EXHIBIT 10.1
------------
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
6, 2008, between EpiCept Corporation, a Delaware corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), the Company desires to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company, 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 Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"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 405 under the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to
be an Affiliate of such Purchaser.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except any Saturday, any Sunday, any
day which is a federal legal holiday in the United States or any day on
which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations
to pay the Subscription Amount and (ii) the Company's obligations to
deliver the Securities have been satisfied or waived.
"Closing Price" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
or (b) if there is no such price on such date, then the closing bid price
on the Trading Market on the date nearest preceding such date (as reported
by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c) if the Common
Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then reported in the "pink sheets" published by Pink
Sheets LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) if the shares of Common Stock are not
then publicly traded the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Shares then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.0001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed into.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Company Counsel" means Xxxx Xxxxxxx & Xxxxxx LLP, with offices
located at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000.
"Evaluation Date" shall have the meaning ascribed to such term in
Section 3.1(r).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common Stock
or options to employees, officers or directors of the Company pursuant to
any stock or option plan duly adopted for such purpose, by a majority of
the non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise or exchange of or conversion of
any Securities issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the
number of such securities or to decrease the exercise, exchange or
conversion price of such securities and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance
shall only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the
2
Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities.
"FWS" means Xxxxxxx Xxxxxxxxx & Xxxxx LLP with offices located at
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Indebtedness" shall have the meaning ascribed to such term in
Section 3.1(z).
"Intellectual Property Rights" shall have the meaning ascribed to
such term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance, right
of first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Per Share Purchase Price" equals $0.9225, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the date
of this Agreement.
"Person" means an 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 other entity of any kind.
"Pre-Notice" shall have the meaning ascribed to such term in Section
4.12.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"Prospectus" means the final prospectus filed for the Registration
Statement.
"Prospectus Supplement" means the supplement to the Prospectus
complying with Rule 424(b) of the Securities Act that is filed with the
Commission and delivered by the Company to each Purchaser at the Closing.
"Purchaser Party" shall have the meaning ascribed to such term in
Section 4.8.
3
"Registration Statement" means the effective registration statement
with Commission file No. 333-145561 which registers the sale of the
Shares, the Warrants and the Warrant Shares by the Purchasers.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule 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.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Stockholder Approval" means approval from the stockholders of the
Company to increase the authorized number of shares of Common Stock of the
Company to at least 125,000,000 shares of Common Stock of the Company, and
the filing of an amendment to the Company's certificate of incorporation
with the Secretary of State of the State of Delaware.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Short Sales" means all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include
the location and/or reservation of borrowable shares of Common Stock).
"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Shares and Warrants purchased hereunder as specified
below such Purchaser's name on the signature page of this Agreement and
next to the heading "Subscription Amount," in United States dollars and in
immediately available funds.
"Time of Sale Prospectus" means the Prospectus, together with the
Prospectus Supplement, if any, and the free writing prospectuses, if any,
used in connection with the offering of the Securities, including any
documents incorporated by reference therein.
"Trading Day" means a day on which the New York Stock Exchange is
open for trading.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange or
the OTC Bulletin Board.
4
"Transaction Documents" means this Agreement, the Warrants and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"Transfer Agent" means American Stock Transfer & Trust Company, the
current transfer agent of the Company, with a mailing address of 0000 00xx
Xxxxxx, 0xx Xxxxx, Xxxxxxxx, XX 00000 and a facsimile number of
000-000-0000, and any successor transfer agent of the Company.
