to the business of the Company and
the Subsidiaries, the location and collection of their assets, and the nature of
all transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with 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 actions are taken with respect to any differences.
(u) Material Agreements. Except for the Transaction Documents or as set
forth on Schedule 2.1(u) hereto, or those that are included as exhibits to the
Commission Documents, neither the Company nor any Subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
if the Company or any Subsidiary were registering securities under the
Securities Act (collectively, "Material Agreements"). Except as set forth in the
Commission Documents or on Schedule 2.1(u) hereto, the Company and each
Subsidiary has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
9
notice of default and, to the best of the Company's knowledge, are not in
default under any Material Agreement now in effect, the result of which could
cause a Material Adverse Effect. No written or oral contract, instrument,
agreement (other than the Certificate of Designation with respect to the
Preferred Stock, this Agreement or any other Transaction Document(s)),
commitment, obligation (other than any obligation imposed by state law), plan or
arrangement of the Company or of any Subsidiary limits or shall limit the
payment of dividends on its Common Stock.
(v) Transactions with Affiliates. Except as set forth on Schedule
2.1(v) hereto or disclosed in any of the Commission Documents, there are no
loans, leases, agreements, contracts, royalty agreements, management contracts
or arrangements or other continuing transactions between (i) the Company, any
Subsidiary or any of their respective its customers or suppliers, on the one
hand, and (ii) on the other hand, any officer, employee, consultant or director
of the Company, or any of its Subsidiaries, or any person owning any capital
stock of the Company or any Subsidiary or any member of the immediate family of
such officer, employee, consultant, director or stockholder or any corporation
or other entity controlled by such officer, employee, consultant, director or
stockholder.
(w) Securities Act of 1933. Assuming the accuracy and completeness of
the representations, warranties and covenants of the Purchasers contained
herein, the Company has complied and will comply with all applicable federal and
state securities laws in connection with the offer, issuance and sale of the
Shares, the Conversion Shares, the Warrants and the Warrant Shares hereunder.
Neither the Company nor anyone acting on its behalf, directly or indirectly, has
or will sell, offer to sell or solicit offers to buy any of the Securities, or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to require registration of
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws. Neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of any of the Securities.
(x) Governmental Approvals. Except as set forth on Schedule 2.1(x)
hereto, and except for the filing of any notice prior or subsequent to the
Closing that may be required under applicable state and/or federal securities
laws (which if required, shall be filed on a timely basis), no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Shares and the Warrants, or,
except as set forth in this Agreement or any other Transaction Document, for the
performance by the Company of its obligations under the Transaction Documents.
(y) Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Except as set forth in the Commission Documents or on Schedule 2.1(y) hereto,
neither the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
10
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary. Since
September 30, 2003, no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
(z) Absence of Certain Developments. Except as set forth in the
Commission Documents or on Schedule 2.1(z) hereto, since September 30, 2003,
neither the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such Subsidiary's business;
(iii) discharged or satisfied any material lien or encumbrance or
paid a material amount of any obligation or liability (absolute or contingent),
other than current liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, which sale, assignment or transfer has had a
Material Adverse Effect, or disclosed any proprietary confidential information
to any person except in the ordinary course of business or to the Purchasers or
their representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $25,000;
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(x) entered into any other transaction other than in the ordinary
course of business, or entered into any other material transaction, whether or
not in the ordinary course of business; (xi) made charitable contributions or
pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management
in connection with the terms and conditions of their employment; or (xiv)
entered into an agreement, written or otherwise, to take any of the foregoing
actions.
(aa) Use of Proceeds. Except as set forth on Schedule 2.1(aa), the
proceeds from the sale of the Shares and the Warrants will be used by the
Company for working capital purposes and, except as set forth on Schedule
2.1(aa), shall not be used to repay any outstanding Indebtedness or any loans to
any officer, director, affiliate or insider of the Company.
