PURCHASE AGREEMENT
Exhibit
10.1
THIS
PURCHASE AGREEMENT (“Agreement”)
is
made as of the 21st day of November,
2005 by
and among Aeolus Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
the
Investors set forth on the signature pages affixed hereto and any other
Investors that may hereafter become a party to this Agreement in accordance
with
the terms hereof (each an “Investor”
and
collectively the “Investors”).
A. The
Company desires, pursuant to this Agreement, to raise up to $2,500,000 through
the issuance and sale of the following to the Investors (the “Private
Placement”):
(i)
up to 1,250,000 shares of a newly created series of the Company’s Preferred
Stock, designated “Series A Convertible Preferred Stock”, par value $0.01 per
share (the “Preferred
Stock”),
which
Preferred Stock shall have the rights, preferences and privileges set forth
in
the Certificate of Designations, Preferences and Rights of Series A Preferred
Stock of Aeolus Pharmaceuticals, Inc., in the form of Exhibit
A
annexed
hereto and made a part hereof (the “Certificate
of Designations”),
and
each share of Preferred Stock shall have a stated value of $2.00 and shall
initially be convertible into shares of the Company's Common Stock, par value
$0.01 per share (the “Common
Stock”),
at a
price of $1.00 per share; and (ii) warrants, in the form of Exhibit
B
annexed
hereto and made a part hereof (the “Warrants”),
to
acquire up to that number of shares of Common Stock initially issuable upon
conversion of the number of shares of Preferred Stock sold by the Company
to the
Investors in the Private Placement; and
B. The
Private Placement is structured to occur in one
closing,
subject
to the conditions hereinafter set forth, at
which
time
the
Investors will purchase an aggregate of 1,250,000 shares of Preferred Stock
(the
“Closing
Shares”),
together with Warrants to acquire up to that number of shares of Common Stock
initially issuable upon conversion of the Closing
Shares (such Warrants, together with the Closing
Shares, the “Securities”), for
an
aggregate purchase price of $2,500,000 (the “Purchase
Price”);
and
C. Contemporaneous
with the sale of the Securities,
the Company and the Investors will execute and deliver a Registration Rights
Agreement, in the form attached hereto as Exhibit
C
(the
“Registration
Rights Agreement”),
pursuant to which the Company will agree to provide certain registration
rights
to the Investors under the Securities Act of 1933, as amended, and the rules
and
regulations promulgated thereunder (the “1933
Act”),
and
applicable state securities laws; and
D. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation
D”),
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the 1933 Act.
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is Controlled by, or is under
common Control with, such Person.
“Business
Day”
means a
day, other than a Saturday or Sunday, on which banks in New York City are
open
for the general transaction of business.
“Company’s
Knowledge”
means
the actual knowledge of the executive officers (as defined in Rule 405 under
the
0000 Xxx) of the Company, after due inquiry.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through
the
ownership of voting securities, by contract or otherwise.
“Conversion
Shares”
means
the shares of Common Stock issuable upon conversion of the Shares.
“Intellectual
Property”
means
all of the following: (i) patents, patent applications, patent disclosures
and
inventions (whether or not patentable and whether or not reduced to practice);
(ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; and (v)
proprietary computer software (including but not limited to data, data bases
and
documentation).
“Lead
Investor”
means
Xmark Opportunity Fund, L.P. and Xmark Opportunity Fund, Ltd.
“Material
Adverse Effect”
means a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of the Company
and
its Subsidiary taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
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“Pro
Rata Portion”
means,
with respect to a specific Investor, the “Pro
Rata Portion”
set
forth opposite such Investor’s name on Schedule
I
attached
hereto.
“Securities”
means
the Shares, the Warrants, the Conversion Shares and the Warrant
Shares.
“Shares”
means
the shares of Preferred Stock purchased by the Investors hereunder
at the
Closing.
“Short
Sales”
means
all “short sales” as defined in Rule 3b-3 of the 1934 Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts,
calls,
short sales, swaps and similar arrangements (including on a total return
basis),
and sales and other transactions through non-US broker dealers or foreign
regulated brokers having the effect of hedging the securities or investment
made
under this Agreement.
“Subsidiary”
means
Aeolus Sciences, Inc., a Delaware corporation.
“Trading
Activities”
means
any of the following: (a) any Short Sales involving the Company’s securities;
(b) the establishment of or change in any “put equivalent position” with the
meaning of Rule 16b-3 of the 1934 Act with respect to the Company’s securities;
and (c) any other transactions in the securities of the Company.
“Transaction
Documents”
means
this Agreement, the Warrants and the Registration Rights Agreement.
“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
2. Purchase
and Sale of the Shares and Warrants; Closing.
2.1 Closing.
Subject
to the terms and conditions of this Agreement, at
the
closing
(the “Closing”) at
which
the Company shall issue and sell to each Investor listed on Schedule
I
attached
hereto, and each Investor listed on Schedule
I
attached
hereto shall severally, and not jointly, purchase from the Company, the number
of shares of Preferred Stock in the respective amounts set forth opposite
its
name on Schedule
I
affixed
hereto, and Warrants to purchase that number of shares of Common Stock set
forth
opposite its name on Schedule
I
affixed
hereto, in exchange for the cash consideration set forth as the “Purchase
Price”
opposite such Investor’s name on Schedule
I
affixed
hereto, in immediately available funds, by wire transfer to an account
designated by the Company for such purpose.
2.2 Time
and Place of Closing.
Subject
to the terms and conditions contained in this Agreement, each Closing shall
take
place at the offices of Xxxxxxxxxx Xxxxxxx PC, counsel to the Lead Investor,
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00
a.m.