"VWAP" 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 a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then quoted for trading on
the OTC Bulletin Board and if prices for the Common Stock are then
reported in the "Pink Sheets" published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices),
the most recent 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 the
Purchasers of a majority in interest of the Shares then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
"Warrants" means, collectively, the Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section
2.2(a) hereof, which Warrants shall be exercisable on or after the date
that Stockholder Approval is obtained and the Warrant Shares are reserved
for issuance, and have a term of exercise equal to 5 years from the date
hereof, in the form of Exhibit A attached hereto.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchasers, severally and not jointly, agree to purchase, up to an
aggregate of $5,000,000.83 of Shares and Warrants. Each Purchaser shall deliver
to the Company, via wire transfer or a certified check, immediately available
funds equal to its Subscription Amount and the Company shall deliver to each
Purchaser its respective Shares and a Warrant as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other items set
forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
5
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of FWS or such other location as the parties shall mutually
agree.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel, substantially in the
form of Exhibit B attached hereto;
(iii) a copy of the irrevocable instructions to the Company's
transfer agent instructing the transfer agent to deliver via the
Depository Trust Company Deposit Withdrawal Agent Commission System
("DWAC") Shares equal to such Purchaser's Subscription Amount
divided by the Per Share Purchase Price, registered in the name of
such Purchaser;
(iv) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 50% of
the number of Shares purchased by each Purchaser, with an exercise
price equal to $0.86, subject to adjustment therein (such Warrant
certificate may be delivered within three Trading Days of the
Closing Date); and
(v) the Prospectus and Prospectus Supplement (which may be
delivered in accordance with Rule 172 under the Securities Act).
(b) On or prior to the Closing Date, each Purchaser shall deliver
or cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) such Purchaser's Subscription Amount by wire transfer to
the account as specified in writing by the Company.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with
the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing
Date of the representations and warranties of the Purchasers
contained herein;
(ii) all obligations, covenants and agreements of each
Purchaser required to be performed at or prior to the Closing Date
shall have been performed; and
6
(iii) the delivery by each Purchaser of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met:
(i) the accuracy in all material respects on the Closing
Date of the representations and warranties of the Company contained
herein;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have
been performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; and
(v) from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission or the
Company's principal Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited,
or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have
occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect
on, or any material adverse change in, any financial market which,
in each case, in the reasonable judgment of each Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
in the Registration Statement or the SEC Reports (as defined below), the Company
hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries. The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each of its direct and
indirect subsidiaries (individually, a "Subsidiary") free and clear of any
Liens, except for the Lien on the common stock of the Company's
Subsidiaries pursuant to the Loan and Security Agreement dated August 30,
2006 with Hercules Technology Growth Capital Inc., and all of the issued
and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.
7
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise 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 or default 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 conduct 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 have or reasonably be
expected to result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business or financial
condition of the Company and the Subsidiaries, taken as a whole, or (iii)
a material adverse effect on the Company's ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.
(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 action is required by the Company, the Board of
Directors or the Company's stockholders in connection therewith other than
in connection with the Required Approvals. Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) that rights to indemnification and
contribution thereunder may be limited by federal or state securities laws
or public policy relating thereto.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the
Securities and the consummation by the Company of the other 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, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under,
result in the creation of any Lien upon any of the properties or assets of
the Company or any Subsidiary, or give to others any rights of
8
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, or (iii) subject to the Required Approvals, conflict with or
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), or by which any
property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as would not
have a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required
to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.4 of this Agreement, (ii) the filing with the Commission of the
Prospectus Supplement, (iii) application(s) to each applicable Trading
Market for the listing of the Securities for trading thereon in the time
and manner required thereby, (iv) such filings as are required to be made
under applicable state securities laws and (v) Stockholder Approval
(collectively, the "Required Approvals").