(bb) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would cause a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Shares and the
Warrants will not involve any transaction which is subject to the prohibitions
of Section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"); provided that, if any Purchaser, or any person or entity that owns a
beneficial interest in any Purchaser, is an "employee pension benefit plan"
(within the meaning of Section 3(2) of ERISA) with respect to which the Company
is a "party in interest" (within the meaning of Section 3(14) of ERISA), the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met.
As used in this Section 2.1(cc), the term "Plan" shall mean an "employee pension
benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
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(a) Organization and Standing of the Purchasers. If the Purchaser is an
entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power and
authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Warrants, and the other agreements and documents contemplated
hereby and thereby and executed by the Purchaser or to which the Purchaser is
party (collectively, the "Purchaser Transaction Documents") and to purchase the
Shares and Warrants being sold to it hereunder. The execution, delivery and
performance of the Purchaser Transaction Documents by each Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. This Agreement has
been duly authorized, executed and delivered by each Purchaser. Each of the
Purchaser Transaction Documents constitutes, or shall constitute when executed
and delivered, valid and binding obligations of each Purchaser enforceable
against such Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by equitable principles or remedies of general
application.
(c) Acquisition for Investment. Each Purchaser is purchasing the Shares
and acquiring the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof. Each Purchaser does not have a present intention to sell
any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to or
through any person or entity; provided, however, that by making the
representations herein and subject to Section 2.2(e) below, each Purchaser does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of any of the Securities at any time in
accordance with federal and state securities laws applicable to such disposition
provided that the Company receives an opinion of its counsel to the effect that
such disposition complies with such laws. Each Purchaser acknowledges that it
(i) has such knowledge and experience in financial and business matters such
that such Purchaser is capable of evaluating the merits and risks of its
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities, and (iii) has been given full access to
such records of the Company and the Subsidiaries and to the officers of the
Company and the Subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation.
(d) Rule 144. Each Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Each Purchaser acknowledges that
it is familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act ("Rule 144"), and that such
Purchaser has been advised that Rule 144 permits resales only under certain
circumstances. Each Purchaser understands that to the extent that Rule 144 is
13
not available, such Purchaser will be unable to sell any Securities without
either registration under the Securities Act or the existence of another
exemption from such registration requirement, provided that the Company receives
an opinion of its counsel to the effect that such sale is exempt from such
registration requirement.
(e) General. Each Purchaser understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth, accuracy and completeness of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein and in the other Purchaser Transaction Documents in order to determine
the applicability of such exemptions and the suitability of such Purchaser to
acquire the Securities. Each Purchaser understands that no United States federal
or state agency or any government or governmental agency has passed upon or made
any recommendation or endorsement with respect to any of the Securities.
(f) Opportunities for Additional Information. Each Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary by such Purchaser in light of such
Purchaser's personal knowledge of the Company's affairs, such Purchaser has
asked such questions and received answers to the full satisfaction of such
Purchaser, and such Purchaser desires to invest in the Company.
(g) No General Solicitation. Each Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications.
(h) Accredited Investor. Each Purchaser is an accredited investor (as
defined in Rule 501 of Regulation D), and such Purchaser has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Securities. Each Purchaser acknowledges that an
investment in the Securities is speculative and involves a high degree of risk.
ARTICLE III
COVENANTS
The parties covenant with one another as follows, which covenants are
for the benefit of each respective covenantee and its respective permitted
assignees.
Section 3.1 Disclosure of Transactions and Other Material
Information. On or before 8:30 a.m., New York City time, on the business day
immediately following the Closing Date, the Company shall file a Current Report
on Form 8-K with the Commission describing the terms of the transactions
14
contemplated by the Transaction Documents and including as exhibits to such
Current Report on Form 8-K this Agreement, the Warrants and the Registration
Rights Agreement, and the schedules hereto and thereto in the form required by
the Exchange Act (including all attachments, the "8-K Filing"). The Company
shall not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide the
Purchaser with any material, nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing with the
Commission without the express written consent of the Purchaser. Neither the
Company nor the 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 the
Purchaser, to make any press release or other public disclosure with respect to
such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith, and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) above, the Purchaser shall
be consulted by the Company (although the consent of the Purchaser shall not be
required) in connection with any such press release or other public disclosure
prior to its release).
