COMMON STOCK PURCHASE AGREEMENT
EXHIBIT
10.1
EXECUTION
COPY
COMMON STOCK PURCHASE
AGREEMENT (the “Agreement”), dated as of January 30, 2009 by and between
SPECTRASCIENCE, INC., a
Minnesota corporation (the “Company”), and FUSION CAPITAL FUND II, LLC,
an Illinois limited liability company (the “Buyer”). Capitalized
terms used herein and not otherwise defined herein are defined in Section 10
hereof.
WHEREAS:
Subject to the terms and conditions set
forth in this Agreement, the Company wishes to sell to the Buyer, and the Buyer
wishes to buy from the Company, up to Six Million Dollars ($6,000,000) of the
Company's common stock, $0.01 par value per share (the “Common
Stock”). The shares of Common Stock to be purchased hereunder are
referred to herein as the "Purchase Shares."
NOW THEREFORE, the Company and
the Buyer hereby agree as follows:
1. PURCHASE
OF COMMON STOCK.
Subject to the terms and conditions set
forth in this Agreement, the Company has the right to sell to the Buyer, and the
Buyer has the obligation to purchase from the Company, Purchase Shares as
follows:
(a) Commencement of Purchases of
Common Stock. The purchase and sale of Purchase Shares
hereunder shall occur from time to time upon written notices by the Company to
the Buyer on the terms and conditions as set forth herein following the
satisfaction of the conditions (the “Commencement”) as set forth in Sections 6
and 7 below (the date of satisfaction of such conditions, the
"Commencement Date").
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(b) The Company’s Right to
Require Purchases. Any time on or after the Commencement Date,
the Company shall have the right but not the obligation to direct the Buyer by
its delivery to the Buyer of Base Purchase Notices from time to time to buy
Purchase Shares (each such purchase a “Base Purchase”) in any amount up to
Twenty-Five-Thousand Dollars ($25,000) per Base Purchase Notice (the “Base
Purchase Amount”) at the Purchase Price on the Purchase Date. The
Company may deliver multiple Base Purchase Notices to the Buyer so long as at
least two (2) Business Days have passed since the most recent Base Purchase was
completed. Notwithstanding the forgoing, any time on or after the
Commencement Date, the Company shall also have the right but not the obligation
by its delivery to the Buyer of Block Purchase Notices from time to time to
direct the Buyer to buy Purchase Shares (each such purchase a “Block Purchase”)
in any amount up to One Million Dollars ($1,000,000) per Block Purchase Notice
at the Block Purchase Price on the Purchase Date as provided
herein. For a Block Purchase Notice to be valid the following
conditions must be met: (1) the Block Purchase Amount shall not exceed Fifty
Thousand Dollars ($50,000) per Block Purchase Notice, (2) the Company must
deliver the Purchase Shares before 11:00 a.m. eastern time on the Purchase Date
and (3) the Sale Price of the Common Stock must not be below $0.30 (subject to
equitable adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) during the Purchase Date,
the date of the delivery of the Block Purchase Notice and during the Business
Day prior to the delivery of the Block Purchase Notice. The Block
Purchase Amount may be increased to up to One Hundred Thousand Dollars
($100,000) per Block Purchase Notice if the Sale Price of the Common Stock is
not below $0.40 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
during the Purchase Date, the date of the delivery of the Block Purchase Notice
and during the Business Day prior to the delivery of the Block Purchase
Notice. The Block Purchase Amount may be increased to up to Two
Hundred Fifty Thousand Dollars ($250,000) per Block Purchase Notice if the Sale
Price of the Common Stock is not below $0.60 (subject to equitable adjustment
for any reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction) during the Purchase Date, the date of the delivery of
the Block Purchase Notice and during the Business Day prior to the delivery of
the Block Purchase Notice. The Block Purchase Amount may be increased
to up to Five Hundred Thousand Dollars ($500,000) per Block Purchase Notice if
the Sale Price of the Common Stock is not below $1.25 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) during the Purchase Date, the date of the
delivery of the Block Purchase Notice and during the Business Day prior to the
delivery of the Block Purchase Notice. The Block Purchase Amount may be
increased to up to One Million Dollars ($1,000,000) per Block Purchase Notice if
the Sale Price of the Common Stock is not below $2.50 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) during the Purchase Date, the date of the
delivery of the Block Purchase Notice and during the Business Day prior to the
delivery of the Block Purchase Notice. As used herein, the term
“Block Purchase Price” shall mean the lesser of (i) the lowest Sale Price of the
Common Stock on the Purchase Date or (ii) the lowest Purchase Price during the
previous ten (10) Business Days prior to the date that the valid Block Purchase
Notice was received by the Buyer. However, if at any time during the
Purchase Date, the date of the delivery of the Block Purchase Notice or during
the Business Day prior to the delivery of the Block Purchase Notice, the Sale
Price of the Common Stock is below the applicable Block Purchase threshold
price, such Block Purchase shall be void and the Buyer’s obligations to buy
Purchase Shares in respect of that Block Purchase Notice shall be
terminated. Thereafter, the Company shall again have the right to
submit a Block Purchase Notice as set forth herein by delivery of a new Block
Purchase Notice only if the Sale Price of the Common Stock is above the
applicable Block Purchase threshold price during the date of the delivery of the
Block Purchase Notice and during the Business Day prior to the delivery of the
Block Purchase Notice. The Company may deliver multiple Block
Purchase Notices to the Buyer so long as at least two (2) Business Days have
passed since the most recent Block Purchase was completed.