(f) Issuance of the Securities; Registration. The Securities are
duly authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company
other than any restrictions on transfer provided herein. The Warrant
Shares, when issued in accordance with the terms of the Warrants, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company. Other than the Warrant Shares, the Company has
reserved from its duly authorized capital stock the maximum number of
shares of Common Stock issuable pursuant to this Agreement. The Company
has prepared and filed the Registration Statement in conformity with the
requirements of the Securities Act, which became effective on September
18, 2007 (the "Effective Date"), including the Prospectus, and such
amendments and supplements thereto as may have been required to the date
of this Agreement. The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing
the use of the Prospectus has been issued by the Commission and no
proceedings for that purpose have been instituted or, to the knowledge of
the Company, are threatened by the Commission. The Company, if required by
the rules and regulations of the Commission, proposes to file the
Prospectus, with the Commission pursuant to Rule 424(b). At the time the
Registration Statement and any amendments thereto became effective, at the
date of this Agreement and at the Closing Date, the Registration Statement
and any amendments thereto conformed and will conform in all material
respects to the requirements of the Securities Act and did not and 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 not misleading; and the Prospectus and any amendments
9
or supplements thereto, at time the Prospectus or any amendment or
supplement thereto was issued and at the Closing Date, conformed and will
conform in all material respects to the requirements of the Securities Act
and did not and will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(g) Capitalization. The capitalization of the Company is as
described in the Registration Statement and the SEC Reports. The Company
has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than as described in SEC Reports, or
pursuant to the exercise of employee stock options under the Company's
stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company's employee stock purchase plans and pursuant to
the conversion or exercise of Common Stock Equivalents. No Person has any
right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of the
Securities and as described in the Registration Statement, there are no
outstanding options, warrants, scrip 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 Common Stock Equivalents. The
issuance and sale of the Securities 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 any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the
Board of Directors or others is required for the issuance and sale of the
Securities. Except as described in the Registration Statement and the SEC
Reports, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company's capital stock to which
the Company is a party or, to the knowledge of the Company, between or
among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has complied in
all material respects with requirements to file all reports, schedules,
forms, statements and other documents required to be filed by the Company
under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the year preceding the date hereof (or such shorter period as
the Company was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein
as the "SEC Reports") 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. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and the rules and
10
regulation 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 and
except that unaudited financial statements may not contain all footnotes
required by GAAP, 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.
(i) Material Changes; Undisclosed Events, Liabilities or
Developments. Since the date of the latest audited financial statements
included within the SEC Reports or the Registration Statement, except as
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that would 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 disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting,
(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
plans. The Company does not have pending before the Commission any request
for confidential treatment of information. Except for the issuance of the
Securities contemplated by this Agreement, no event, liability or
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed prior to the date of
this Agreement or in the Time of Sale Prospectus.
(j) Litigation. Except as disclosed in the SEC Reports or in the
Registration Statement, there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) would, if
there were an unfavorable decision, have a Material Adverse Effect.
11
Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or
former director or officer of the Company. The Commission has not issued
any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which would have a Material Adverse Effect. No executive
officer, to the knowledge of the Company, is in violation of any material
term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any
other contract or agreement or any restrictive covenant, and, to the
Company's knowledge, the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. The Company and
its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance would not, individually or in the
aggregate, have a Material Adverse Effect.
(l) 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 applicable to its
business and all such laws that affect the environment, except in each
case as would not have a Material Adverse Effect.
(m) 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 would not have 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.
(n) Title to Assets. The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them 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
12
free and clear of all Liens, except for Liens for the benefit of Hercules
Technology Growth Capital, Inc. and 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 and Liens for the payment of federal, state or other taxes,
the payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company and the Subsidiaries are in compliance.
(o) 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, trade secrets,
inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the
failure to so have would have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of 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. The Company and its Subsidiaries have taken reasonable
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so would not,
individually or in the aggregate, have a Material Adverse Effect.
(p) 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, including, but not
limited to, directors and officers insurance coverage. 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 without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set
forth in the Registration Statement or the SEC Reports, 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, other than for (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) other employee
benefits, including stock option agreements under any stock option plan of
the Company.
13
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is
in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of
2002 which are applicable to it as of the Closing Date. 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 GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that information required to be disclosed by the
Company in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms. The Company's certifying
officers have evaluated the effectiveness of the Company's disclosure
controls and procedures as of the end of the period covered by the
Company's most recently filed periodic report under the Exchange Act (such
date, the "Evaluation Date"). The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company's internal
control over financial reporting (as such term is defined in the Exchange
Act) that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
(s) Certain Fees. Except as otherwise provided in the Transaction
Documents, 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 the Transaction Documents. The
Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.