Section 3.2 Registration and Listing. The Company will use its
commercially reasonable efforts to cause its Common Stock to be registered under
Section 12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will promptly file the "Listing Application" for,
or in connection with, the issuance and delivery of the Conversion Shares and
the Warrant Shares.
Section 3.3 Inspection Rights. In the event the Registration
Statement (as defined in the Registration Rights Agreement) is not effective,
has been suspended or is otherwise no longer effective, the Company shall
permit, during normal business hours and upon reasonable request and reasonable
notice, a Purchaser or any employees, agents or representatives thereof that are
parties to an effective confidentiality agreement with the Company of
appropriate scope, so long as a Purchaser shall be obligated hereunder to
purchase the Shares or shall beneficially own the Shares or Conversion Shares,
or shall own Warrant Shares or the Warrants which, in the aggregate, represent
more than two percent (2%) of the total combined voting power of all voting
securities then outstanding, to examine and make reasonable copies of and
extracts from the records and books of account of, and visit and inspect, during
the term of the Warrants, the properties, assets, operations and business of the
Company and any Subsidiary, and to discuss the affairs, finances and accounts of
the Company and any Subsidiary with any of its officers, consultants, directors,
and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and
cause each Subsidiary to comply, with all applicable laws, rules, regulations
and orders, the noncompliance with which could have a Material Adverse Effect.
15
Section 3.5 Keeping of Records and Books of Account. The Company
shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied.
Section 3.6 Other Agreements. The Company shall not enter into
any agreement containing any provision that would violate the terms of, or cause
a default under, any material term of any Transaction Document.
Section 3.7 Reservation of Shares. So long as the Shares or
Warrants remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, the maximum
number of shares of Common Stock to effect the conversion of the Shares and the
exercise of the Warrants.
Section 3.8 Non-public Information. Neither the Company nor any
of its officers or agents shall disclose any material non-public information
about the Company to the Purchasers, and neither the Purchasers nor any of their
affiliates, officers or agents will solicit any material non-public information
from the Company.
Section 3.9 Lock-Up. Each Purchaser agrees to sell, in each
calendar month during the one-year period beginning on the Closing Date, not
more than 1/12 of the aggregate number of Conversion Shares and Warrant Shares
issuable to such Purchaser pursuant to the Transaction Documents; provided,
however, that the number of such Conversion Shares and Warrant Shares that can
be sold shall be cumulative and shall begin to accumulate on the day following
the Closing Date; and, provided further that the number of such Conversion
Shares and Warrant Shares that may be sold in any calendar month shall increase
to 1/6 of such aggregate number of Conversion Shares and Warrant Shares issuable
to the undersigned in the event that the average daily trading volume in the
Common Stock is equal to or greater than 200,000 shares per day in the previous
20 trading days. The Company shall use its commercially reasonable efforts to
cause each of its officers, directors and affiliates to enter into an agreement
containing covenants substantially similar to those set forth in this Section
3.10.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company
to Close and to Sell the Shares and Warrants. The obligation hereunder of the
Company to close and issue and sell the Shares and the Warrants to the
Purchasers on the Closing Date is subject to the satisfaction or waiver, at or
before the Closing, of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties.
The representations and warranties of each Purchaser Transaction Documents shall
be true and correct in all material respects as of the date when made and as of
16
the Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true
and correct in all material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Shares
and Warrants shall have been delivered to the Company at the Closing.
(e) Delivery of Purchaser Transaction Documents. The Purchaser
Transaction Documents shall have been duly executed and delivered by the
Purchasers to the Company.
Section 4.2 Conditions Precedent to the Obligation of the
Purchasers to Close and to Purchase the Shares and Warrants. The obligation
hereunder of the Purchasers to purchase the Shares and Warrants and consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Purchasers' sole benefit and may be waived by the
Purchasers at any time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and in
each of the Transaction Documents shall be true and correct in all material
respects as of the Closing Date, except for representations and warranties that
are expressly made as of a particular date, which shall be true and correct in
all material respects as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all 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.