(New York Time), on
the
date (the “Closing
Date”)
that
is no later than one (1) Business Day after satisfaction or waiver (if
applicable) of all of the conditions set forth in Sections 5.1 and 5.2 that
are
applicable to the
Closing,
or at such other location and on such other date as the Company and the Lead
Investor shall mutually agree in writing.
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3. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors that, except as set
forth in the schedules delivered herewith, as such schedules may be revised,
amended or updated prior to any Closing date (collectively, the “Disclosure
Schedules”):
3.1 Organization,
Good Standing and Qualification.
Each of
the Company and the Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and
has all requisite corporate power and authority to carry on its business
as now
conducted and to own its properties. Each of the Company and the Subsidiary
is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership
or
leasing of property makes such qualification necessary unless the failure
to so
qualify would not reasonably be expected to have a Material Adverse Effect.
The
Subsidiary is the only corporation for which the Company is required under
GAAP
to consolidate the income statements and balance sheets with its
own.
3.2 Authorization.
The
Company has full corporate power and authority and has taken or will take
prior
to the
Closing
all requisite action on the part of the Company, its officers, directors
and
stockholders necessary for (i) the authorization, execution and delivery
of the
Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the
Securities.
The
Transaction Documents constitute the legal, valid and binding obligations
of the
Company, enforceable against the Company in accordance with their terms,
except
(a) as limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally, (b) as limited by the laws relating
to specific performance, injunctive relief or other equitable remedies, and
(c)
to the extent the indemnification provisions contained in this Agreement
and the
Registration Rights Agreement may be limited by applicable laws.
3.3 Capitalization.
Schedule
3.3
sets
forth (a) the authorized capital stock of the Company on the date hereof;
(b)
the number of shares of capital stock issued and outstanding on the date
hereof;
(c) the number of shares of capital stock of the Company issuable pursuant
to
options outstanding and reserved for issuance, on the date hereof, under
the
Company’s stock plans on the date hereof (the “Options”);
and
(d) the number of shares of capital stock of the Company
issuable
and reserved for issuance, on the date hereof, pursuant to securities (other
than the Shares, the Warrants, the Conversion Shares, the Warrant Shares
and the
Options) exercisable for, or convertible into or exchangeable for any shares
of
capital stock of the Company. All of the issued and outstanding shares of
the
Company’s capital stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of pre-emptive rights and were issued
in full
compliance with applicable state and federal securities law and any rights
of
third parties. Except as described on Schedule
3.3,
all of
the issued and outstanding shares of capital stock of the Subsidiary have
been
duly authorized and validly issued and are fully paid, nonassessable and
free of
pre-emptive rights, were issued in full compliance with applicable state
and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim. Except as described on Schedule
3.3,
no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on
Schedule
3.3,
there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or its
Subsidiary is or may be obligated to issue any equity securities of any kind
and
except as contemplated by this Agreement, neither the Company nor its
Subsidiary is
currently in negotiations for the issuance of any equity securities of any
kind.
Except as described on Schedule
3.3,
there
are no voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company
held by
them. Except as described on Schedule
3.3,
no
Person has the right to require the Company to register any securities of
the
Company under the 1933 Act, whether on a demand basis or in connection with
the
registration of securities of the Company for its own account or for the
account
of any other Person other than pursuant to (i) the Registration Rights
Agreement, (ii) that certain Registration Rights Agreement dated July 15,
1999
between Interneuron Pharmaceuticals, Inc. and the Company, (iii) that certain
Amended and Restated Registration Rights Agreement dated as of May 15, 2002
among the Company, Elan International Services, Ltd. and Elan
Pharma International Limited, (iv) that certain Registration Rights Agreement
dated September 16, 2003 among the Company, Incara, Inc. and Xxxxxxx
Capital,
LLC, and (v) that certain Registration Rights Agreement dated April 19, 2004
among the Company, certain investors and SCO Securities LLC.
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The
issuance and sale of the Securities hereunder will not obligate the Company
to
issue shares of Common Stock or other securities to any other Person (other
than
the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security of the
Company.
Except
as
described on Schedule
3.3,
the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangements in effect giving any Person the right to purchase
any equity interest in the Company upon the occurrence of certain
events.
3.4 Valid
Issuance.
The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those created by the Investors), except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws.
The
Warrants have been duly and validly authorized. Upon the due exercise of
the
Warrants or conversion of the Shares, the Warrant Shares or the Conversion
Shares, as the case may be, will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except
for
restrictions on transfer set forth in the Transaction Documents or imposed
by
applicable securities laws and except for those created by the Investors.
The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the exercise of the Warrants and conversion of the Shares, in each case,
free and clear of all encumbrances and restrictions, except for restrictions
on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws and except for those created by the Investors.
3.5 Consents.
The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of,
action
by or in respect of, or filing with, any Person, governmental body, agency,
or
official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable
time
periods. Subject to the accuracy of the representations and warranties of
each
Investor set forth in Section 4 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Securities, (ii) the
issuance of the Warrant Shares upon due exercise of the Warrants, (iii) the
issuance of the Conversion Shares upon conversion of the Shares, and (iv)
the
other transactions contemplated by the Transaction Documents from the provisions
of any shareholder rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute binding
on
the Company or to which the Company or any of its assets and properties may
be
subject and any provision of the Company’s Certificate of Incorporation or
By-laws that is or could reasonably be expected to become applicable to the
Investors as a result of the transactions contemplated hereby, including
without
limitation, the issuance of the Securities and the ownership, disposition
or
voting of the Securities by the Investors or the exercise of any right granted
to the Investors pursuant to this Agreement or the other Transaction
Documents.
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3.6 Delivery
of SEC Filings; Business.
The
Company has made available to the Investors through the SEC’s Electronic Data
Gathering and Retrieval System (“XXXXX”),
true
and complete copies of the Company’s Annual Report on Form 10-K for the fiscal
year ended September 30, 2004 (the “10-K”),
and
all other reports filed by the Company with the SEC pursuant to the 1934
Act
since the filing of the 10-K and prior to the date hereof and/or each applicable
Closing date (collectively, the “SEC
Filings”).