(t) Investment Company. The Company is not, and immediately after
receipt of payment for the Securities, will not be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(u) Registration Rights. Except as disclosed in the Registration
Statement or the SEC Reports, no Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of
the Company.
(v) Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
14
that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received
notice 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.
(w) Application of Takeover Protections. The Company and the Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's certificate of
incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to 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.
(x) Disclosure. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents,
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 it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in the Prospectus
Supplement. The Company understands and confirms that the Purchasers will
rely on the foregoing representation in effecting transactions in
securities of the Company. All disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company, its business and the
transactions contemplated hereby is true and correct and does 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 light of the
circumstances under which they were made, not misleading. The press
releases disseminated by the Company during the twelve months preceding
the date of this Agreement taken as a whole do not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made and when made, not
misleading. 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 hereof.
(y) No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of any
applicable stockholder approval provisions of any Trading Market on which
any of the securities of the Company are listed or designated.
(z) Solvency. Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the
15
fair saleable value of the Company's 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 2007 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 liabilities when such amounts
are required to be paid. Other than as set forth or described in the
Registration Statement and the SEC Reports, including without limitation,
the Company's independent registered public accounting firm's explanatory
paragraph in its report on the Company's consolidated financial statements
for 2006, the Company has no knowledge of any facts or circumstances which
lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one
year from the Closing Date. The Registration Statement and the SEC Reports
sets forth as of the date thereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or
any Subsidiary has commitments. For the purposes of this Agreement,
"Indebtedness" means (a) any liabilities for borrowed money or amounts
owed in excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and
other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet
(or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease
payments in excess of $50,000 due under leases required to be capitalized
in accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(aa) Tax Status. Except for matters that would not, individually or
in the aggregate, have a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which has
been asserted or threatened against the Company or any Subsidiary.
(bb) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended.
16
(cc) Accountants. The Company's accounting firm is Deloitte &
Touche LLP. To the knowledge of the Company, such accounting firm who the
Company expects will express its opinion with respect to the financial
statements to be included in the Company's Annual Report on Form 10-K for
the year ending December 31, 2007 is a registered public accounting firm
as required by the Exchange Act.
(dd) 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 the
Transaction Documents and the transactions contemplated thereby. The
Company further acknowledges that no Purchaser is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated
thereby and any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction Documents and
the transactions contemplated thereby is merely incidental to the
Purchasers' purchase of the Securities. The Company further represents to
each Purchaser that the Company's decision to enter into this Agreement
and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(ee) Acknowledgement Regarding Purchaser's Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Sections 3.2(e) and 4.13 hereof), it is
understood and acknowledged by the Company (i) that none of the Purchasers
have been asked by the Company to agree, nor has any Purchaser agreed, to
desist from purchasing or selling, long and/or short, securities of the
Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) that past
or future open market or other transactions by any Purchaser, specifically
including, without limitation, Short Sales or "derivative" transactions,
before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that any Purchaser, and counter-parties
in "derivative" transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a "short" position in the
Common Stock, and (iv) that each Purchaser shall not be deemed to have any
affiliation with or control over any arm's length counter-party in any
"derivative" transaction. The Company further understands and acknowledges
that (a) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the
Warrant Shares deliverable with respect to Securities are being determined
and (b) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after the
time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute
a breach of any of the Transaction Documents.
(ff) Regulation M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for,
17
purchased, or, paid any compensation for soliciting purchases of, any of
the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of
the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company's placement agent in connection with the
placement of the Securities.
