EXHIBIT 10.44
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
March 9, 2004 by and between Lynx Therapeutics, Inc., a Delaware corporation
(the "COMPANY"), and each purchaser identified on the signature pages hereto
(each, a "PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company,
certain securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms have the meanings indicated:
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144.
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any Subsidiary commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction relating to the Company or any Subsidiary thereof; (b)
there is commenced against the Company or any Subsidiary any such case
or proceeding that is not dismissed within 60 days after commencement;
(c) the Company or any Subsidiary is adjudicated insolvent or bankrupt
or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any
appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 days; (e)
the Company or any Subsidiary makes a general assignment for the
benefit of creditors; (f) the Company or any Subsidiary fails to pay,
or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Company or any Subsidiary calls a
meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (h) the Company or any
Subsidiary, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of
the foregoing.
"BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
"CHANGE OF CONTROL" means the consummation of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act with
respect to the Company or the execution by the Company or its
controlling stockholders of an agreement providing for or reasonably
likely to result in the foregoing event.
"CLOSING" means the closing of the purchase and sale of the
Shares and the Warrants pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on an Eligible Market or any other
national securities exchange, the closing bid price per share of the
Common Stock for such date (or the nearest preceding date) on the
primary Eligible Market or exchange on which the Common Stock is then
listed or quoted; (b) if prices for the Common Stock are then quoted on
the OTC Bulletin Board, the closing bid price per share of the Common
Stock for such date (or the nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent closing bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by a majority-in-interest of the Purchasers.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.01 per share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"COMPANY COUNSEL" means Xxxxxx Godward LLP.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for
Common Stock.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market or the Nasdaq
Small Cap Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" means the issuance of Common Stock (A) upon
exercise or conversion of any options or other securities described in
Schedule 3.1(f) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification,
and that the applicable exercise or conversion price or ratio is
described in such schedule), (B) in connection with any grant of
options, warrants or the issuance of additional securities to
employees, officers, directors or consultants of the Company pursuant
to a stock option plan or stock purchase plan duly adopted by the
Company's board of directors or in respect of the issuance of Common
Stock upon exercise of any such options, (C) pursuant to a bona fide
firm commitment underwritten public offering with a nationally
recognized underwriter (excluding any equity line) in an aggregate
offering amount greater than $20,000,000, or (D) in connection with a
bona fide joint venture or development agreement or strategic
partnership or merger, consolidation, acquisition or similar business
combination, the primary purpose of which is not to raise equity
capital.
"FILING DATE" means April 9, 2004.
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without
limitation, costs of preparation and reasonable attorneys' fees.
"OPTIONS" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"PERSON" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or any court or other federal, state,
local or other governmental authority or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
"REGISTRATION STATEMENT" means each registration statement
required to be filed under Article VI, including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"REQUIRED EFFECTIVENESS DATE" means June 8, 2004.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant
to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"SECURITIES" means the Shares, the Warrants and the Underlying
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the aggregate number of shares of Common Stock,
which are being issued and sold to the Purchasers at the Closing.
"SUBSIDIARY" means any Person in which the Company, directly
or indirectly, owns a majority of the capital stock or holds an equity
or similar majority interest that are required to be listed in Schedule
3.1(a).
"TRADING DAY" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, (b) if the
Common Stock is not then listed or quoted and traded on any Eligible
Market, then a day on which trading occurs on the NASDAQ Small Cap
Market (or any successor thereto), or (c) if trading does not occur on
the NASDAQ Small Cap Market (or any successor thereto), any Business
Day.
"TRADING MARKET" means the NASDAQ Small Cap Market or any
other Eligible Market on which the Common Stock is then listed or
quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants,
the Transfer Agent Instructions and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"TRANSFER AGENT" means EquiServe Trust Company, N.A. or any
other transfer agent selected by the Company.
"TRANSFER AGENT INSTRUCTIONS" means the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D, executed by the Company
and delivered to and acknowledged in writing by the Transfer Agent.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants and any securities issued in exchange for
or in respect of such shares.
"WARRANTS" means, collectively, the Common Stock purchase
warrants issued and sold under this Agreement, in the form of Exhibit
A, and any warrants issued upon exercise of such warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Shares and a Warrant to purchase such number of Underlying
Shares, each as indicated below such Purchaser's name on the signature page of
this Agreement, for an aggregate purchase price for such Purchaser as indicated
below such Purchaser's name on the signature page of this Agreement. The Closing
shall take place at the offices of Proskauer Rose LLP immediately following the
execution hereof, or at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to
be delivered to each Purchaser the following:
(i) one or more stock certificates, free and
clear of all restrictive and other legends (except as expressly
provided in Section 4.1(b) hereof), evidencing the number of Shares
indicated below such Purchaser's name on the signature page of this
Agreement, registered in the name of such Purchaser;
(ii) a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to
acquire the number of Underlying Shares indicated below such
Purchaser's name on the signature page of this Agreement, on the terms
set forth therein;
(iii) a legal opinion of Company Counsel, in the
form of Exhibit B, executed by such counsel and delivered to the
Purchasers; and
(iv) duly executed Transfer Agent Instructions
acknowledged by the Transfer Agent.
(b) At the Closing, each Purchaser shall deliver or cause
to be delivered to the Company the purchase price indicated below such
Purchaser's name on the signature page of this Agreement, in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by the Company for such purpose.