(c) Payment for Purchase
Shares. The Buyer shall pay to the Company an amount equal to
the Purchase Amount with respect to such Purchase Shares as full payment for
such Purchase Shares via wire transfer of immediately available funds on the
same Business Day that the Buyer receives such Purchase Shares if they are
received by the Buyer before 11:00 a.m. eastern time or if received by the Buyer
after 11:00 a.m. eastern time, the next Business Day. The Company
shall not issue any fraction of a share of Common Stock upon any
purchase. If the issuance would result in the issuance of a fraction
of a share of Common Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share. All payments made
under this Agreement shall be made in lawful money of the United States of
America or wire transfer of immediately available funds to such account as the
Company may from time to time designate by written notice in accordance with the
provisions of this Agreement. Whenever any amount expressed to be due
by the terms of this Agreement is due on any day that is not a Business Day, the
same shall instead be due on the next succeeding day that is a Business
Day.
(d) Purchase Price
Floor. The Company and the Buyer shall not effect any sales
under this Agreement on any Purchase Date where the Purchase Price for any
purchases of Purchase Shares would be less than the Floor
Price. “Floor Price” means $0.15, which shall be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction.
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(e) Records of
Purchases. The Buyer and the Company shall each maintain
records showing the remaining Available Amount at any give time and the dates
and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.
(f) Taxes. The
Company shall pay any and all transfer, stamp or similar taxes that may be
payable with respect to the issuance and delivery of any shares of Common Stock
to the Buyer made under this Agreement.
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
The Buyer
represents and warrants to the Company that as of the date hereof and as of the
Commencement Date:
(a) Investment
Purpose. The Buyer is entering into this Agreement and
acquiring the Commitment Shares, (as defined in Section 4(e) hereof) (this
Agreement, the Purchase Shares and the Commitment Shares are collectively
referred to herein as the "Securities"), for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof; provided however, by making the representations herein,
the Buyer does not agree to hold any of the Securities for any minimum or other
specific term.
(b) Accredited Investor
Status. The Buyer is an "accredited investor" as that term is
defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on
Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The
Buyer has been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Securities that have been reasonably requested by the Buyer, including,
without limitation, the SEC Documents (as defined in Section 3(f)
hereof). The Buyer understands that its investment in the Securities
involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence
investigations conducted by the Buyer or its representatives shall modify, amend
or affect the Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below. The Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.
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(e) No Governmental
Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(f) Transfer or
Sale. The Buyer understands that except as provided in the
Registration Rights Agreement (as defined in Section 4(a) hereof): (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
(g) Validity;
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(h) Residency. The
Buyer is a resident of the State of Illinois.
(i) No Prior Short
Selling. The Buyer represents and warrants to the Company that
at no time prior to the date of this Agreement has any of the Buyer, its agents,
representatives or affiliates engaged in or effected, in any manner whatsoever,
directly or indirectly, any (i) "short sale" (as such term is defined in Section
242.200 of Regulation SHO of the Securities Exchange Act of 1934, as amended
(the "1934 Act")) of the Common Stock or (ii) hedging transaction, which
establishes a net short position with respect to the Common Stock.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Buyer that as of the date hereof and as
of the Commencement Date:
(a) Organization and
Qualification. The Company and its "Subsidiaries" (which for
purposes of this Agreement means any entity in which the Company, directly or
indirectly, owns 50% or more of the voting stock or capital stock or other
similar equity interests) are corporations duly organized and validly existing
in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authority to own their
properties and to carry on their business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing could not reasonably be
expected to have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on any
of: (i) the business, properties, assets, operations, results of operations or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, or (ii) the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 3(b)
hereof). The Company has no Subsidiaries except as set forth on
Schedule 3(a).
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(b) Authorization; Enforcement;
Validity. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and each of the other agreements
entered into by the parties on the Commencement Date and attached hereto as
exhibits to this Agreement (collectively, the "Transaction Documents"), and to
issue the Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation, the issuance of the Commitment Shares and the
reservation for issuance and the issuance of the Purchase Shares issuable under
this Agreement, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its shareholders, (iii) this Agreement has been, and each other
Transaction Document shall be on the Commencement Date, duly executed and
delivered by the Company and (iv) this Agreement constitutes, and each other
Transaction Document upon its execution on behalf of the Company, shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and
remedies. The Board of Directors of the Company has approved the
resolutions (the “Signing Resolutions”) substantially in the form as set forth
as Exhibit C-1
attached hereto to authorize this Agreement and the transactions contemplated
hereby. The Signing Resolutions are valid, in full force and effect
and have not been modified or supplemented in any respect other than by the
resolutions set forth in Exhibit C-2 attached
hereto regarding the registration statement referred to in Section 4
hereof. The Company has delivered to the Buyer a true and correct
copy of a unanimous written consent adopting the Signing Resolutions executed by
all of the members of the Board of Directors of the Company. No other
approvals or consents of the Company’s Board of Directors and/or shareholders is
necessary under applicable laws and the Company’s Certificate of Incorporation
and/or Bylaws to authorize the execution and delivery of this Agreement or any
of the transactions contemplated hereby, including, but not limited to, the
issuance of the Commitment Shares and the issuance of the Purchase
Shares.