3.2 Representations and Warranties of the Purchasers. Each Purchaser,
for itself and for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date 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 full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which
it is a party has been duly executed by such Purchaser, and when delivered
by such Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable
against it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(b) Own Account. Such Purchaser is acquiring the Securities as
principal for its own account and not with a view to or for distributing
or reselling such Securities or any part thereof in violation of the
Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser's right to sell
the Securities immediately pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state securities laws)
in violation of the Securities Act or any applicable state securities law.
Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants, it will be either: (i) an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
under the Securities Act or (ii) a "qualified institutional buyer" as
defined in Rule 144A(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
18
(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) Short Sales and Confidentiality Prior To The Date Hereof.
Other than consummating the transactions contemplated hereunder, such
Purchaser has not, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the
Company during the period commencing from the time that such Purchaser
first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of
the transactions contemplated hereunder ("Discussion Time").
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this
transaction).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Warrant Shares. (a) If all or any portion of a Warrant is exercised
at a time when there is an effective registration statement to cover the
issuance or resale of the Warrant Shares or if the Warrant is exercised via
cashless exercise, the Warrant Shares issued pursuant to any such exercise shall
be issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the
Warrant Shares) is not effective or is not otherwise available for the sale or
resale of the Warrant Shares, the Company shall immediately notify the holders
of the Warrants in writing that such registration statement is not then
effective and thereafter shall promptly notify such holders when the
registration statement is effective again and available for the sale or resale
of the Warrant Shares. The Purchasers acknowledge that the current Registration
Statement is likely to be unavailable for the issuance of the Warrant Shares
following the filing of the Company's Annual Report on Form 10-K for the year
ended December 31, 2007.
4.2 Furnishing of Information. Until the earliest of the time that (i)
no Purchaser owns Securities or (ii) the Warrants have expired, 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 even if the Company
is not then subject to the reporting requirements of the Exchange Act. As long
as any Purchaser owns Securities, if the Company is not required to file reports
19
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) 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 the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144.
4.3 Integration. The Company shall not 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 for purposes of the rules and regulations of any Trading
Market such that it would require stockholder approval prior to the closing of
such other transaction unless stockholder approval is obtained before the
closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. (New York City time) on the Trading Day immediately following the date
hereof, issue a Current Report on Form 8-K, disclosing the material terms of the
transactions contemplated hereby, and filing the Transaction Documents as
exhibits thereto. The Company and each Purchaser shall consult with each other
in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or delayed,
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 or 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 (i) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) with the Commission
and (ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause (ii).
4.5 Stockholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
4.6 Non-Public Information. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it nor any other Person acting on
its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
20
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.
4.7 Use of Proceeds. Except as set forth in the Prospectus Supplement,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for (a) the
redemption of any Common Stock or Common Stock Equivalents or (b) the settlement
of any outstanding material litigation.
4.8 Indemnification of Purchasers. Subject to the provisions of this
Section 4.8, the Company will indemnify and hold each Purchaser and its
directors, officers, stockholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, stockholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by a Purchaser Party effected
without the Company's prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Purchaser Party's breach of
21
any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents.
4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement, other than the Warrant Shares. It is understood, however, that the
Company does not currently have any shares reserved for issuance of the Warrant
Shares. After the date that Stockholder Approval is obtained and deemed
effective, the Company shall reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the purpose
of enabling the Company to issue all of the Warrant Shares. The Company shall
hold an annual meeting of stockholders by June 30, 2008, or as soon thereafter
as practicable, for the purpose of obtaining Stockholder Approval, with the
recommendation of the Company's Board of Directors that such proposal be
approved, and the Company shall solicit proxies from its stockholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal. If the Company does not obtain Stockholder
Approval at the first meeting, the Company shall call a meeting every six months
thereafter to seek Stockholder Approval until the earlier of the date
Stockholder Approval is obtained or the Warrants are no longer exercisable.
4.10 Listing of Common Stock.(a) The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
Closing Date) to list on such Trading Market (a) all of the Shares and (b)
following Stockholder Approval and their reservation for issuance, the Warrant
Shares. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.