(c) No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
("Bloomberg") shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by Bloomberg,
nor shall a banking moratorium have been declared either by the United States or
Nevada State authorities, nor shall there have occurred any national or
international calamity or crisis of such magnitude in its effect on any
17
financial market which, in each case, in the reasonable judgment of the
Purchasers, makes it impracticable or inadvisable to purchase the Shares.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary, seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Opinion of Counsel, Etc. The Purchasers shall have received an
opinion of counsel to the Company, dated the Closing Date, substantially in the
form of Exhibit C hereto, and such other certificates and documents as the
Purchasers or their counsel shall reasonably require incident to the Closing.
(g) Warrants and Shares. The Company shall have delivered to the
Purchasers the originally executed Warrants (in such denominations as each
Purchaser may request but in no event in denominations of less than 100) and
shall have delivered certificates representing the Shares (in such denominations
as each Purchaser may request) being acquired by the Purchasers at the Closing.
(h) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to the Purchasers (the "Resolutions").
(i) Certificate of Designations. As of the Closing Date, the
Company shall have filed with the Nevada Secretary of State a Certificate of
Designation authorizing the Preferred Stock in substantially the Form of Exhibit
D attached hereto.
(j) Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Preferred Stock, solely
for the purpose of effecting the issuance of the Shares, a number of shares of
Preferred Stock equal to the aggregate number of the Shares. As of the Closing
Date, the Company shall have reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the Shares and the
exercise of the Warrants, a number of shares of Common Stock equal to the number
of Conversion Shares and the number of Warrant Shares issuable upon conversion
of the Preferred Stock and the exercise of the Warrants, respectively, assuming
the Warrants are exercised and the Shares are converted on the Closing Date
(assuming the Warrants are fully exercisable and the Shares fully convertible on
such date regardless of any limitation on the timing or amount of such exercise
or conversion).
18
(k) Secretary's Certificate. The Company shall have delivered to
the Purchasers a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(l) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate of an executive officer of the
Company, dated as of the Closing Date, confirming the accuracy of the Company's
representations, warranties and covenants contained herein and in each of the
other Transaction Documents as of the Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.
(m) Fees and Expenses. As of the Closing Date, all fees and
expenses required to be paid by the Company in connection with the transactions
contemplated by this Agreement shall have been, or authorized to be, paid by the
Company.
(n) Registration Rights Agreement. As of the Closing Date, the
parties shall have entered into the Registration Rights Agreement in the Form of
Exhibit E attached hereto.
(o) Material Adverse Effect. No Material Adverse Effect shall have
occurred.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Shares, the
Conversion Shares, the Warrants and the Warrant Shares shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or "blue sky"
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR AXM
PHARMA, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
Each certificate representing any Shares shall also be stamped or
otherwise imprinted with a legend substantially in the following form:
19
AXM PHARMA, INC. WILL FURNISH TO EACH HOLDER OF ITS SERIES A
CONVERTIBLE PREFERRED STOCK WHO SO REQUESTS WITHOUT CHARGE A COPY OF
THE CERTIFICATE OF DESIGNATION SETTING FORTH THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF SUCH STOCK AND ANY OTHER CLASS OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
The Company agrees to reissue certificates representing any of the
Securities, without the legend set forth above, if at such time, prior to making
any transfer of any such Securities, such holder thereof shall give written
notice to the Company describing the manner and terms of such transfer and
removal as the Company may reasonably request. Such proposed transfer will not
be effected until: (a) the Company has notified such holder that either (i) in
the opinion of Company counsel, the registration of the Shares, the Conversion
Shares, Warrants or Warrant Shares under the Securities Act is not required in
connection with such proposed transfer, or (ii) a registration statement under
the Securities Act covering such proposed disposition has been filed by the
Company with the Commission and has become effective under the Securities Act;
and (b) the Company has notified such holder that either (i) in the opinion of
Company counsel, the registration or qualification under the securities or "blue
sky" laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or "blue sky"
laws has been effected. The Company will use its best efforts to respond to any
such notice from a holder within five (5) days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, in connection therewith, to qualify to do business in
any state where it is not then qualified or to take any action that would
subject it to tax or to the general service of process in any state where it is
not then subject. The restrictions on transfer contained in this Section 5.1
shall be in addition to, and not by way of limitation of, any other restrictions
on transfer contained in any other section of this Agreement.