The
SEC Filings are the only filings required of the Company pursuant to the
1934
Act for such periods. The Company and the
Subsidiary
are
engaged in all material respects only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate description in
all
material respects of the business of the Company and the
Subsidiary,
taken
as a whole.
3.7 Use
of
Proceeds.
The net
proceeds from the sale of the Shares and the Warrants hereunder shall be
used by
the Company strictly in accordance with the budget approved by the Company’s
Board of Directors on July 12, 2005, as may be amended by the Company’s Board of
Directors from time to time following receipt of written consent of such
amendment by the Lead Investor.
3.8 No
Material Adverse Change.
Since
December 31, 2004, except as disclosed in the SEC Filings or as described
on
Schedule
3.8,
there
has not been:
(i) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the 10-K, except for changes in the ordinary course of business or which
have
not and would not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(ii) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company;
(iii) any
material damage, destruction or loss, whether or not covered by insurance,
to
any material assets or properties of the Company or its Subsidiary;
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(iv) any
waiver, not in the ordinary course of business, by the Company or the Subsidiary
of a material right or of a material debt owed to it;
(v) any
satisfaction or discharge of any material lien, claim or encumbrance or payment
of any material obligation by the Company or the Subsidiary, except in the
ordinary course of business or which is not material to the assets, properties,
financial condition, operating results or business of the Company and its
Subsidiary taken as a whole (as such business is presently conducted and
as it
is currently proposed to be conducted);
(vi) except
in
connection with the Private Placement, any change or amendment to the Company's
Certificate of Incorporation or by-laws, or material change to any material
contract or arrangement by which the Company or the Subsidiary is bound or
to
which any of their respective assets or properties is subject;
(vii) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or the Subsidiary;
(viii) any
material transaction entered into by the Company or the Subsidiary other
than in
the ordinary course of business (excluding the Private Placement);
(ix) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or the Subsidiary;
(x) the
loss
or threatened loss of any customer which has had or would reasonably be expected
to have a Material Adverse Effect; or
(xi) any
other
event or condition of any character that has had or would reasonably be expected
to have a Material Adverse Effect.
3.9 SEC
Filings.
(i) At
the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary
in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(ii) Each
(a)
registration statement and any amendment thereto filed by the Company with
the
SEC since January 1, 2003 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and (b) prospectus filed by the Company with
the
SEC pursuant to Rule 424(b) under the 1933 Act, as of its issue date and
as of
the closing of any sale of securities pursuant thereto, did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.
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3.10 No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result
in
a breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Certificate of Incorporation or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of
which
have been made available to the Investors through XXXXX), or (ii)(a) any
statute, rule, regulation or order of any governmental agency or body or
any
court, domestic or foreign, having jurisdiction over the Company, the Subsidiary
or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or the Subsidiary is a party or by which
the
Company or the Subsidiary is bound or to which any of their respective assets
or
properties is subject, except, in the case of clause (ii) hereof, as would
not
reasonably be expected to result in a material adverse effect upon the Company’s
ability to perform its obligations under the Agreement.
3.11 Tax
Matters.
Each of
the Company and the Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or the Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown as due
thereon
or otherwise owed by them. The charges, accruals and reserves on the books
of
the Company in respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments against the
Company or the Subsidiary nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal
period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiary, taken
as a
whole. All taxes and other assessments and levies that the Company or the
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third
party
when due, except for those taxes, assessments and levies contested by the
Company or the Subsidiary in good faith. There are no tax liens or claims
pending or, to the Company’s Knowledge, threatened against the Company or the
Subsidiary or any of their respective assets or property. Except as described
on
Schedule
3.11,
there
are no outstanding tax sharing agreements or other such arrangements between
the
Company and the Subsidiary or other corporation or entity.
3.12 Title
to Properties.
Except
as disclosed in the SEC Filings or Schedule 3.12, each of the Company and
the
Subsidiary has good and marketable title to all real properties and all other
properties and assets owned by it, in each case free from liens, encumbrances
and defects that materially affect the value thereof or materially interfere
with the use made or currently planned to be made thereof by them; and except
as
disclosed in the SEC Filings or Schedule 3.1, each of the Company and the
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with
the
use made or currently planned to be made thereof by it, except (a) as limited
by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally, (b) as limited by laws relating to specific
performance, injunctive relief or other equitable remedies, and (c) to the
extent any indemnification provisions contained in such leases may be limited
by
applicable laws.
3.13 Certificates,
Authorities and Permits.
Each of
the Company and the Subsidiary possesses adequate certificates, authorities
or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor the
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or the Subsidiary, would reasonably be expected
to have
a Material Adverse Effect, individually or in the aggregate.
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3.14 No
Labor Disputes.
No
material labor dispute with the employees of the Company or the Subsidiary
exists or, to the Company’s Knowledge, is imminent.
3.15 Intellectual
Property.
(a) To
the
Company’s Knowledge, all
Intellectual Property of the Company and its Subsidiary is currently in
compliance with all legal requirements (including timely filings, proofs
and
payments of fees) and is valid and enforceable. No Intellectual Property
of the
Company or its Subsidiary which is necessary for the conduct of Company’s and
its Subsidiary’s respective businesses as currently conducted or as currently
proposed to be conducted is now involved in any cancellation, dispute or
litigation, and, to the Company’s Knowledge, no such action is threatened. No
patent of the Company or its Subsidiary is now involved in any interference,
reissue, re-examination or opposition proceeding.