4.11 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended for the Company to treat the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
4.12 Subsequent Equity Sales.
(a) From the date hereof until 30 days after the Closing Date,
neither the Company nor any Subsidiary shall issue shares of Common Stock
or Common Stock Equivalents.
22
(b) From the date hereof until such time as no Purchaser holds any
of the Securities, the Company shall be prohibited from effecting or
entering into an agreement to effect any Subsequent Financing involving a
Variable Rate Transaction. "Variable Rate Transaction" means a transaction
in which the Company issues or sells (i) any debt or equity securities
that are convertible into, exchangeable or exercisable for, or include the
right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock or (ii) enters into any
agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined price. Any
Purchaser shall be entitled to obtain injunctive relief against the
Company to preclude any such issuance, which remedy shall be in addition
to any right to collect damages.
(c) Notwithstanding the foregoing, this Section 4.12 shall not
apply in respect of an Exempt Issuance, except that no Variable Rate
Transaction shall be an Exempt Issuance.
4.13 Short Sales and Confidentiality After The Date Hereof. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section 4.4. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.4, such Purchaser will
maintain the confidentiality of the existence and terms of this transaction.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced as described in Section 4.4. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.
4.14 Delivery of Securities After Closing. The Company shall deliver, or
cause to be delivered, the respective Securities purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.
4.15 Capital Changes. Until the one year anniversary of the Closing Date,
the Company shall not undertake a reverse or forward stock split or
23
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in interest of the Shares.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as
to such Purchaser's obligations hereunder only and without any effect whatsoever
on the obligations between the Company and the other Purchasers, by written
notice to the other parties, if the Closing has not been consummated on or
before March 14, 2008; provided, however, that no such termination will affect
the right of any party to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. 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
delivery of any Securities to the Purchasers.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
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.
5.4 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
set forth on the signature pages attached hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd 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 address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 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 the Purchasers of at least 85% of the Shares still held by the
Purchasers or, in the case of a waiver, by the party against whom enforcement of
any such waived provision 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 any party to exercise any right hereunder in any manner
impair the exercise of any such right.
24
5.6 Headings. 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.
5.7 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 each Purchaser (other than by merger). Any
Purchaser may assign any or all of 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 of the Transaction Documents that apply to the
"Purchasers."
5.8 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 as otherwise set forth in Section 4.8.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. 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 other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys' fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.
5.11 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
25
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 or by e-mail delivery of a ".pdf" format
data file, 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 or ".pdf" signature page were an original
thereof.
5.12 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other 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; provided,
however, in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock delivered in connection
with any such rescinded exercise notice.
5.14 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 (in the case of mutilation), 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. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
5.15 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 contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
26
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
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.
5.17 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 or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other 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 Documents. 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. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FWS. FWS
does not represent the Purchasers but only Xxxxxx & Xxxxxxx LLC. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
5.21 Waiver of Jury Trial. In any action, suit or proceeding in any
jurisdiction brought by any party against any other party, the parties each
knowingly and intentionally, to the greatest extent permitted by applicable law,
27
hereby absolutely, unconditionally, irrevocably and expressly waives forever
trial by jury.
(Signature Pages Follow)
28
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.
EPICEPT CORPORATION Address for Notice:
-------------------
000 Xxx Xxx Xxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx,
President & CEO
By:__________________________________________ Fax: 000-000-0000
Name:
Title:
With a copy to (which shall not constitute notice):
Xxxxxxxxx X. Xxxxx, Esq.
Xxxx Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
29
[PURCHASER SIGNATURE PAGES TO EPCT SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser: _____________________________________________________________
Signature of Authorized Signatory of Purchaser: ________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Purchaser:_____________________________________________________
Fax Number of Purchaser: _______________________________________________________
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Subscription Amount: $_________________
Shares: _________________
Warrant Shares: __________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
30