(c) Capitalization. As
of the date hereof, the authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock and 25,000,000 undesignated shares, of which
as of the date hereof, 68,602,636 shares are issued and outstanding, 0 are held
as treasury shares, 10,290,395 shares are reserved for issuance
pursuant to the Company's stock option plans of which only approximately
1,940,395 shares remain available for future grants and 787,453 warrant shares
are issuable and reserved for issuance pursuant to securities (other than stock
options issued pursuant to the Company's stock option plans) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii) 0 shares
of Preferred Stock are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as disclosed in Schedule 3(c),
(i) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company, (ii) there are no outstanding debt securities, (iii) there are no
other outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement) other than registration
rights as described in Schedule 3(c), (v) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Buyer
true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-laws, as amended and as in effect on the
date hereof (the "By-laws"), and summaries of the terms of all securities
convertible into or exercisable for Common Stock, if any, and copies of any
documents containing the material rights of the holders thereof in respect
thereto.
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(d) Issuance of
Securities. The Commitment Shares have been duly authorized
and, upon issuance in accordance with the terms hereof, the Commitment Shares
shall be (i) validly issued, fully paid and non-assessable and (ii) free from
all taxes, liens and charges with respect to the issue thereof. 11,558,974
shares of Common Stock have been duly authorized and reserved for issuance upon
purchase under this Agreement. 547,009 shares of Common Stock (subject to
equitable adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) have been duly authorized
and reserved for issuance as Additional Commitment Shares in accordance with
Section 4(e) of this Agreement. Upon issuance and
payment therefore in accordance with the terms and conditions of this Agreement,
the Purchase Shares shall be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common
Stock.
(e) No
Conflicts. Except as disclosed in Schedule 3(e), 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 (including, without limitation, the reservation for issuance and
issuance of the Purchase Shares) will not (i) result in a violation of the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market 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 the case of
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations under clause (ii), which could not reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in Schedule 3(e),
neither the Company nor its Subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any Certificate of Designation,
Preferences and Rights of any outstanding series of preferred stock of the
Company or By-laws or their organizational charter or by-laws,
respectively. Except as disclosed in Schedule 3(e), neither the
Company nor any of its Subsidiaries is in violation of any term of or is in
default under any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations or amendments which could not reasonably be
expected to have a Material Adverse Effect. The business of the
Company and its Subsidiaries is not being conducted, and shall not be conducted,
in violation of any law, ordinance, regulation of any governmental entity,
except for possible violations, the sanctions for which either individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act or applicable state securities laws, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence shall be
obtained or effected on or prior to the Commencement Date. Except as
listed in Schedule 3(e), since January 1, 2008 the Company has not received nor
delivered any notices or correspondence from or to the Principal
Market. The Principal Market has not commenced any delisting
proceedings against the Company.
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(f) SEC Documents; Financial
Statements. Except as disclosed in Schedule 3(f), since January 1, 2008,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). As of their respective dates
(except as they have been correctly amended), the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC (except
as they may have been properly amended), contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their
respective dates (except as they have been properly amended), the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as listed in Schedule 3(f), the Company has
received no notices or correspondence from the SEC since January 1,
2008. The SEC has not commenced any enforcement proceedings against
the Company or any of its subsidiaries.
(g) Absence of Certain
Changes. Except as disclosed in Schedule 3(g), since September
30, 2008, there has been no material adverse change in the business, properties,
operations, financial condition or results of operations of the Company or its
Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or
insolvency proceedings. The Company is financially solvent and is
generally able to pay its debts as they become due.
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(h) Absence of
Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, which
could reasonably be expected to have a Material Adverse
Effect. A description of each action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body which, as of the date of this Agreement, is
pending or threatened in writing against or affecting the Company, the Common
Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, is
set forth in Schedule 3(h).
(i) Acknowledgment Regarding
Buyer's Status. The Company acknowledges and agrees that the
Buyer is acting solely in the capacity of arm's length purchaser with respect to
the Transaction Documents and the transactions contemplated hereby and
thereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the
Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives and advisors.
(j) No General
Solicitation. 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 0000 Xxx) in connection with the offer or sale of the
Securities.
(k) Intellectual Property
Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all material trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth on Schedule 3(k), none of the
Company's material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of any material
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule 3(k), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement, which could reasonably
be expected to have a Material Adverse Effect.
(l) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.
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(m) Title. The
Company and its Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
them which is material to the business of the Company and its Subsidiaries, in
each case free and clear of all liens, encumbrances and defects except such as
are described in Schedule 3(m) or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(n) Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
(o) Regulatory
Permits. The Company and its Subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(p) Tax
Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
(q) Transactions With
Affiliates. Except as set forth on Schedule 3(q) and other
than the grant or exercise of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has an interest or is an officer,
director, trustee or partner.