(c) Notwithstanding anything to the contrary in this
Section 2.2, in the event that the Company cannot deliver all of the items
set forth in Sections 2.2(a) above, each Purchaser shall instead deliver the
purchase price set forth in Section 2.2(b) (the "ESCROW
FUNDS") to the Company Counsel, to be held by the Company Counsel in escrow
on behalf of such Purchaser. Upon confirmation from all the Purchasers of
receipt by the Purchasers of all the items set forth in Sections 2(a) above
(which may be in writing or via email), the Company Counsel shall release
the Escrow Funds to the Company. In the event all of the items set forth in
Sections 2(a) are not delivered to a Purchaser on or prior to March 12,
2004, the Company Counsel shall immediately return the Escrow Funds to a
Purchaser upon the request of such Purchaser. The Company Counsel hereby
acknowledges and agrees to act as escrow agent in accordance with this
Section 2(c). The Company Counsel (i) shall be entitled to rely on any
written or email communication received from a Purchaser and (ii) shall not
be liable for any acts or omissions of any kind any unless caused by its own
gross negligence or willful misconduct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed
in Schedule 3.1(a), the Company owns, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and
clear of any Lien, and all the issued and outstanding shares of capital
stock or comparable equity interests of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar
rights.
(b) Organization and Qualification. Each of the Company
and the Subsidiaries is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to do business and is in good standing as
a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not, individually or in the
aggregate, (i) adversely affect the legality, validity or enforceability of
any Transaction Document, (ii) have or result in a material adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) adversely impair the Company's ability to perform fully on a
timely basis its obligations under any of the Transaction Documents (any of
(i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the Company
and no further consent or action is required by the Company, its Board of
Directors or its stockholders. Each of the Transaction Documents has been
(or upon delivery will be) duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
(d) 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) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of
the Company or any Subsidiary is bound or affected, except to the extent
that such conflict, default or termination right could not reasonably be
expected to have a Material Adverse Effect, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject), or by
which any property or asset of the Company or a Subsidiary is bound or
affected.
(e) Issuance of the Securities. The Securities (including
the Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of stockholders. The Company
has reserved from its duly authorized capital stock the maximum number of
shares of Common Stock issuable upon exercise of the Warrants.
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other
securities of the Company (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Company) is
set forth in Schedule 3.1(f). All outstanding shares of capital stock are
duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance with all applicable securities laws. Except as a result
of the sale of the Warrants and as disclosed in Schedule 3.1(f), there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. There are no anti-dilution or
price adjustment provisions contained in any security issued by the Company
(or in any agreement
providing rights to security holders) and the issue and sale of the
Securities (including the Underlying Shares) will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as specifically
disclosed in Schedule 3.1(f), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange
Act), or has the right to acquire, by agreement with or by obligation
binding upon the Company, beneficial ownership of in excess of 5% of the
outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC REPORTS" and, together
with this Agreement and the Schedules to this Agreement, the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any
such extension. The Company has made available to the Purchasers copies of
all SEC Reports filed within the ten (10) days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, 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 the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto or in
the case of unaudited financial statements, as permitted by Form 10-Q of the
Commission, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for 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,
immaterial, year-end audit adjustments. All material agreements, as such
contracts are defined in Section 601(a)(10) of Regulation S-K under the
Securities Act, to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject
are included as part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with
the Commission, (iii) the Company has not altered its method of accounting
or the identity of its auditors, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to
existing Company stock option and stock purchase plans.
(i) Absence of Litigation. Except as set forth in
Schedule 3.1(i), there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, overtly threatened against or affecting the Company or any of its
Subsidiaries that could, individually or in the aggregate, have a Material
Adverse Effect. Schedule 3.1(i) contains a complete list and summary
description of any pending or, to the knowledge of the Company, threatened
proceeding against or affecting the Company or any of its Subsidiaries that
could individually or in the aggregate, have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result
in a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule
or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually
or in the aggregate, have or result in a Material Adverse Effect.
(k) Title to Assets. The Company and the Subsidiaries
have good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the Subsidiaries
and good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case
free and clear of all Liens, except for Liens as do not materially affect
the value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
compliance.
(l) Certain Fees. Except for the fees to Ashenden Finance
& Cie, and those described in Schedule 3.1(l), all of which are payable to
registered broker-dealers, no brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement, and the
Company has not taken any action that would cause any Purchaser to be liable
for any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited any
offer to buy the Securities by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any Person
acting on the Company's behalf has, directly or indirectly, at any time
within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale
of the Securities as contemplated hereby or (ii) cause the offering of the
Securities pursuant to the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the
rules and regulations of any Trading Market. The Company is not, and is not
an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company is not a United
States real property holding corporation within the meaning of the Foreign
Investment in Real Property Tax Act of 1980.
(n) Form S-3 Eligibility. The Company is eligible to
register its Common Stock for resale by the Purchasers using Form S-3
promulgated under the Securities Act.
(o) Listing and Maintenance Requirements. Except as
described in the Company's Annual Report for the year ended December 31,
2002 initially filed on Form 10-K with the Commission on March 28, 2003, as
amended (the "ANNUAL REPORT"), the Company has not, in the two years
preceding the date hereof, received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market.
(p) Registration Rights. Except as described in Schedule
3.1(p), the Company has not granted or agreed to grant to any Person any
rights (including "piggy-back" registration rights) to have any securities
of the Company registered with the Commission or any other governmental
authority that have not been satisfied.