(b) All
of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and
the Subsidiary’s respective businesses as currently conducted or as currently
proposed to be conducted to which the Company or the Subsidiary is a party
or by
which any of their assets are bound (other than generally commercially
available, non-custom, off-the-shelf software application programs having
a
retail acquisition price of less than $10,000 per license) (collectively,
“License
Agreements”)
are
valid and binding obligations of the Company or its Subsidiary that is a
party
thereto and, to the Company’s Knowledge, the other parties thereto, enforceable
in accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability, relating to or affecting creditors’ rights generally, (b)
as limited by laws relating to specific performance, injunctive relief or
other
equitable remedies, and (c) to the extent any indemnification provisions
contained in the License Agreements may be limited by applicable laws.
To
the
Company’s Knowledge, there
exists no event or condition which will result in a material violation or
breach
of or constitute (with or without due notice or lapse of time or both) a
default
by the Company or the Subsidiary under any such License Agreement.
(c) To
the
Company’s Knowledge, the
Company
and its Subsidiary own or have the valid right to use all of the Intellectual
Property that is necessary for the conduct of the Company’s and its Subsidiary’s
respective businesses as currently conducted or as currently proposed to
be
conducted and for the ownership, maintenance and operation of the Company’s and
its Subsidiary’s properties and assets, free and clear of all liens,
encumbrances, adverse claims or obligations to license all such owned
Intellectual Property and Confidential Information, other than licenses entered
into in the ordinary course of the Company’s and its Subsidiary’s businesses.
The Company and its Subsidiary have a valid and enforceable right to use
all
third party Intellectual Property and Confidential Information used or held
for
use in the respective businesses of the Company and its Subsidiary.
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(d) To
the
Company’s Knowledge, the
conduct
of the Company’s and its Subsidiary’s businesses as currently conducted does not
infringe or otherwise violate (collectively, “Infringe”)
any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company’s Knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiary which are necessary for the conduct of Company’s and the Subsidiary’s
respective businesses as currently conducted or as currently proposed to
be
conducted are not being Infringed by any third party. There is no litigation
or
order pending or outstanding or, to the Company’s Knowledge, threatened or
imminent, that seeks to limit or challenge the ownership, use, validity or
enforceability of any Intellectual Property or Confidential Information of
the
Company and its Subsidiary and the Company’s or its Subsidiary’s use of any
Intellectual Property or Confidential Information owned by a third party,
and,
to the Company’s Knowledge, there is no valid basis for the same.
(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment
of or
restriction on the Company’s or the Subsidiary’s ownership or right to use any
of the Intellectual Property or Confidential Information which is necessary
for
the conduct of Company’s and the Subsidiary’s respective businesses as currently
conducted or as currently proposed to be conducted.
(f) The
Company and the Subsidiary have taken reasonable steps to protect the Company’s
and the Subsidiary’s rights in their Intellectual Property and Confidential
Information. Each employee, consultant and contractor of the Company and
the
Subsidiary who has had access to Confidential Information which is necessary
for
the conduct of Company’s and the Subsidiary’s respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement
to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof. Except under confidentiality obligations, there has
been
no material disclosure of any of the Company’s or the Subsidiary’s Confidential
Information to any third party.
3.16 Environmental
Matters.
Neither
the Company nor the Subsidiary (a) is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous
or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”),
(b)
owns or operates any real property contaminated with any substance that is
subject to any Environmental Laws, (c) is liable for any off-site disposal
or
contamination pursuant to any Environmental Laws, or (d) is subject to any
claim
relating to any Environmental Laws, which violation, contamination, liability
or
claim has had or would reasonably be expected to have a Material Adverse
Effect,
individually or in the aggregate; and there is no pending or, to the Company’s
Knowledge, threatened investigation that might lead to such a
claim.
3.17 Litigation.
Except
as described on Schedule
3.17,
there
are no pending actions, suits or proceedings against the Company or its
Subsidiary, or to which the Company or the Subsidiary is a party, or directly
affecting any of their properties; and to the Company’s Knowledge, no such
actions, suits or proceedings are threatened or contemplated.
-10-
3.18 Financial
Statements.
The
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and, in the
case of
quarterly financial statements, as permitted by Form 10-Q under the 1934
Act).
Except as set forth in the financial statements of the Company included in
the
SEC Filings filed prior to the date hereof or as described on Schedule
3.18,
neither
the Company nor the Subsidiary has incurred any material liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of
such
financial statements, none of which, individually or in the aggregate, have
had
or would reasonably be expected to have a Material Adverse Effect.
3.19 Insurance
Coverage.
The
Company and the Subsidiary maintain in full force and effect insurance coverage
that is customary for comparably situated companies for the business being
conducted and properties owned or leased by the Company and the Subsidiary,
and
the Company reasonably believes such insurance coverage to be adequate
against such liabilities, claims and risks against which it is customary
for
comparably situated companies to insure.
3.20 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon
the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in Schedule
3.20.
3.21 No
Directed Selling Efforts or General Solicitation.
Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation
D) in
connection with the offer or sale of any of the Securities.
3.22 No
Integrated Offering.
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 Company
security or solicited any offers to buy any security, under circumstances
that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.
3.23 Private
Placement.
As of
the date hereof, in reliance on the Investors’ representations and warranties
set forth in Section 4, the offer and sale of the Securities to the Investors
as
contemplated hereby is exempt from the registration requirements of the 1933
Act.
3.24 Questionable
Payments.
Neither
the Company nor the Subsidiary nor, to the Company’s Knowledge, any of their
respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or the Subsidiary,
has
on behalf of the Company or the Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or the Subsidiary;
or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback
or
other unlawful payment of any nature.
-11-
3.25 Transactions
with Affiliates.
Except
as disclosed in the SEC Filings or as disclosed on Schedule
3.25,
none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with
the
Company or the Subsidiary (other than as holders of stock options and/or
warrants, and 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 Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
3.26 Internal
Controls.