-12-
(r) Application of Takeover
Protections. The Company and its board of directors have taken
or will take prior to the Commencement Date all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
(s) Foreign Corrupt
Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any of its Subsidiaries has, in the course of its actions for, or
on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
4. COVENANTS.
(a) Filing of Form 8-K and
Registration Statement. The Company agrees that it shall,
within the time required under the 1934 Act file a Report on Form 8-K disclosing
this Agreement and the transaction contemplated hereby. The Company
shall also file within thirty (30) Business Days from the date hereof a new
registration statement covering the sale of the Commitment Shares and Purchase
Shares in accordance with the terms of the Registration Rights Agreement between
the Company and the Buyer, dated as of the date hereof (“Registration Rights
Agreement”),the remaining 121,428 restricted common shares sold in the Private
Placement Offering in May 2008 and 73,168 common shares underlying outstanding
placement agent warrants
(b) Blue Sky. The Company
shall take such action, if any, as is reasonably necessary in order to obtain an
exemption for or to qualify (i) the initial sale of the Commitment Shares and
any Purchase Shares to the Buyer under this Agreement and (ii) any subsequent
resale of the Commitment Shares and any Purchase Shares by the Buyer, in each
case, under applicable securities or "Blue Sky" laws of the states of the United
States in such states as is reasonably requested by the Buyer from time to time,
and shall provide evidence of any such action so taken to the
Buyer.
(c) Listing. The
Company shall promptly secure the listing of all of the Purchase Shares and
Commitment Shares upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all such securities from time
to time issuable under the terms of the Transaction Documents. The
Company shall maintain the Common Stock's authorization for quotation on the
Principal Market. Neither the Company nor any of its Subsidiaries
shall take any action that would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal
Market. The Company shall promptly, and in no event later than the
following Business Day, provide to the Buyer copies of any notices it receives
from the Principal Market regarding the continued eligibility of the Common
Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section.
-13-
(d) Limitation on Short Sales
and Hedging Transactions. The Buyer agrees that beginning on
the date of this Agreement and ending on the date of termination of this
Agreement as provided in Section 11(k), the Buyer and its agents,
representatives and affiliates shall not in any manner whatsoever enter into or
effect, directly or indirectly, any (i) "short sale" (as such term is defined in
Section 242.200 of Regulation SHO of the 0000 Xxx) of the Common Stock or (ii)
hedging transaction, which establishes a net short position with respect to the
Common Stock.
(e) Issuance of Commitment
Shares; Limitation on Sales of Commitment Shares. Immediately
upon the execution of this Agreement, the Company shall issue to the Buyer as
consideration for the Buyer entering into this Agreement 1,094,017 shares of
Common Stock (the "Initial Commitment Shares"). In connection with
each purchase of Purchase Shares hereunder, the Company agrees to issue to the
Buyer a number of shares of Common Stock (the “Additional Commitment Shares” and
together with the Initial Commitment Shares, the “Commitment Shares”) equal to
the product of (x) 547,009 and (y) the Purchase Amount Fraction. The
“Purchase Amount Fraction” shall mean a fraction, the numerator of which is the
Purchase Amount purchased by the Buyer with respect to such purchase of Purchase
Shares and the denominator of which is Six Million Dollars
($6,000,000). The Additional Commitment Shares shall be equitably
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction. The Initial Commitment
Shares shall be issued in certificated form and (subject to Section 5 hereof)
shall bear the following restrictive legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
The
Buyer agrees that the Buyer shall not transfer or sell the Commitment Shares
until the earlier of 480 Business Days (24 Monthly Periods) from the date hereof
or the date on which this Agreement has been terminated, provided, however, that
such restrictions shall not apply: (i) in connection with any transfers to or
among affiliates (as defined in the 1934 Act), (ii) in the event that the
Commencement does not occur on or before June 1, 2009, due to the failure of the
Company to satisfy the conditions set forth in Section 7 or (iii) if an Event of
Default has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default, including any failure by the Company to timely
issue Purchase Shares under this Agreement. Notwithstanding the
forgoing, the Buyer may transfer Commitment Shares to a third party in order to
settle a sale made by the Buyer where the Buyer reasonably expects the Company
to deliver Purchase Shares to the Buyer under this Agreement so long as the
Buyer maintains ownership of the same overall number of shares of Common Stock
by "replacing" the Commitment Shares so transferred with Purchase Shares when
the Purchase Shares are actually issued by the Company to the
Buyer.
(g) Due
Diligence. The Buyer shall have the right, from time to time
as the Buyer may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours. The Company
and its officers and employees shall provide information and reasonably
cooperate with the Buyer in connection with any reasonable request by the Buyer
related to the Buyer's due diligence of the Company, including, but not limited
to, any such request made by the Buyer in connection with (i) the filing of the
registration statement described in Section 4(a) hereof and (ii) the
Commencement. Each party hereto agrees not to disclose any
Confidential Information of the other party to any third party and shall not use
the Confidential Information for any purpose other than in connection with, or
in furtherance of, the transactions contemplated hereby. Each party
hereto acknowledges that the Confidential Information shall remain the property
of the disclosing party and agrees that it shall take all reasonable measures to
protect the secrecy of any Confidential Information disclosed by the other
party.
-14-
5. TRANSFER
AGENT INSTRUCTIONS.