(q) Application of Takeover Protections. There is no
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover
provision under the Company's charter documents or the laws of its state of
incorporation that is or could become applicable to any of the Purchasers as
a result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without
limitation, as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(r) Disclosure. The Company confirms that neither it nor
any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, nonpublic information. The Company understands and
confirms that each of the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business
and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf
of the Company are true and correct and do not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred
or information exists with respect to the Company or any of its Subsidiaries
or its or their business, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed, except, until such time as the press release is
issued as contemplated by Section 4.6, the execution of this Agreement. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.
(s) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the Purchasers
is acting solely in the capacity of an arm's length purchaser with respect
to this Agreement and the transactions contemplated hereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company or any other Purchaser (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and
any advice given by any Purchaser or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Purchaser's purchase of the
Securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(t) Patents and Trademarks. The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports
and which the failure to so have could have a Material Adverse Effect
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor
any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights.
(u) Insurance. The Company and the Subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. Neither
the Company nor any 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.
(v) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not,
individually or in the
aggregate, have or result in a Material Adverse Effect ("MATERIAL PERMITS"),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(w) Transactions With Affiliates and Employees. Except as
set forth in the Annual Report, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (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 entity in
which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
(x) Solvency. Based on the financial condition of the
Company as of the Closing Date, (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect
of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash
flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be
payable on or in respect of its debt).
(y) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
3.2 Representations and Warranties of the Purchasers. Each
Purchaser hereby, as to itself only and for no other Purchaser, represents and
warrants to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such
Purchaser. This Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any
part thereof, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption from
such registration and in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Purchaser to hold Securities for any period of time.
Such Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was
offered the Shares and the Warrants, it was, and at the date hereof it is,
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company
and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such inquiries
nor any other investigation conducted by or on behalf of such Purchaser or
its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) No Short Positions or Stock Ownership. Each Purchaser
has not, as of the Closing Date, entered into any Short Sales. For purposes
of this Section 3.2(f), a "SHORT SALE" by a Purchaser means a sale of Common
Stock that is marked as a short sale and that is executed at a time when
such Purchaser has no equivalent offsetting long position in the Common
Stock. For purposes of determining whether a Purchaser has an equivalent
offsetting long position in the Common Stock, all Common Stock and all
Common Stock that
would be issuable upon conversion or exercise in full of all Options then
held by such Purchaser (assuming that such Options were then fully
convertible or exercisable, notwithstanding any provisions to the contrary,
and giving effect to any conversion or exercise price adjustments scheduled
to take effect in the future) shall be deemed to be held long by such
Purchaser.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities
Act, and in compliance with any applicable state securities laws. In
connection with any transfer of Securities other than pursuant to an
effective registration statement or to the Company or pursuant to Rule
144(k), except as otherwise set forth herein, the Company may require the
transferor to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with its Transfer Agent, without any such legal
opinion, any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any certificate
evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) following any sale of such Securities while a
Registration Statement covering the resale of such Securities is effective under
the Securities Act, provided that the prospectus delivery requirements of the
Securities Act have been met, or (ii) following any sale of such Securities
pursuant to Rule 144, or (iii) if such Securities are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Transfer Agent on the Effective Date. Following the
Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three Trading Days following
the delivery by a Purchaser to the Company or the Transfer Agent of a legended
certificate representing such Securities and following delivery by a Purchaser
to the Company or Company Counsel of a signed and completed notice of sale
representing that the prospectus delivery requirements of the Securities Act
have been met with respect to such sale, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.
(c) The Company acknowledges and agrees that a Purchaser
may from time to time pledge or grant a security interest in some or all of
the Securities in connection with a bona fide margin agreement or other loan
or financing arrangement secured by the Securities and, if required under
the terms of such agreement, loan or arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of the pledgee, secured party or pledgor shall be
required in connection therewith, but such legal opinion may be required in
connection with a subsequent transfer following default by the Purchaser
transferee of the pledge. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. During the earlier of (i)
the date two years from the Closing Date or (ii) as long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule
144 applicable to the issuer of securities relating to transactions for the
sale of securities pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.
4.4 Reservation of Securities. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 [Reserved]
4.6 Securities Laws Disclosure; Publicity. The Company shall, on
or before 9:30 a.m. New York City time of the first Trading Day following the
Closing Date, issue a press release acceptable to the Purchasers disclosing the
transactions contemplated hereby. Within one Trading Day following the Closing
Date, the Company shall file a Current Report on Form 8-K with the Commission
(the "8-K FILING") describing the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K this
Agreement and the form of Warrants, in the form required by the Exchange Act.
Thereafter, the Company shall timely file any filings and notices required by
the Commission or applicable law with respect to the transactions contemplated
hereby and provide copies thereof to the Purchasers promptly after filing.
Except with respect to the 8-K Filing and the press release referenced above (a
copy of which will be provided to the Purchasers for their review as early as
practicable prior to its filing), the Company shall, at least two Trading Days
prior to the filing or dissemination of any disclosure required by this
paragraph, provide a copy thereof to the Purchasers for their review. The
Company and the Purchasers shall consult with each other in issuing any press
releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure. 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 any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. No Purchaser shall have any liability
to the Company, its Subsidiaries, or any of its or their respective officers,
directors,
employees, stockholders or agents for any such disclosure. Subject to the
foregoing, neither the Company nor any Purchaser shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions (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) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Each press release disseminated during
the 12 months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact.