The
Company is
in
material compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
currently applicable to the Company. The Company and
the
Subsidiary 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 1934 Act Rules 13a-14 and 15d-14)
for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiary, is
made
known to the certifying officers by others within those entities, particularly
during the period in which the Company’s most recently filed period report under
the 1934 Act, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of the
end of
the
period
covered by the Company’s
most
recently filed periodic report under the 1934 Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the 1934
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 significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K) or, to the Company's Knowledge, in other factors
that
could significantly affect the Company's internal controls. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 1934 Act.
3.27 Listing.
The
Common Stock is quoted on the Over the Counter Bulletin Board (the “OTCBB”).
The
Company has not received any oral or written notice that its Common Stock
is not
eligible nor will become ineligible for quotation on the OTCBB nor that its
Common Stock does not meet all requirements for the continuation of such
quotation. The Company satisfies all the requirements for the continued
quotation of its Common Stock on the OTCBB.
-12-
3.28 Disclosures.
Neither
the Company nor any Person acting on its behalf has provided the Investors
or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The written materials delivered
to
the Investors in connection with the transactions contemplated by the
Transaction Documents do not contain any untrue statement of a material fact
or
omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made,
not
misleading.
4. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants
to the
Company that:
4.1 Organization
and Existence.
Such
Investor is a validly existing corporation, limited partnership or limited
liability company and has all requisite corporate, partnership or limited
liability company power and authority to invest in the Securities pursuant
to
this Agreement.
4.2 Authorization.
The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and
will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
except (a) as limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally, (b) as limited by the laws relating
to specific performance, injunctive relief or other equitable remedies, and
(c)
to the extent the indemnification provisions contained in the Agreement and
Registration Rights Agreement may be limited by applicable laws.
4.3 Purchase
Entirely for Own Account.
The
Securities to be purchased by such Investor hereunder will be acquired for
such
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act,
and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act
without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws.
Nothing
contained herein shall be deemed a representation or warranty by such Investor
to hold the Securities for any period of time.
4.4 Investment
Experience.
Such
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Securities and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and
risks of the investment contemplated hereby.
4.5 Disclosure
of Information.
Such
Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from
the
Company regarding the Company, its business and the terms and conditions
of the
offering of the Securities. Such Investor acknowledges that it has access
to the
SEC Filings via XXXXX. Neither such inquiries nor any other due diligence
investigation conducted by such Investor shall modify, amend or affect such
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.
-13-
4.6 Restricted
Securities.
Such
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such Securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
Such Investor agrees to resell such Securities only pursuant to registration
under the 1933 Act or an available exemption from registration, and agrees
not
to engage in hedging transactions with regard to such Securities unless in
compliance with the 1933 Act.
4.7 Legends.
It is
understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:
(a) “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144(k)
of such
Act,
or
(iii) the Company has received an opinion of counsel reasonably satisfactory
to
it that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities
laws.”
(b) If
required by the authorities of any state in connection with the issuance
of sale
of the Securities, the legend required by such state authority.
4.8
Accredited
Investor.
Such
Investor is an accredited investor as defined in Rule 501(a) of Regulation
D.
4.9
No
General Solicitation.
Such
Investor did not learn of the investment in the Securities as a result of
any
public advertising or general solicitation.
4.10
Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon
the
Company, the Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.
4.11 Certain
Trading Activities.
Such
Investor has not directly or indirectly, nor has any Person acting on behalf
of
or pursuant to any understanding with such Investor, engaged in any Trading
Activities since the time that such Investor was first contacted by the Company
regarding the Private Placement. Except for the Private Placement, such Investor
covenants that neither it nor any Person acting on its behalf or pursuant
to any
understanding with it will engage in any Trading Activities prior to the
time
that the Private Placement (including all material terms thereof) is publicly
disclosed.
5.
Conditions
to Closing.
5.1 Conditions
to the Investors’ Obligations to Effect the Closing.
The
obligation of each Investor to purchase the Securities
at the Closing
is subject to the fulfillment to the Lead Investor’s satisfaction, on or prior
to the Closing
Date, of the following conditions, any of which may be waived by the Lead
Investor on behalf of all Investors, in the Lead Investor’s sole discretion:
-14-
(a) The
representations and warranties made by the Company in Section 3 hereof qualified
as to materiality shall be true and correct at all times from the date of
this
Agreement to and on the Closing
Date, except to the extent any such representation or warranty expressly
speaks
as of an earlier date, in which case such representation or warranty shall
be
true and correct as of such earlier date, and, the representations and
warranties made by the Company in Section 3 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
from
the date of this Agreement to and on the Closing
Date, except to the extent any such representation or warranty expressly
speaks
as of an earlier date, in which case such representation or warranty shall
be
true and correct in all material respects as of such earlier date. The Company
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by it on or prior to the
Closing
Date.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers required to be obtained in connection with and
on or
prior to the Closing
for consummation of the purchase and sale of the Securities
and the consummation of the other transactions contemplated by the Transaction
Documents (including any requisite waivers from the holders of the Company’s
Series B Preferred Stock), all of which shall be in full force and
effect.
(c) The
Company shall have executed and delivered to Investors the Registration Rights
Agreement.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or
judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or
in the
other Transaction Documents.
(e) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing
Date, certifying to the fulfillment of the conditions specified in subsections
(a), (b), (d) and (h) of this Section 5.1.
(f)
The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing
Date, certifying the resolutions adopted by the Board of Directors of the
Company approving the transactions contemplated by this Agreement and the
other
Transaction Documents and the issuance of the Securities, certifying the
current
versions of the Certificate of Incorporation and Bylaws of the Company and
certifying as to the signatures and authority of persons signing the Transaction
Documents and related documents on behalf of the Company.