Immediately
upon the execution of this Agreement, the Company shall deliver to the Transfer
Agent a letter in the form as set forth as Exhibit E attached
hereto with respect to the issuance of the Initial Commitment Shares. On the Commencement
Date, the Company shall cause any restrictive legend on the Initial Commitment
Shares and the
100,000 shares of Common Stock issued to the Buyer upon signing that certain
Term Sheet between the Buyer and the Company and dated as of December 16, 2008
(the “Signing Shares”) to be removed and all of
the Purchase Shares and Additional Commitment Shares, to be issued under this
Agreement shall be issued without any restrictive legend unless the Buyer
expressly consents otherwise. The Company shall issue irrevocable
instructions to the Transfer Agent, and any subsequent transfer agent, to issue
Purchase Shares in the name of the Buyer for the Purchase Shares (the
"Irrevocable Transfer Agent Instructions"). The Company warrants to
the Buyer that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, will be given by the Company to the
Transfer Agent with respect to the Purchase Shares, the Signing Shares or the
Commitment Shares and that all of such shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement subject to the
provisions of Section 4(e) in the case of the Commitment Shares.
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6.
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CONDITIONS
TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK UNDER
THIS AGREEMENT.
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The right
of the Company hereunder to commence sales of the Purchase Shares is subject to
the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales):
(a) The
Buyer shall have executed each of the Transaction Documents and delivered the
same to the Company;
(b) A
registration statement covering the sale of all of the Commitment Shares, the
Signing Shares and Purchase Shares shall have been declared effective under the
1933 Act by the SEC and no stop order with respect to the registration statement
shall be pending or threatened by the SEC.
-15-
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7.
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CONDITIONS
TO THE BUYER'S OBLIGATION TO MAKE PURCHASES OF SHARES OF COMMON
STOCK.
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The
obligation of the Buyer to buy Purchase Shares under this Agreement is subject
to the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales) and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has
occurred:
(a) The
Company shall have executed each of the Transaction Documents and delivered the
same to the Buyer;
(b) The
Company shall have issued to the Buyer the Initial Commitment Shares and shall
have removed the restrictive transfer legend from the certificate representing
the Initial Commitment Shares and the Signing Shares;
(c) The
Common Stock shall be authorized for quotation on the Principal Market, trading
in the Common Stock shall not have been within the last 365 days suspended by
the SEC or the Principal Market and the Purchase Shares, the Signing Shares and
the Commitment Shares shall be approved for listing upon the Principal
Market;
(d) The
Buyer shall have received the opinions of the Company's legal counsel dated as
of the Commencement Date substantially in the form of Exhibit
A attached hereto;
(e) The
representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Commencement Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Commencement Date. The Buyer shall have received a
certificate, executed by the CEO, President or CFO of the Company, dated as of
the Commencement Date, to the foregoing effect in the form attached hereto as
Exhibit
B;
(f) The
Board of Directors of the Company shall have adopted resolutions in the form
attached hereto as Exhibit
C which shall be in full force and effect without any amendment or
supplement thereto as of the Commencement Date;
(g) As
of the Commencement Date, the Company shall have reserved out of its authorized
and unissued Common Stock, (A) solely for the purpose of effecting purchases of
Purchase Shares hereunder, 11,558,974 shares of Common Stock and (B) as
Additional Commitment Shares in accordance with Section 4(e) hereof, 547,009
shares of Common Stock;
(h) The
Irrevocable Transfer Agent Instructions, in form acceptable to the Buyer shall
have been delivered to and acknowledged in writing by the Company and the
Company's Transfer Agent;
(i) The
Company shall have delivered to the Buyer a certificate evidencing the
incorporation and good standing of the Company in the State of Minnesota issued
by the Secretary of State of the State of Minnesota as of a date within ten (10)
Business Days of the Commencement Date;
-16-
(j) The
Company shall have delivered to the Buyer a certified copy of the Certificate of
Incorporation as certified by the Secretary of State of the State of Minnesota
within ten (10) Business Days of the Commencement Date;
(k) The
Company shall have delivered to the Buyer a secretary's certificate executed by
the Secretary of the Company, dated as of the Commencement Date, in the form
attached hereto as Exhibit
D;
(l) A
registration statement covering the sale of all of the Commitment Shares, the
Signing Shares and Purchase Shares shall have been declared effective under the
1933 Act by the SEC and no stop order with respect to the registration statement
shall be pending or threatened by the SEC. The Company shall have
prepared and delivered to the Buyer a final and complete form of prospectus,
dated and current as of the Commencement Date, to be used by the Buyer in
connection with any sales of any Commitment Shares, Signing Shares or Purchase
Shares, and to be filed by the Company one Business Day after the Commencement
Date. The Company shall have made all filings under all applicable federal and
state securities laws necessary to consummate the issuance of the Commitment
Shares, the Signing Shares and the Purchase Shares pursuant to this Agreement in
compliance with such laws;
(m) No
Event of Default has occurred, or any event which, after notice and/or lapse of
time, would become an Event of Default has occurred;
(n) On
or prior to the Commencement Date, the Company shall take all necessary action,
if any, and such actions as reasonably requested by the Buyer, in order to
render inapplicable any control share acquisition, business combination,
shareholder rights plan or poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Certificate
of Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities; and
(o) The
Company shall have provided the Buyer with the information requested by the
Buyer in connection with its due diligence requests made prior to, or in
connection with, the Commencement, in accordance with the terms of Section 4(g)
hereof.