4.7 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company's debt (other than payment of
trade payables and accrued expenses in the ordinary course of the Company's
business and consistent with prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or
any officer, director, partner, controlling Person, employee or agent of a
Purchaser or any of its Affiliates (a "RELATED PERSON") becomes involved in any
capacity in any Proceeding brought by or against any Person in connection with
or as a result of any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by the Company in any
Transaction Documents, the Company will indemnify and hold harmless such
Purchaser or Related Person for its reasonable legal and other expenses
(including the costs of any investigation, preparation and travel) and for any
Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser's or
Related Person's gross negligence or willful misconduct. The conduct of any
Proceedings for which indemnification is available under this paragraph shall be
governed by Section 6.4(c) below. The indemnification obligations of the Company
under this paragraph shall be in addition to any liability that the Company may
otherwise have and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Purchasers and
any such Related Persons. The Company also agrees that neither the Purchasers
nor any Related Persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the transactions contemplated by the Transaction Documents,
except to the extent that any Losses incurred by the Company result from the
gross negligence or willful misconduct of the applicable Purchaser or Related
Person in connection with such transactions. If the Company breaches its
obligations under any Transaction Document, then, in addition to any other
liabilities the Company may have under any Transaction Document or applicable
law, the Company shall pay or reimburse the Purchasers on demand for all costs
of collection and enforcement (including reasonable attorneys fees and
expenses). Without limiting the generality of the foregoing, the Company
specifically agrees to reimburse the Purchasers on demand for all costs of
enforcing the indemnification obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in
all material respects as of the date when made and as of the Closing as
though made on and as of such date; and
(b) Performance. The Company and each other Purchaser
shall have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of the Purchasers contained herein shall be true and correct
in all material respects as of the date when made and as of the Closing Date
as though made on and as of such date; and
(b) Performance. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Purchasers at or prior to the
Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior
to the Filing Date, the Company shall prepare and file with the Commission a
"Shelf" Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company
is not then eligible to register for resale the Registrable Securities on
Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith as the Purchasers may consent) and shall contain
(except if otherwise directed by the Purchasers) the "Plan of Distribution"
attached hereto as Exhibit C.
(b) The Company shall use its commercially reasonably
efforts to cause the Registration Statement to be declared effective by the
Commission as promptly as possible after the filing thereof, but in any
event prior to the Required Effectiveness Date, and shall use its best
efforts to keep the Registration Statement continuously effective under the
Securities Act until the fifth anniversary of the Effective Date or such
earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be
sold without volume restrictions pursuant to Rule 144(k) (the "EFFECTIVENESS
PERIOD").
(c) The Company shall notify each Purchaser in writing
promptly (and in any event within one Trading Day) after receiving
notification from the Commission that the Registration Statement has been
declared effective.
(d) Upon the occurrence of any Event (as defined below)
and on every monthly anniversary thereof until the applicable Event is
cured, as partial relief for the damages suffered therefrom by the
Purchasers (which remedy shall not be exclusive of any other remedies
available under this Agreement, at law or in equity), the Company shall pay
to each Purchaser an amount in cash, as liquidated damages and not as a
penalty, equal to 1% of the aggregate purchase price paid by such Purchaser
hereunder. The payments to which a Purchaser shall be entitled pursuant to
this Section 6.1(d) are referred to herein as "EVENT PAYMENTS". Any Event
Payments payable pursuant to the terms hereof shall apply on a pro-rata
basis for any portion of a month prior to the cure of an Event. In the event
the Company fails to make Event Payments in a timely manner, such Event
Payments shall bear interest at the rate of 1.5% per month (prorated for
partial months) until paid in full.
For such purposes, the occurrence of the Registration Statement not being filed
on or prior to the Filing Date or not being declared effective on or prior to
the Required Effectiveness Date shall constitute an "EVENT".
(e) Notwithstanding anything in this Agreement to the
contrary, the Company may, by written notice to the Purchasers, suspend
sales under a Registration Statement after the Effective Date thereof and/or
require that the Purchasers immediately cease the sale of shares of Common
Stock pursuant thereto and/or defer the filing of any subsequent
Registration Statement if at any time the Company determines in good faith
that such Registration Statement contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and cannot be utilized in
connection with the sale of shares of Common Stock until it has been
appropriately amended. Upon receipt of such notice, each Purchaser shall
immediately discontinue any sales of Registrable Securities pursuant to such
registration until such Purchaser has received copies of a supplemented or
amended Prospectus or until such Purchaser is advised in writing by the
Company that the then-current Prospectus may be used and has received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus. In no event, however, shall
this right be exercised to suspend sales beyond the period during which (in
the good faith determination of the Company's Board of Directors) the
failure to require such suspension would be materially detrimental to the
Company. Furthermore, in no event may the Company exercise its rights
hereunder for a period of more than 7 consecutive Trading Days or more than
20 Trading Days in any twelve month period. Immediately after the end of any
suspension period under this Section 6.1(e), the Company shall take all
necessary actions (including filing any required supplemental prospectus) to
restore the effectiveness of the applicable Registration Statement and the
ability of the Purchasers to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.