ARTICLE VI
TERMINATION
Section 6.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written consent
of the Company and the Purchasers.
Section 6.2 Effect of Termination. In the event of termination by
the Company or the Purchasers, written notice thereof shall forthwith be given
to the other party and the transactions contemplated by this Agreement shall be
terminated without further action by any party. If this Agreement is terminated
as provided in Section 6.1 herein, this Agreement shall become void and of no
further force and effect, except for Sections 8.1 and 8.2, and Article VII
herein. Nothing in this Section 6.2 shall be deemed to release the Company or
any Purchaser from any liability for any breach under this Agreement, or to
20
impair the rights of the Company or such Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1 General Indemnity. The Company agrees to indemnify
and hold harmless each Purchaser (and its respective directors, officers,
employees, affiliates, agents, successors and assigns) from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by each Purchaser or any such person as a result of any inaccuracy in
or breach of the representations, warranties or covenants made by the Company
herein. The Purchasers severally but not jointly agree to indemnify and hold
harmless the Company and its directors, officers, employees, affiliates, agents,
successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys' fees, charges and disbursements) incurred by the Company
as result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Purchasers herein.
Section 7.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect to such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify such person in writing of the indemnifying party's election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
21
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, which
consent may not be unreasonably withheld, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. If
the indemnifying party fails or refuses to promptly assume the defense of any
such claim, proceeding or action, then the indemnification required by this
Article VII shall be made by periodic payments of the amount thereof during the
course of investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred, so long as the indemnified party
irrevocably agrees to refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to applicable law.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement; provided,
however, that the Company shall pay $10,000 to Gryphon Master Fund, L.P. to
reimburse it for the fees and expenses (including attorneys' fees and expenses)
incurred by it in connection with its due diligence review of the Company and
the preparation, negotiation, execution, delivery and performance of this
Agreement and the other Transaction Documents and the transactions contemplated
thereunder (including its counsel's review of the Registration Statement), the
full amount of which shall be due and payable in cash at Closing (but only if
the Closing occurs). In addition, the Company shall pay all reasonable fees and
expenses incurred by each Purchaser in connection with any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents or incurred in connection with the enforcement of this Agreement and
any of the other Transaction Documents, including, without limitation, all
reasonable attorneys' fees, disbursements and expenses.
Section 8.2 Specific Enforcement; Consent to Jurisdiction.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
22
(b) The Company and each Purchaser (i) hereby irrevocably submit
to the exclusive jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York County for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby, and (ii) hereby waive, and
agree not to assert in any such suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of each such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. The Company and each Purchaser
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 8.2
shall affect or limit any right to serve process in any other manner permitted
by law. The Company and the Purchasers hereby agree that the prevailing party in
any suit, action or proceeding arising out of or relating to the Shares, this
Agreement, the Registration Rights Agreement or the Warrants, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
Section 8.3 Entire Agreement; Amendment. This Agreement, the
Transaction Documents and the Purchaser Transaction Documents contain the entire
understanding and agreement of the parties with respect to the matters covered
hereby and, except as specifically set forth herein or in any of the Transaction
Documents or Purchaser Transaction Documents, neither the Company nor any
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters. This Agreement, the Transaction Documents and the
Purchaser Transaction Documents supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers and their permitted assigns
owning of record at least a majority in interest of the then-outstanding Shares,
and no provision hereof may be waived other than by a written instrument signed
by the party against whom enforcement of any such waiver is sought. No amendment
to this Agreement shall be effective to the extent that it applies to less than
all of the holders of the Shares then outstanding or violates any provision of
the Nevada Corporation Law. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents or holders of Shares, as the
case may be.