(g)
The
Investors shall have received an opinion from Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP, the Company's counsel, dated as of the Closing
Date, in form and substance reasonably acceptable to the Investors and such
counsel and addressing such legal matters as the Investors may reasonably
request.
-15-
(h)
No
stop
order or suspension of trading shall have been imposed by the SEC or any
other
governmental or regulatory body with respect to public trading in the Common
Stock.
(i)
The
Company shall have executed and delivered to the Lead Investor a filed copy
of
the Certificate of Designations certified by the Secretary of State of
Delaware.
(j)
No
event
or events shall have occurred from and after the date of this Agreement that,
individually or in the aggregate, is reasonably likely, in the reasonable
judgment of the Lead Investor, to result in a Material Adverse
Effect.
5.2 Conditions
to Obligations of the Company to Effect the Closing.
The
Company's obligation to sell and issue the Securities
at the Closing
is subject to the fulfillment to the satisfaction of the Company on or prior
to
the Closing
Date of the following conditions, any of which may be waived by the
Company:
(a)
The
representations and warranties made by the Investors in Section 4 hereof,
other
than the representations and warranties contained in Sections 4.3, 4.4, 4.5,
4.6, 4.7, 4.8 and 4.9 (the “Investment
Representations”),
shall
be true and correct in all respects when made, and shall be true and correct
in
all material respects on the Closing
Date with the same force and effect as if they had been made on and as of
said
date. The Investment Representations shall be true and correct in all respects
when made, and shall be true and correct in all respects on the Closing
Date with the same force and effect as if they had been made on and as of
said
date. The Investors shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by
them
on or prior to the Closing
Date.
(b)
The
Investors shall have executed and delivered to the Company the Registration
Rights Agreement.
(c)
The
Investors shall have delivered the Purchase
Price to the Company.
5.3 Termination;
Effects.
(a)
The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing
shall terminate as follows:
(i)
Upon
the
mutual written consent of the Company and the Lead Investor;
(ii)
By
the
Company if any of the conditions set forth in Section 5.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii)
By
the
Lead Investor (with respect to all of the Investors) if any of the conditions
set forth in Section 5.1 shall have become incapable of fulfillment, and
shall
not have been waived by the Lead Investor; or
-16-
(iv) By
either
the Company or any Investor (with respect to itself only) if the Closing
has not occurred on or prior to November 15, 2005;
provided,
however, that, except in the case of clause (i) above, the party seeking
to
terminate its obligation to effect the Closing
shall not then be in breach of any of its representations, warranties, covenants
or agreements contained in this Agreement or the other Transaction Documents
if
such breach has resulted in the circumstances giving rise to such party’s
seeking to terminate its obligation to effect the Closing.
(b)
In
the
event of termination by the Company or any Investor of its obligations to
effect
the Closing
,
as
applicable, pursuant to this Section 5.5, written notice thereof shall forthwith
be given to the Company and the other Investors and, in the case of any
termination by an Investor of its obligations to effect the Closing,
pursuant to Section 5.5(a)(iv) or Section 5.5(b)(iv) (an “Investor
Termination”),
the
other Investors shall have the right to terminate their obligations to effect
the Closing
upon
written notice to the Company and the other Investors delivered within 10
Business Days of the notice of the Investor Termination. Nothing in this
Section
5.5 shall be deemed to release any party from any liability for any breach
by
such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or
the
other Transaction Documents.
6. Covenants
and Agreements of the Company.
6.1 Reservation
of Common Stock.
The
Company shall at all times reserve and keep available out of its authorized
but
unissued shares of Common Stock, solely for the purpose of providing for
the
exercise of the Warrants, the conversion of the Shares and the issuance of
payment-in-kind dividends pursuant to Section 3 of the Certificate of
Designations, such number of shares of Common Stock as shall from time to
time
equal the number of shares sufficient to permit the exercise of the Warrants,
the conversion of the Shares and the issuance of the payment-in-kind dividends,
in each case, issued or issuable pursuant to this Agreement or, in the case
of
the payment-in-kind dividends, the Certificate of Designations in accordance
with their respective terms.
6.2 Reports.
The
Company will furnish to such Investors and/or their assignees such information
relating to the Company and its Subsidiary as from time to time may reasonably
be requested by such Investors and/or their assignees; provided, however,
that
the Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as
being
material nonpublic information and provides the Investors, such advisors
and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
6.3 No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with
the
Company’s obligations to the Investors under the Transaction
Documents.
6.4 Insurance.
The
Company shall not materially reduce the insurance coverages described in
Section
3.19.
-17-
6.5 Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.
6.6 Listing
of Underlying Shares and Related Matters.
For so
long as the Common Stock or other securities of the Company are traded on
the
OTCBB, the Company will use its best efforts to cause the Conversion Shares
and
the Warrant Shares to be tradeable on the OTCBB. If the Company applies to
have
its Common Stock or other securities traded on any principal stock exchange
or
market, it shall include in such application the Conversion Shares and the
Warrant Shares and will take such other action as is necessary to cause such
Common Stock to be so listed.
6.7 Termination
of Covenants.
The
provisions of Sections 6.2 through 6.5 shall terminate and be of no further
force and effect on the date on which the Company’s obligations under the
Registration Rights Agreement to register the Registrable Securities (as
such
term is defined in the Registration Rights Agreement) shall
terminate.
6.8 Removal
of Legends.