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8.
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INDEMNIFICATION.
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In
consideration of the Buyer's execution and delivery of the Transaction Documents
and acquiring the Securities hereunder and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Buyer and all of its affiliates,
shareholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, other than with respect
to Indemnified Liabilities which directly and primarily result from the gross
negligence or willful misconduct of the Indemnitee. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
-17-
9. EVENTS
OF DEFAULT.
An "Event
of Default" shall be deemed to have occurred at any time as any of the following
events occurs:
(a) while
any registration statement is required to be maintained effective pursuant to
the terms of the Registration Rights Agreement, the effectiveness of such
registration statement lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to the Buyer for sale of all of the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of ten (10) consecutive Business Days
or for more than an aggregate of thirty (30) Business Days in any 365-day
period;
(b) the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market for a period of three (3) consecutive Business
Days;
(c) the
delisting of the Company’s Common Stock from the Principal Market, provided,
however, that the Common Stock is not immediately thereafter trading on the New
York Stock Exchange, NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or the NYSE Alternext US;
(d) the
failure for any reason by the Transfer Agent to issue Purchase Shares to the
Buyer within five (5) Business Days after the applicable Purchase Date which the
Buyer is entitled to receive;
(e) the
Company breaches any representation, warranty, covenant or other term or
condition under any Transaction Document if such breach could have a Material
Adverse Effect and except, in the case of a breach of a covenant which is
reasonably curable, only if such breach continues for a period of at least five
(5) Business Days;
(f) if
any Person commences a proceeding against the Company pursuant to or within the
meaning of any Bankruptcy Law;
(g) if
the Company pursuant to or within the meaning of any Bankruptcy Law; (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors, (E) becomes insolvent, or
(F) is generally unable to pay its debts as the same become due;
-18-
(h) a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company in an involuntary case, (B)
appoints a Custodian of the Company or for all or substantially all of its
property, or (C) orders the liquidation of the Company or any Subsidiary;
or
(i) a
material adverse change in the business, properties, operations, financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
In
addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be permitted or obligated to purchase
any shares of Common Stock under this Agreement. If pursuant to or
within the meaning of any Bankruptcy Law, the Company commences a voluntary case
or any Person commences a proceeding against the Company, a Custodian is
appointed for the Company or for all or substantially all of its property, or
the Company makes a general assignment for the benefit of its creditors, (any of
which would be an Event of Default as described in Sections 9(f), 9(g) and
9(h) hereof) this
Agreement shall automatically terminate without any liability or payment to the
Company without further action or notice by any Person. No such
termination of this Agreement under Section 11(k)(i) shall affect the Company's
or the Buyer's obligations under this Agreement with respect to pending
purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this
Agreement.
10. CERTAIN
DEFINED TERMS.
For
purposes of this Agreement, the following terms shall have the following
meanings:
(a) “1933
Act” means the Securities Act of 1933, as amended.
(b) “Available
Amount” means initially Six Million Dollars ($6,000,000) in the aggregate which
amount shall be reduced by the Purchase Amount each time the Buyer purchases
shares of Common Stock pursuant to Section 1 hereof.
(c) “Bankruptcy
Law” means Title 11, U.S. Code, or any similar federal or state law for the
relief of debtors.
(d) “Base
Purchase Notice” shall mean an irrevocable written notice from the Company to
the Buyer directing the Buyer to buy up to the Base Purchase Amount in Purchase
Shares as specified by the Company therein at the applicable Purchase Price on
the Purchase Date.
(e) “Block
Purchase Amount” shall mean such Block Purchase Amount as specified by the
Company in a Block Purchase Notice subject to Section 1(b) hereof.
(f) “Block
Purchase Notice” shall mean an irrevocable written notice from the Company to
the Buyer directing the Buyer to buy the Block Purchase Amount in Purchase
Shares as specified by the Company therein at the Block Purchase Price as of the
Purchase Date subject to Section 1 hereof.
-19-
(d) “Business
Day” means any day on which the Principal Market is open for trading including
any day on which the Principal Market is open for trading for a period of time
less than the customary time.
(e) “Closing
Sale Price” means, for any security as of any date, the last closing trade price
for such security on the Principal Market as reported by the Principal Market,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing trade price of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by the Principal Market.
(f) “Confidential
Information” means any information disclosed by either party to the other party,
either directly or indirectly, in writing, orally or by inspection of tangible
objects (including, without limitation, documents, prototypes, samples, plant
and equipment), which is designated as "Confidential," "Proprietary" or some
similar designation. Information communicated orally shall be considered
Confidential Information if such information is confirmed in writing as being
Confidential Information within ten (10) Business Days after the initial
disclosure. Confidential Information may also include information disclosed to a
disclosing party by third parties. Confidential Information shall not, however,
include any information which (i) was publicly known and made generally
available in the public domain prior to the time of disclosure by the disclosing
party; (ii) becomes publicly known and made generally available after disclosure
by the disclosing party to the receiving party through no action or inaction of
the receiving party; (iii) is already in the possession of the receiving party
at the time of disclosure by the disclosing party as shown by the receiving
party’s files and records immediately prior to the time of disclosure; (iv) is
obtained by the receiving party from a third party without a breach of such
third party’s obligations of confidentiality; (v) is independently developed by
the receiving party without use of or reference to the disclosing party’s
Confidential Information, as shown by documents and other competent evidence in
the receiving party’s possession; or (vi) is required by law to be disclosed by
the receiving party, provided that the receiving party gives the disclosing
party prompt written notice of such requirement prior to such disclosure and
assistance in obtaining an order protecting the information from public
disclosure.