(f) The Company shall not, prior to the Effective Date of
the Registration Statement, prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing
of a Registration Statement or any related Prospectus or any amendment or
supplement thereto (specifically excluding any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall furnish to each Purchaser and any counsel designated by any Purchaser
(each, a "PURCHASER COUNSEL", and Mainfield Enterprises, Inc. has initially
designated Proskauer Rose LLP) copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Purchasers
and each Purchaser Counsel. The Company shall not file a Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which Purchasers holding a majority of the Registrable Securities shall
reasonably object in good faith.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to each Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as to
the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements
in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible, and in any event within 15 days, to any comments
received from the Commission with respect to the Registration Statement or
any amendment thereto and as promptly as reasonably possible provide the
Purchasers true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Purchasers thereof set forth in
the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Purchasers of Registrable Securities to be
sold and each Purchaser Counsel as promptly as reasonably possible, and (if
requested by any such Person) confirm such notice in writing no later than
one Trading Day thereafter, of any of the following events: (i) the
Commission notifies the Company whether there will be a "review" of any
Registration Statement; (ii) the Commission comments in writing on any
Registration Statement (in which case the Company shall deliver to each
Purchaser a copy of such comments and of all written responses thereto);
(iii) any Registration Statement or any post-effective amendment is declared
effective; (iv) the Commission or any other Federal or state governmental
authority requests any amendment or supplement to any Registration Statement
or Prospectus or requests additional information related thereto; (v) the
Commission issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi)
the Company receives notice of any suspension of the qualification or
exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in
any Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference is untrue in any material
respect or any revision to a Registration Statement, Prospectus or other
document is required so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness
of any Registration Statement, or (ii) any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Purchaser and each Purchaser Counsel,
without charge, at least one conformed copy of each Registration Statement
and each amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(f) Promptly deliver to each Purchaser and each Purchaser
Counsel, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto
as such Persons may reasonably request. The Company hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each of
the selling Purchasers in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(g) (i) In the time and manner required by each Trading
Market, prepare and file with such Trading Market an additional shares
listing application covering all of the Registrable Securities; (ii) take
all steps necessary to cause such Registrable Securities to be approved for
listing on each Trading Market as soon as possible thereafter; (iii) provide
to the Purchasers evidence of such listing; and (iv) maintain the listing of
such Registrable Securities on each such Trading Market or another Eligible
Market.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with
the selling Purchasers and each applicable Purchaser Counsel in connection
with the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale under
the securities or blue sky laws of such jurisdictions within the United
States as any Purchaser requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be obligated to file any general consent
to service of process or to qualify as a foreign corporation or as a dealer
in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise subject.
(i) Cooperate with the Purchasers to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by this
Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any
such Purchasers may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(k) Comply with all applicable rules and regulations of
the Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Purchaser, the officers, directors, partners, members, agents,
brokers (including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a margin
call of Common Stock), investment advisors and employees of each of them,
each Person who controls any such Purchaser (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, partners, members, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and against any and all Losses, as incurred, arising out of or relating to
any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (i) such untrue statements, alleged
untrue statements, omissions or alleged omissions are based solely upon
information regarding such Purchaser furnished in writing to the Company by
such Purchaser expressly for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the
type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of an
outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior
to the receipt by such Purchaser of the Advice contemplated in Section 6.5.
The Company shall notify the Purchasers promptly of the institution, threat
or assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review) arising
solely out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of any omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in
writing by such Purchaser to the Company specifically for inclusion in such
Registration Statement or such Prospectus or to the extent that (i) such
untrue statements or omissions are based solely upon information regarding
such Purchaser furnished in writing to the Company by such Purchaser
expressly for use therein, or to the extent that such information relates to
such Purchaser or such Purchaser's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (ii) in the case of an occurrence of an event of the type
specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of an
outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior
to the receipt by such Purchaser of the Advice contemplated in Section 6.5.
In no event shall the liability of any selling Purchaser hereunder be
greater in amount than the dollar amount of the net proceeds received by
such Purchaser upon the sale of the Registrable Securities giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the "INDEMNIFYING
PARTY") in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 6.4(a) or (b) is unavailable to an Indemnified Party (by reasons
other than the specified exclusions to indemnification), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or
omissions that resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations
set forth in Section 6.4(c), any reasonable attorneys' or other reasonable
fees or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or expenses
if the indemnification provided for in this Section was available to such
party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Purchaser from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Other than pursuant to the
exercise of existing registration rights by certain stockholders of the Company
as specified in Schedule 6.6 hereto, neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company
or any Purchaser, by written notice to the other parties, if the Closing has not
been consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to
Mainfield Enterprises, Inc. an aggregate of $10,000 for their legal fees and
expenses incurred in connection with the preparation and negotiation of the
Transaction Documents and related work in connection with the filing of the
Registration Statement with the Commission. In lieu of the foregoing payment,
Mainfield Enterprises, Inc. may retain such amount at the Closing or require the
Company to pay such amount directly to Proskauer Rose LLP. Except as expressly
set forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, 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. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such Company
Securities.
7.4 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (b) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section on a day that is not a Trading
Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The addresses and facsimile numbers for such
notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing
hereafter, in the same manner, by such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver 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 subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Purchasers under Article VI and that does not directly or indirectly
affect the rights of other Purchasers may be given by Purchasers holding at
least a majority of the Registrable Securities to which such waiver or consent
relates.
7.6 Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. 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.