Upon
the earlier of (i) the registration of an Investor’s Securities for resale
pursuant to the Registration Rights Agreement and receipt by the Company
of the
Investor’s written confirmation that such Securities will not be disposed of
except in compliance with the prospectus delivery requirements of the 1933
Act,
or (ii) the date on which an Investor’s Securities become available for sale
pursuant to Rule 144(k) of the 1933 Act (“Rule
144(k)”),
the
Company shall, upon an Investor’s written request, promptly cause certificates
evidencing the Investor’s Securities to be replaced with certificates which do
not bear such restrictive legends, and Warrant Shares subsequently issued
upon
due exercise of the Warrants and Conversion Shares subsequently issued upon
conversion of the Shares shall not bear such restrictive legends provided
the
provisions of either clause (i) or clause (ii) above, as applicable, are
satisfied with respect to such Warrant Shares or Conversion Shares. When
the
Company is required to cause unlegended certificates to replace previously
issued legended certificates, if unlegended certificates are not delivered
to an
Investor within three
(3)
Business
Days
of
submission by that Investor of legended certificate(s) to the Company’s transfer
agent together with a representation letter in customary form, the Company
shall
be liable to the Investor for liquidated damages in an amount equal to 1.5%
of
the aggregate purchase price of the Securities evidenced by such certificate(s)
for each thirty (30) day period (or portion thereof) beyond such three
(3)
Business
Day-period
that the unlegended certificates have not been so delivered.
7. Survival
and Indemnification.
7.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement.
7.2 Indemnification.
The
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including
without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
to which such Person may become subject as a result of any breach of a
representation, warranty, covenant or agreement made by or to be performed
on
the part of the Company under the Transaction Documents, and will reimburse
any
such Person for all such amounts as they are incurred by such
Person.
-18-
7.3
Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”)
of
notice of any demand, claim or circumstances which would or might give rise
to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section 7.2, such Indemnified
Person shall promptly notify the Company in writing and the Company shall
assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
materially prejudiced by such failure to notify. In any such proceeding,
any
Indemnified Person shall have the right to retain its own counsel, but the
fees
and expenses of such counsel shall be at the expense of such Indemnified
Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed
to
the retention of such counsel; or (ii) in the reasonable judgment of counsel
to
such Indemnified Person representation of both parties by the same counsel
would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified
Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party
and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
8.
Miscellaneous.
8.1
Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable, provided, however,
that
an Investor may assign its rights and delegate its duties hereunder in whole
or
in part to an Affiliate without the prior written consent of the Company
or the
other Investors, after notice duly given by such Investor to the Company
and the
other Investors, provided, that (i) such Affiliate or third party makes the
representations and warranties to the Company set forth in Section 4 and
if such
securities are legended at the time of such assignment and delegation, and
(ii)
no such assignment or obligation shall affect the obligations of such Investor
hereunder. The provisions of this Agreement shall inure to the benefit of
and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon
any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8.2 Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
-19-
8.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only
and
are not to be considered in construing or interpreting this
Agreement.
8.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement
shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such
notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(A)
if sent during normal business hours of the recipient; or (B) if not, then
on
the next Business Day after such receipt, (iii) if given by mail, then such
notice shall be deemed given upon the earlier of (A) receipt of such notice
by
the recipient or (B) three (3) days after such notice is deposited in first
class mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, specifying two day delivery, then such notice shall
be
deemed given the second Business Day after delivery to such carrier. All
notices
shall be addressed to the party to be notified at the address as follows,
or at
such other address as such party may designate by ten (10) days’ advance written
notice to the other party:
If
to the
Company:
00000
Xxxxxxxxx Xxxxx
Xxxxxx
Xxxxxx, XX 00000
Attention:
Fax:
With
a
copy (which shall not constitute notice to the Company) to:
Paul,
Hastings, Xxxxxxxx & Xxxxxx LLP
0000
Xxxxxx Xxxxxx Xxxxx
Xxx
Xxxxx, XX 00000
Attention:
Xxxxx X. Xxxx
Fax:
(000) 000-0000
If
to the
Investors:
to
the
addresses set forth on the signature pages hereto.
8.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay the reasonable and customary third party
expenses incurred by the Investors in connection with the negotiation,
preparation and execution of the Transaction Documents, including the reasonable
fees and expenses of Xxxxxxxxxx Xxxxxxx PC, as counsel to the Lead Investor,
not
to exceed $50,000 without the prior written approval of the Company. Such
expenses shall be paid not later than, in the case of fees and expenses
associated with the Closing,
ten (10) Business Days following the Closing.
The Company shall reimburse the Investors upon demand for all reasonable
out-of-pocket expenses incurred by the Investors, including without limitation
reimbursement of attorneys’ fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Transaction
Documents. In the event that legal proceedings are commenced by any party
to
this Agreement against another party to this Agreement in connection with
this
Agreement or the other Transaction Documents, the party or parties which
do not
prevail in such proceedings shall severally, but not jointly, pay their pro
rata
share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.
-20-
8.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either
retroactively or prospectively), only with the written consent of the Company
and the Lead Investor on behalf of all Investors. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder
of
any Securities purchased under this Agreement at the time outstanding, each
future holder of all such Securities, and the Company.
8.7 Publicity.
Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Lead Investor (in the case of a release
or
announcement by the Company) (which consents shall not be unreasonably withheld,
conditioned or delayed), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange
or
securities market, in which case the Company or the Investors, as the case
may
be, shall allow the Lead Investor or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on
such
release or announcement in advance of such issuance. By 8:30 a.m. (New York
City
time) on the trading day immediately following the Closing
Date, the Company shall issue a press release disclosing the consummation
of the
transactions contemplated by this Agreement. The Company will file a Current
Report on Form 8-K attaching the press release described in the foregoing
sentence as well as copies of the Transaction Documents, as required under
applicable law. In addition, the Company will make such other filings and
notices related to the Private Placement as required
by the
SEC.
8.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to
be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate
or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
8.9 Entire
Agreement.
This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties
with
respect to the subject matter hereof and thereof.
-21-
8.10 Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
8.11 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the jurisdiction
of
the courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose
of
any suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each
party
hereto anywhere in the world by the same methods as are specified for the
giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding
and
to the laying of venue in such court. Each party hereto irrevocably waives
any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action
or
proceeding brought in any such court has been brought in an inconvenient
forum.
EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS
BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
8.12 Independent
Nature of Investors' Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or
in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors 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
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor 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 Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of
closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
[signature
page follows]
-22-
COMPANY: | ||
|
|
|
By: /s/ Xxxxxxx X. Xxxxxxx, Xx. | ||
Name: Xxxxxxx
X. Xxxxxxx, Xx.
Title:
Chief
Executive Officer
|
||
INVESTORS: | ||
|
|
Xmark
Opportunity Fund, L.P.
|
By: /s/ Xxxxxxxx X. Xxxx | ||
Name:
Xxxxxxxx X. Xxxx
Title: C.I.O.
Address
for Notice:
000
Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxx,
XX 00000
Attn:
Xxxxxxxx Xxxx
Telephone:
000.000.0000
Facsimile:
203.653.2501
With
a Copy To:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxx, Esq.
Telephone:
000.000.0000
Facsimile:
973.597.2400
|
||
[SIGNATURE
PAGE TO PURCHASE AGREEMENT]
-23-
Xmark Opportunity Fund, Ltd. | ||
|
||
By: /s/ Xxxxxxxx X. Xxxx | ||
Name:
Xxxxxxxx X. Xxxx
Title: C.I.O.
Address
for Notice:
000
Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxx,
XX 00000
Attn:
Xxxxxxxx Xxxx
Telephone:
000.000.0000
Facsimile:
203.653.2501
With
a Copy To:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxx, Esq.
Telephone:
000.000.0000
Facsimile:
973.597.2400
|
||
[SIGNATURE
PAGE TO PURCHASE AGREEMENT]
-24-
Xmark JV Investment Partners, LLC | ||
|
||
By: /s/ Xxxxxxxx X. Xxxx | ||
Name:
Xxxxxxxx X. Xxxx
Title: C.I.O.
Address
for Notice:
000
Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxx,
XX 00000
Attn:
Xxxxxxxx Xxxx
Telephone:
000.000.0000
Facsimile:
203.653.2501
With
a Copy To:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxx, Esq.
Telephone:
000.000.0000
Facsimile:
973.597.2400
|
||
[SIGNATURE
PAGE TO PURCHASE AGREEMENT]
-25-
Biotechnology Value Fund, L.P. | ||
|
||
By:
BVF Partners L.P.
Its:
General Partner
|
||
By:
BVF Partners L.P.
Its:
General Partner By:
/s/ Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
President
Address
for Notice:
000
X. Xxxxxxxx Xxx, Xxxxx 0000
Xxxxxxx
XX 00000
Telephone:
000.000.0000
Facsimile:
312.506.6888
|
||
Biotechnology Value Fund II, L.P. | ||
|
||
By:
BVF Partners L.P.
Its:
General Partner
|
||
By:
BVF Partners L.P.
Its:
General Partner By:
/s/ Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
President
Address
for Notice:
000
X. Xxxxxxxx Xxx, Xxxxx 0000
Xxxxxxx
XX 00000
Telephone:
000.000.0000
Facsimile:
312.506.6888
|
||
[SIGNATURE
PAGE TO PURCHASE AGREEMENT]
-26-
BVF Investments, L.L.C. | ||
|
||
By:
BVF Partners L.P.
Its:
Managing Partner
|
||
By:
BVF, Inc.
Its:
General Partner By:
/s/ Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
President
Address
for Notice:
000
X. Xxxxxxxx Xxx, Xxxxx 0000
Xxxxxxx
XX 00000
Telephone:
000.000.0000
Facsimile:
312.506.6888
|
||
Investment 10 L.L.C. | ||
|
||
By:
BVF Partners L.P.
Its:
Managing Partner
|
||
By:
BVF, Inc.
Its:
Attorney-in-fact By:
/s/ Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
President
Address
for Notice:
000
X. Xxxxxxxx Xxx, Xxxxx 0000
Xxxxxxx
XX 00000
Telephone:
000.000.0000
Facsimile:
312.506.6888
|
||
[SIGNATURE
PAGE TO PURCHASE AGREEMENT]
-27-
Biomedical Offshore Value Fund, Ltd. | ||
|
||
|
||
By:
/s/ Xxxxx X. Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
Chief Financial Officer
Address
for Notice:
0
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Telephone:
000.000.0000
Facsimile:
203.971.3320
|
||
[SIGNATURE
PAGE TO PURCHASE AGREEMENT]
-28-
SCHEDULE
I
INVESTORS
Name
of
Investor
|
Closing
Purchase
Price
|
Number
of
Shares
of
Preferred
Stock
|
Warrants
to
Acquire
Shares
of
Common
Stock
|
Pro
Rata
Portion
|
Xmark
Opportunity Fund, L.P.
|
$660,000.00
|
330,000
|
660,000
|
26.40%
|
Xmark
Opportunity Fund, Ltd.
|
$990,000.00
|
495,000
|
990,000
|
39.60%
|
Xmark
JV Investment Partners, LLC
|
$500,000.00
|
250,000
|
500,000
|
20.00%
|
Biotechnology
Value Fund, L.P.
|
$74,000.00
|
37,000
|
74,000
|
2.96%
|
Biotechnology
Value Fund II, L.P.
|
$48,000.00
|
24,000
|
48,000
|
1.92%
|
Investment
10, LLC
|
$12,336.00
|
6,168
|
12,336
|
0.49%
|
BVF
Investments, LLC
|
$115,664.00
|
57,832
|
115,664
|
4.63%
|
Biomedical
Offshore Value Fund, Ltd.
|
$100,000.00
|
50,000
|
100,000
|
4.00%
|
TOTAL
|
$2,500,000.00
|
1,250,000
|
2,500,000
|
100.00%
|
-29-