(g) “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
(h) “Maturity
Date” means the date that is 480 Business Days (24 Monthly Periods) from the
Commencement Date.
(i) “Monthly
Period” means each successive 20 Business Day period commencing with the
Commencement Date.
(j) “Person”
means an individual or entity including any limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(k) “Principal
Market” means the OTC Bulletin Board; provided however, that in the event the
Company’s Common Stock is ever listed or traded on he New York Stock Exchange,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or the NYSE Alternext US, then the “Principal Market” shall mean such
other market or exchange on which the Company’s Common Stock is then listed or
traded.
-20-
(l) “Purchase
Amount” means, with respect to any particular purchase made hereunder, the
portion of the Available Amount to be purchased by the Buyer pursuant to Section
1 hereof as set forth in a valid Base Purchase Notice or a valid Block Purchase
Notice which the Company delivers to the Buyer.
(m) “Purchase
Date” means with respect to any particular purchase made hereunder, the Business
Day after receipt by the Buyer of a valid Base Purchase Notice or a valid Block
Purchase Notice that the Buyer is to buy Purchase Shares pursuant to Section 1
hereof.
(n)
“Purchase Price” means the lower of the (A) the lowest Sale Price of the Common
Stock on the Purchase Date and (B) the arithmetic average of the three (3)
lowest Closing Sale Prices for the Common Stock during the twelve (12)
consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction).
(o) “Sale
Price” means any trade price for the shares of Common Stock on the Principal
Market as reported by the Principal Market.
(q) “SEC”
means the United States Securities and Exchange Commission.
(r) “Transfer
Agent” means the transfer agent of the Company as set forth in Section 11(f)
hereof or such other person who is then serving as the transfer agent for the
Company in respect of the Common Stock.
11. MISCELLANEOUS.
(a) Governing Law; Jurisdiction;
Jury Trial. The corporate laws of the State of Minnesota shall
govern all issues concerning the relative rights of the Company and its
shareholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction
Documents shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
-21-
(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement. With the exception of the Mutual Nondisclosure
Agreement between the parties dated as of December 17, 2008, this Agreement
supersedes all other prior oral or written agreements between the Buyer, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. The Company acknowledges and agrees that is has not relied
on, in any manner whatsoever, any representations or statements, written or
oral, other than as expressly set forth in this Agreement.
(f) Notices. Any
notices, consents or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt when delivered personally; (ii) upon receipt
when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
Business Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the
Company:
SpectraScience,
Inc.
00000
Xxxxxxxx Xxxxxx Xx., Xxxxx 00
Xxx
Xxxxx, XX 00000
Telephone: 858-847-0200
Facsimile: 000-000-0000
Attention: Chief
Executive Officer
With a
copy to:
Xxxxxxxx
& Xxxxxx PA
0000
Xxxxx Xxxxxx Xxxxxx000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx,
XX 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention:
Xxxxx Xxxxxxxxx
-22-
If to the
Buyer:
Fusion
Capital Fund II, LLC
000
Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx,
XX 00000
Telephone: 312-644-6644
Facsimile: 000-000-0000
Attention: Xxxxxx
X. Xxxxxx
If to the
Transfer Agent:
Xxxxx
Fargo Shareowner Services161 Xxxxx Xxxxxxx Xxxxxxxx
Xxxxx Xx.
Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx
Xxxx
or at
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of
such notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer, including
by merger or consolidation. The Buyer may not assign its rights or
obligations under this Agreement.
(h) 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.
(i) Publicity. The
Buyer shall have the right to approve before issuance any press release, SEC
filing or any other public disclosure made by or on behalf of the Company
whatsoever with respect to, in any manner, the Buyer, its purchases hereunder or
any aspect of this Agreement or the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of the Buyer, to make any
press release or other public disclosure (including any filings with the SEC)
with respect to such transactions as is required by applicable law and
regulations so long as the Company and its counsel consult with the Buyer in
connection with any such press release or other public disclosure at least two
(2) Business Days prior to its release. The Buyer must be provided
with a copy thereof at least two (2) Business Days prior to any release or use
by the Company thereof. The Company agrees and acknowledges that its
failure to fully comply with this provision constitutes a material adverse
effect on its ability to perform its obligations under this
Agreement.
(j) Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
-23-
(k) Termination. This
Agreement may be terminated only as follows:
(i) By
the Buyer any time an Event of Default exists without any liability or payment
to the Company. However, if pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding against the Company, a Custodian is appointed for the Company or for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event of
Default as described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination
of this Agreement under this Section 11(k)(i) shall affect the Company's or the
Buyer's obligations under this Agreement with respect to pending purchases and
the Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
(ii) In
the event that the Commencement shall not have occurred, the Company shall have
the option to terminate this Agreement for any reason or for no reason without
any liability whatsoever of any party to any other party under this
Agreement.