Section 8.4 Notices. Any notice, demand, request, waiver or
other communication required or permitted to be given hereunder shall be in
writing and shall be deemed given and received (a) upon hand delivery or
delivery by telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received), or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
23
If to the Company: AXM Pharma, Inc.
0000 Xxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx, President
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Law Offices of Xxxxx X. Xxxxxxx, P.C.
000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party or parties hereto in accordance with the provisions of this Section
8.4.
Section 8.5 Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 8.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 8.7 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. After the Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
Section 8.8 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person (other than indemnified parties, as
contemplated by Article VII).
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Nevada, without
24
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 8.10 Survival. The representations and warranties of the
Company contained in Sections 2.1(o) and 2.1(s) shall survive until the
expiration of the applicable statutes of limitations, and those contained in
Article II, with the exception of Sections 2.1(o) and 2.1(s), shall survive the
execution and delivery hereof and the Closing until the date two (2) years from
the Closing Date, and the agreements and covenants set forth in Articles I, III,
V, VII and VIII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder.
Section 8.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.
Section 8.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the names of the
Purchasers without the consent of the Purchasers in accordance with Section 8.3,
which consent shall not be unreasonably withheld or delayed, or unless and until
such disclosure is required by law, rule or applicable regulation, and then only
to the extent of such requirement.
Section 8.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 8.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the Warrants
and the Registration Rights Agreement.
[Remainder of page intentionally left blank.]
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
AXM PHARMA, INC.
By:
-------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: President
BANYAN ASIA LIMITED
By: BANYAN FUND MANAGEMENT, LLC,
its General Partner
By:
-------------------------------
S.P. Wijegoonaratna,
Managing Member
BANYAN MAC 24, LTD.
By: BANYAN FUND MANAGEMENT, LLC,
its General Partner
By:
-------------------------------
S.P. Wijegoonaratna,
Managing Member
26
EXHIBIT A
LIST OF PURCHASERS
NAMES AND ADDRESSES OF NUMBER OF SHARES NUMBER OF WARRANTS DOLLAR AMOUNT
PURCHASERS PURCHASED PURCHASED OF INVESTMENT
--------- --------- --------- -------------
Banyan Asia Limited 378,400 440,000 $ 851,400
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
Banyan Mac 24, Ltd. 481,600 560,000 $1,083,600
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
A-1
EXHIBIT B
---------
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Nevada and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Shares, the Conversion Shares, the Warrants and the Warrant Shares. The
execution, delivery and performance of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby have
been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Shares and the Warrants have been duly executed, issued and
delivered by the Company and each of the Transaction Documents constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its respective terms. The Shares, the Conversion
Shares and the Warrant Shares are not subject to any preemptive rights under the
Certificate or the Bylaws.
3. The Shares have been duly authorized and, when delivered against
payment in full as provided in the Purchase Agreement, will be validly issued,
fully paid and nonassessable. The Conversion Shares, have been duly authorized
and reserved for issuance, and, when delivered upon conversion of the Shares,
will be validly issued, fully paid and nonassessable. The Warrant Shares, have
been duly authorized and reserved for issuance, and, when delivered upon
exercise or against payment in full as provided in the Warrants, will be validly
issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Shares, the
Conversion Shares, the Warrants and the Warrant Shares do not (a) violate any
provision of the Certificate or Bylaws, (b) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party and which is known to us, (c) create or impose a
lien, charge or encumbrance on any property of the Company under any agreement
or any commitment known to us to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (d) result in a violation of any Federal, state, local or foreign
statute, rule, regulation, order, judgment, injunction or decree (including
Federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
C-1
5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Shares, the Conversion Shares, the Warrants or
the Warrant Shares other than filings as may be required by applicable Federal
and state securities laws and regulations.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto. There is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Shares and the Warrants and the
offer, issuance and sale of the Conversion Shares and the Warrant Shares
pursuant to the Agreement and the Warrants, as applicable, are exempt from the
registration requirements of the Securities Act of 1933, as amended.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
C-2
EXHIBIT D
---------
FORM OF CERTIFICATE OF DESIGNATIONS
D-1
EXHIBIT E
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
E-1