7.7 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Any Purchaser may
assign its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the "Purchasers." Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such
Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trail. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS
HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER,
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT 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 VIA REGISTERED OR CERTIFIED
MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) 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 CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and/or
exercise of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser hereunder or pursuant to the Warrants or
any Purchaser enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company by a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or
employee of any other Purchaser, and no Purchaser or any of its agents or
employees shall have any liability to any other Purchaser (or any other Person)
relating to or arising from any such information, materials, statements or
opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser in connection with making
its investment hereunder and that no other Purchaser will be acting as agent of
such Purchaser in connection with monitoring its investment hereunder. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
LYNX THERAPEUTICS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
Address for Notice:
00000 Xxxxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
Attn: President and Chief Executive Officer
With a copy to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx X. Xxxxx, Esq.
Consented and Acknowledged
with respect to Section 2.2(c) only
XXXXXX GODWARD LLP
By: /s/ Xxxxx X. Xxxxx
------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
Mainfield Enterprises, Inc.
By: /s/ Avi Vigder
--------------------
Name: Avi Vigder
Title: Authorized Signatory
Purchase Price(1): $ 1,249,999.80
Number of Shares to be acquired: 245,098
Underlying Shares subject to Warrant(2): 56,373
Address for Notice:
Mainfield Enterprises, Inc.
c/o Sage Capital Growth, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Eldad Gal
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
----------------------------
(1) $5.10 per share
(2) 23% Warrant coverage
CITYPLATZ LIMITED
By: /s/ Xxxxxx Xxxxx
----------------
Name: Xxxxxx Xxxxx
Title: Director
Purchase Price(3): $5.10
Number of Shares to be acquired: 245,098
Underlying Shares subject to Warrant(4): 56,373
Address for Notice:
c/o Trident Trust Company
00-00 Xxxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
XX00 0XX
-------------------------
(3) $5.10 per Share
(4) 23% Warrant coverage
ALEXANDRA GLOBAL MASTER FUND LTD.
By: ALEXANDRA INVESTMENT
MANAGEMENT, LLC,
As Investment Advisor
By: /s/ Xxxxx Xxxxxxxxxx
--------------------
Name: Xxxxx Xxxxxxxxxx
Title: Principal
Purchase Price(5): $1,020,000.00
Number of Shares to be acquired: 200,000
Underlying Shares subject to Warrant(6): 46,000
Address for Notice:
c/o Alexandra Investment Management, LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx
-------------------------
(5) $5.10 per Share
(6) 23% Warrant coverage
OMICRON MASTER TRUST
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Purchase Price(7): $ 499,998.90
Number of Shares to be acquired: 98,039
Underlying Shares subject to Warrant(8): 22,549
Address for Notice:
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel#: (000) 000-0000
Fax#: (000) 000-0000
Attn: Xxxxx Xxxx
-------------------------
(7) $5.10 per Share
(8) 23% Warrant coverage
Exhibits:
A Form of Warrant
B Opinion of Company Counsel
C Plan of Distribution
D Transfer Agent Instructions
EXHIBIT A
[The Form of Warrant]
EXHIBIT B
Form of Opinion of Company Counsel
March _, 2004
To the Purchasers listed on Exhibit A hereto
RE: LYNX THERAPEUTICS, INC. PRIVATE PLACEMENT
Ladies and Gentlemen:
We have acted as counsel for Lynx Therapeutics, Inc., a Delaware corporation
(the "Company"), in connection with the issuance and sale of an aggregate of
seven hundred eighty eight thousand two hundred thirty five (788,235) shares
(the "Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock") and warrants (the "Warrants") to purchase an aggregate of one
hundred eighty one thousand two hundred ninety five (181,295) shares of Common
Stock (the "Warrant Shares") under the Securities Purchase Agreement of even
date herewith (the "Purchase Agreement"), among the Company and the Purchasers
named therein (the "Purchasers"). The Shares, the Warrants and the Warrant
Shares are collectively referred to herein as the "Securities". We are rendering
this opinion pursuant to Section 2.2 of the Purchase Agreement. Except as
otherwise defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in, and made
pursuant to, the Purchase Agreement by the various parties thereto, and have
examined and relied upon the originals or copies of such records, documents,
certificates, opinions, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
As to certain factual matters, we have relied upon a certificate executed by an
officer of the Company, a copy of which has been provided to your counsel, and
have not sought to independently verify such matters. Where we render an opinion
"to the best of our knowledge" or concerning an item "known to us" or our
opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company; (ii) a review of certificates executed by an officer of the Company
covering such matters; and (iii) such other investigation, if any, that we
specifically set forth herein.
With regard to our opinions in paragraph 5 and 6 below, insofar as they address
"to our knowledge" agreements of the Company, we have relied on a certificate
executed by an officer of the Company and have reviewed (i) the Company's
Amended and Restated Certificate of Incorporation, (ii) the Company's Bylaws, as
amended, (iii) any material contract to which the Company is a party and
attached as an exhibit to an SEC Report, and (iv) such other agreements, if any,
as are identified in such officer's certificate.