(iii) In
the event that the Commencement shall not have occurred on or before June 1,
2009, due to the failure to satisfy the conditions set forth in Sections 6 and 7
above with respect to the Commencement, the nonbreaching party shall have the
option to terminate this Agreement at the close of business on such date or
thereafter without liability of any party to any other party.
(iv)
At any time after the Commencement Date, the Company shall have the option to
terminate this Agreement for any reason or for no reason by delivering notice (a
“Company Termination Notice”) to the Buyer electing to terminate this Agreement
without any liability whatsoever of any party to any other party under this
Agreement. The Company Termination Notice shall not be effective
until one (1) Business Day after it has been received by the Buyer.
(v) This
Agreement shall automatically terminate on the date that the Company sells and
the Buyer purchases the full Available Amount as provided herein, without any
action or notice on the part of any party and without any liability whatsoever
of any party to any other party under this Agreement.
(vi) If
by the Maturity Date for any reason or for no reason the full Available Amount
under this Agreement has not been purchased as provided for in Section 1 of this
Agreement, this Agreement shall automatically terminate on the Maturity Date,
without any action or notice on the part of any party and without any liability
whatsoever of any party to any other party under this Agreement.
Except as
set forth in Sections 11(k)(i) (in respect of an Event of Default under Sections
9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this Agreement pursuant
to this Section 11(k) shall be effected by written notice from the Company to
the Buyer, or the Buyer to the Company, as the case may be, setting forth the
basis for the termination hereof. The representations and warranties
of the Company and the Buyer contained in Sections 2, 3 and 5 hereof, the
indemnification provisions set forth in Section 8 hereof and the agreements and
covenants set forth in Section 11, shall survive the
Commencement and any termination of this Agreement. No termination of
this Agreement shall affect the Company's or the Buyer's rights or obligations
(i) under the Registration Rights Agreement which shall survive any such
termination or (ii) under this Agreement with respect to pending purchases and
the Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
-24-
(l) No Financial Advisor,
Placement Agent, Broker or Finder. The Company
represents and warrants to the Buyer that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Buyer represents and warrants to the Company
that it has not engaged any financial advisor, placement agent, broker or finder
in connection with the transactions contemplated hereby. The Company
shall be responsible for the payment of any fees or commissions, if any, of any
financial advisor, placement agent, broker or finder relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and
hold the Buyer harmless against, any liability, loss or expense (including,
without limitation, attorneys' fees and out of pocket expenses) arising in
connection with any such claim.
(m) No Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
(n) Remedies, Other Obligations,
Breaches and Injunctive Relief. The Buyer’s remedies provided
in this Agreement shall be cumulative and in addition to all other remedies
available to the Buyer under this Agreement, at law or in equity (including a
decree of specific performance and/or other injunctive relief), no remedy of the
Buyer contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit the Buyer's
right to pursue actual damages for any failure by the Company to comply with the
terms of this Agreement. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyer and that
the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Buyer shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
(0) Enforcement
Costs. If: (i) this Agreement is placed by the Buyer in the
hands of an attorney for enforcement or is enforced by the Buyer through any
legal proceeding; or (ii) an attorney is retained to represent the Buyer in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyer in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to the Buyer, as
incurred by the Buyer, all reasonable costs and expenses including attorneys'
fees incurred in connection therewith, in addition to all other amounts due
hereunder.
(p) Failure or Indulgence Not
Waiver. No failure or delay in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or
privilege.
* * * * *
-25-
IN WITNESS WHEREOF, the Buyer
and the Company have caused this Common Stock Purchase Agreement to be duly
executed as of the date first written above.
|
THE COMPANY:
|
|
SPECTRASCIENCE, INC.
|
|
By: /s/ Xxxxx X.
Xxxxx
|
|
Name: Xxxxx X.
Xxxxx
|
|
Title: Chief Financial
Officer
|
|
BUYER:
|
|
FUSION CAPITAL FUND II,
LLC
|
|
BY: FUSION CAPITAL PARTNERS,
LLC
|
|
BY: SGM HOLDINGS CORP.
|
|
By: /s/ Xxxxxx X.
Xxxxxx
|
|
Name: Xxxxxx X.
Xxxxxx
|
|
Title:
President
|
-26-
SCHEDULES
|
Schedule
3(a)
|
Subsidiaries
|
|
Schedule
3(c)
|
Capitalization
|
|
Schedule
3(e)
|
Conflicts
|
|
Schedule
3(f)
|
1934
Act Filings
|
|
Schedule
3(g)
|
Material
Changes
|
|
Schedule
3(h)
|
Litigation
|
|
Schedule
3(k)
|
Intellectual
Property
|
|
Schedule
3(m)
|
Liens
|
|
Schedule
3(q)
|
Certain
Transactions
|
EXHIBITS
|
Exhibit
A
|
Form
of Company Counsel Opinion
|
|
Exhibit
B
|
Form
of Officer’s Certificate
|
|
Exhibit
C
|
Form
of Resolutions of Board of Directors of the Company
|
|
Exhibit
D
|
Form
of Secretary’s Certificate
|
|
Exhibit
E
|
Form
of Letter to Transfer Agent
|