With regard to our opinions in paragraphs 8 and 9 with respect to the Warrant
Shares, we have assumed with your permission that the Warrant Shares are issued
upon exercise of the Warrants at the Closing and prior to the occurrence of any
change in law or factual circumstance that might affect the opinions expressed
therein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Purchase Agreement and the Warrants (together, the
"Transaction Documents")) where authorization, execution and delivery are
prerequisites to the effectiveness of such documents. We have also assumed: that
all individuals executing and delivering documents in their individual
capacities had the legal capacity to so execute and deliver; that the
Transaction Documents are obligations binding upon the parties thereto other
than the Company; that the parties thereto other than the Company have received
all documents that they were to receive under the Transaction Documents; that
the parties to the Transaction Documents other than the Company have filed any
required California franchise tax or income tax returns and have paid any
required California franchise or income taxes; and that there are no extrinsic
agreements or understandings among the parties to the Transaction Documents that
would modify or interpret the terms thereof or the respective rights or
obligations of the parties thereunder.
Our opinions are expressed with respect only to the laws of the State of
California, the General Corporation Law of the State of Delaware and applicable
federal laws of the United States and are expressed only as to the outcome that
would pertain were California law, the General Corporation Law of the State of
Delaware or the federal laws of the United States (excluding choice of law
principles and excluding the effect of any law other than California law, the
General Corporation Law of the State of Delaware or the federal laws of the
United States) the governing law applicable to the relevant issue. We express no
opinion as to whether the laws of any particular jurisdiction apply. We note
that the parties to the Transaction Documents have designated the laws of the
State of New York as the laws governing such Transaction Documents. Accordingly,
with your permission, our opinion in paragraph 3 below as to the validity,
binding effect and enforceability of the Transaction Documents, is premised upon
the result that would obtain if a California court were to apply the internal
laws of the State of California (notwithstanding the designation of the laws of
the State of New York to govern the interpretation and enforcement of the
Transaction Documents). Neither special rulings of any governmental authorities
nor opinions of counsel in said jurisdiction have been obtained. We are not
rendering any opinion as to compliance with any federal or state (i) law, rule
or regulation
relating to antitrust matters, or (ii) antifraud law, rule or regulation
relating to securities, or to the sale or issuance thereof or as to the
enforceability of any waiver of trial by jury.
With regard to our opinion in paragraph 1 below, with respect to the good
standing of the Company, we have relied solely on an examination of a
certificate of good standing issued by the Secretary of State of the State of
Delaware, dated March 5, 2004 and a certificate of good standing issued by the
Secretary of State of the State of California, dated March 5, 2004, and a
bringdown letter dated as of March 9, 2004.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
corporate good standing under the laws of the State of Delaware. The
Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of the state of California. The Company has
the corporate power and authority to own and hold its properties and to
carry on its business as currently conducted.
2. The Company has the corporate power and authority to enter into, deliver
and perform each of the Transaction Documents to which it is a party and to
issue, sell and deliver the Shares and the Warrants, and to issue and
deliver the Warrant Shares upon exercise of the Warrants.
3. All necessary corporate action has been taken by the Company to authorize
the execution, delivery and performance by the Company of each of the
Transaction Documents to which it is a party. Each of the Transaction
Documents has been duly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as liquidated
damages or penalty provisions and rights to indemnity and contribution may
be limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar laws affecting creditors' rights, and subject to general
equity principles and to limitations on availability of equitable relief,
including specific performance.
4. The execution and delivery by the Company of the Transaction Documents to
which it is a party and the performance by it of its obligations thereunder
will not (i) violate the General Corporation Law of the State of Delaware
or federal law, or any court order, judgment or decree applicable to the
Company and known to us, (ii) conflict with, result in a violation of or
constitute a default under or breach of, or result in the creation of a
lien or a right of acceleration under, any material contract to which the
Company is a party and attached as an exhibit to an SEC Report or (iii)
violate its Amended and Restated Certificate of Incorporation or Bylaws, as
amended.
5. The authorized capital stock of the Company immediately prior to the
Closing consists of 60,000,000 shares of Common Stock, par value $0.01 per
share, of which, to our knowledge, 6,199,245 shares are validly issued and
outstanding, fully paid and non-assessable, and 2,000,000 shares of
Preferred Stock, par value $0.01 per share, none of which are issued or
outstanding. Except as set forth in the SEC Reports, the Transaction
Documents, the Disclosure Schedule or the Company's Amended and Restated
Certificate of Incorporation, to our knowledge, (i) no subscription,
warrant, option, convertible security or other right to purchase or
otherwise acquire shares of the capital stock or other equity securities of
the Company under any agreement to which the Company is a party is
authorized or outstanding and (ii) there is no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities or
other such rights or to distribute to holders of any of its equity
securities any evidence of indebtedness or asset. Except as provided in the
Company's Amended and Restated Certificate of Incorporation, the SEC
Reports, the Transaction Documents or the Disclosure Schedule, to our
knowledge, (i) the Company has no obligation to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein or
to pay any dividend or make any other distribution in respect thereof, and
(ii) there are no voting trusts or agreements, stockholders' agreements,
pledge agreements, buy-sell agreements, rights of first refusal, preemptive
rights, registration rights or proxies relating to any securities of the
Company under any agreements to which the Company is a party.
6. The Shares and the Warrant Shares have been duly authorized and the Warrant
Shares have been reserved for issuance upon exercise of the Warrants. The
issuance, sale and delivery of the Shares and the Warrants by the Company
to the Purchasers in accordance with the Purchase Agreement, and the
issuance and delivery of the Warrant Shares upon exercise of the Warrants,
have been duly authorized by all necessary corporate action on the part of
the Company. The Shares, when issued, sold and delivered against payment
therefor in accordance with the provisions of the Purchase Agreement and
the Warrant Shares, when issued upon exercise of the Warrants and payment
therefor in accordance with the terms of the Warrants, will be duly and
validly issued, fully paid and non-assessable. Except as set forth in the
Transaction Documents or the Disclosure Schedule or the SEC Reports,
neither the issuance, sale and delivery of the Shares and the Warrants nor
the issuance and delivery of the Warrant Shares upon exercise of the
Warrants is subject to any preemptive right or right of first refusal on
the part of the holders of any class of securities of the Company arising
under law, the Company's Amended and Restated Certificate of Incorporation
or Bylaws, as amended, or, to our knowledge, under any other agreement to
which the Company is a party.
7. To our knowledge, no action, suit, claim or proceeding to which the Company
or its subsidiaries is a party is pending or is overtly threatened in
writing against the Company or its subsidiaries that could have a Material
Adverse Effect or that questions the validity or enforceability of, or
seeks to enjoin the performance of, the Transaction Documents.
8. No notices, reports or other filings are required to be made by the Company
or any of its subsidiaries with, nor are any consents, registrations,
applications, approvals, permits, licenses or authorizations required to be
obtained by the Company or any of its subsidiaries from any regulatory
authority or governmental body in the United States required in connection
with the consummation or performance by the Company of the transactions
contemplated by the Transaction Documents or in connection with the
issuance of the Shares and the Warrants or upon issuance of the Warrant
Shares other than those contemplated by the Purchase Agreement and normal
post-closing filings in connection with qualifying for exemptions from the
registration requirements of applicable securities laws.
9. Assuming the accuracy of the representations and warrants of the Company
set forth in Section 3.1 of the Purchase Agreement and of the Purchasers
set forth in Section 3.2 of the Purchase Agreement, the offer and sale of
the Shares and Warrants pursuant to the Purchase Agreement is exempt from
the registration requirements of the Securities Act subject to the timely
filing of a Form D pursuant to Securities and Exchange Commission
Regulation D.
10. To our knowledge, the Company meets the eligibility requirements for the
use of Form S-3 for the registration of the secondary offering of the
Securities and Underlying Securities.
Our opinions are limited to the specific issues addressed and are limited in all
respects to laws and facts existing on the date hereof. By rendering our
opinions, we do not undertake to advise you of any changes in such laws or facts
which may occur after the date hereof or the effect that such changes or
occurrences might have on our opinions.
Our opinions are limited to the matters expressly stated herein and are rendered
solely for your benefit and may not be quoted or relied upon for any other
purpose or by any other person, firm or entity without our prior written
consent.
Sincerely,
Xxxxx X. Xxxxx
EXHIBIT A
PURCHASERS
MAINFIELD ENTERPRISES, INC.
CITYPLATZ LIMITED
OMICRON MASTER TRUST
ALEXANDRA GLOBAL MASTER FUND LTD
EXHIBIT C
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares if liabilities are imposed on that person under the Securities
Act.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus after we have filed an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus and may sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares of common stock purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares of common stock, including $10,000 of fees and
disbursements of counsel to the selling stockholders. We have agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
The selling stockholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities
Exchange Act of 1934 may apply to sales of our common stock and activities of
the selling stockholders.
EXHIBIT D
Transfer Agent Instructions
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
LYNX THERAPEUTICS, INC.
EquiServe Trust Company, N.A.
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreements (the "Purchase
Agreement"), dated as of March _, 2004, among Lynx Therapeutics, Inc., a
Delaware corporation (the "Company") and the purchasers named therein (the
"Holders") pursuant to which the Company is issuing the Company's common stock,
$0.01 par value per share (the "Common Stock"), and certain Common Stock
purchase warrants (the "Warrants") which shall be exercisable into shares of
Common Stock. The shares of Common Stock issued and transferred at the Closing
and issuable and transferable upon exercise of the Warrants are collectively
referred to herein as "Underlying Shares."
The Company has agreed with the Holders that it will instruct you to: (A) issue
the Underlying Shares free of all restrictive and other legends if, at the time
of such issue, (i) (a) a Holder has sold such Underlying Shares pursuant to a
then-effective registration statement covering the resale of such Underlying
Shares and (b) such Holder represents that the prospectus delivery requirements
of the Securities Act have been met, (ii) such Underlying Shares are eligible
for sale under Rule 144(k) or (iii) such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission); or (B) reissue the
Underlying Shares (if such shares were originally issued with a restrictive
legend) free of all restrictive and other legends (i) a Holder has sold such
Underlying Shares pursuant to a then-effective registration statement covering
the resale of such Underlying Shares or (ii) following any sale of such
Underlying Shares pursuant to Rule 144 or (iii) such Underlying Shares are
eligible for sale under Rule 144(k) or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Pursuant to the foregoing, either the Company or our counsel will prepare
further letters in order to effect any future issuance or reissuance of shares
of Common Stock to the Holders as contemplated by the Purchase Agreement and
this letter. This letter shall serve as our standing irrevocable instructions
with regard to this matter
Please be advised that the Holders have relied upon this instruction letter as
an inducement to enter into the Purchase Agreement. Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with
these instructions.
Very truly yours,
LYNX THERAPEUTICS, INC.
By: _____________________________________
Name: __________________________________
Title: _________________________________
ACKNOWLEDGED AND AGREED:
EquiServe Trust Company, N.A.
By: _________________________________
Name :_______________________________
Title: ________________________________
