EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 3, 2005, among Javelin Pharmaceuticals, Inc., 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 Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, 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 indicated 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
144 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.
"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.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001
per share, and any other class of securities into which such securities may
hereafter have been reclassified or changed into.
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"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 Xxxxxx Xxxx & Priest LLP.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Escrow Agent" shall have the meaning ascribed to such term in the
Escrow Agreement (as defined below).
"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.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"Intellectual Property Rights" shall have the meaning ascribed to such
term in Section 3.1(o).
"Legend Removal Date" shall have the meaning ascribed to such term in
Section 4.1(c).
"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).
"NGN Capital" means NGN Biomed Opportunity I, L.P. and NGN Biomed
Opportunity I GMBH & Co. Beteiligungs KG.
"Per Share Purchase Price" equals $2.25, 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.
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"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
4.13.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Purchaser Party" shall have the meaning ascribed to such term in
Section 4.9.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of Exhibit A attached hereto.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares and the Warrant Shares.
"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, the Warrant Shares and
shares of Common Stock, if any, issued under Section 2(b) of the
Registration Rights Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Short Sales" shall include all "short sales" as defined in Rule 200
of Regulation SHO under the Exchange Act.
"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.
"Subsidiary" means any subsidiary of the Company as set forth on
Schedule 3.1(a).
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"Substantial Investor" means NGN Capital and Wexford Capital together
with any successor entities or affiliates of any of the foregoing.
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
"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
Nasdaq Capital Market, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Warrants, the
Registration Rights Agreement, the Escrow Agreement and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
"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 other than the OTC Bulletin Board, 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 as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if
the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, 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 listed or quoted on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the "Pink Sheets" published by the
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 and reasonably acceptable to the
Company.
"Warrants" means collectively the Common Stock purchase warrants, in
the form of Exhibit C delivered to the Purchasers at the Closing in
accordance with Section 2.2(a) hereof, which Warrants shall be exercisable
immediately and have a term of exercise equal to five years.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Wexford Capital" means Wexford Spectrum Investors LLC and Theta
Investors LLC.
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ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, the amount of
Shares and Warrants as set forth opposite its name on Schedule I hereto. Each
Purchaser shall deliver to the Escrow Agent via wire transfer or a certified
check immediately available funds equal to its Subscription Amount and to be
held pursuant to the terms of the Escrow Agreement and the Company shall deliver
to each Purchaser its respective Shares and Warrants as determined pursuant to
Section 2.2(a) and the other items set forth in Section 2.2 issuable at the
Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of Company Counsel, or such other
location as the parties shall mutually agree.
(a) Deliveries. On 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, 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, on an
expedited basis, a certificate evidencing a number of 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 5% of the
Shares to be purchased by such Purchaser, with an exercise price equal
to $2.25, subject to adjustment therein;
(v) the Registration Rights Agreement duly executed by the
Company;
(vi) a certificate signed by the chief executive officer and
chief financial officer of the Company, dated as of the Closing Date,
to the effect that, to the knowledge of the Company and such officers,
the conditions set forth in Section 2.2(b) have been satisfied;
(vii) a certificate signed by the Secretary of the Company, dated
as of the Closing Date, as to: (i) a copy, certified by the Secretary
of the Company, of the resolutions of the Board of Directors of the
Company evidencing approval of this Transaction Documents and
consummation of the transactions contemplated therein and other
matters contemplated hereby; (ii) a copy, certified by the Secretary
of the Company, of the By-laws of the Company; (iii) certified copies
of all documents evidencing other necessary corporate or other action
and governmental approvals, if any, with respect to this Agreement;
(iv) certifying the names, titles and signatures of the officers of
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the Company authorized to sign this Agreement and the other documents
or certificates to be delivered pursuant to this Agreement by the
Company or any of its officers, together with the true signatures of
such officers; and (v) a copy, certified by the Secretary of the
Company and certified by the Secretary of State of Delaware, of the
Certificate of Incorporation of the Company as in effect on the
Closing Date. =
(b) On 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;
(ii) such Purchaser's Subscription Amount by wire transfer to
the account as specified in writing by the Company; and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
2.2 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 when made and on the
Closing Date of the representations and warranties of the Purchasers
contained herein;
(ii) all obligations, covenants and agreements of the Purchasers
required to be performed at or prior to the Closing Date shall have
been performed; and
(iii) the delivery by the Purchasers 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;
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(v) each Purchaser shall have purchased and paid for the Shares
being purchased by it on the Closing Date, and the aggregate purchase
price paid by all of the Purchasers for the Shares being purchased by
them on the Closing Date shall be at least $30,000,000 and shall be no
more than as specified on Schedule I hereto, with such $30,000,000 in
being held in escrow pursuant to the Escrow Agreement; and
(vi) from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets 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
Shares and Warrants at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set
forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:
(a) Subsidiaries. All of the direct and indirect ownership of
any capital stock, or other equity interests owned or held by the
Company are set forth on Schedule 3.1(a). The Company owns, directly
or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, and all 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.
(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,
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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 condition
(financial or otherwise) or prospects 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
thereby have been duly authorized by all necessary action on the part
of the Company and no further action is required by the Company, its
board of directors or its 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 applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
(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 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 could
not have or reasonably be expected to result in a Material Adverse
Effect.
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(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 Registration Statement, (iii)
the filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws
(collectively, the "Required Approvals").
(f) Issuance of the Securities. 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 restrictions on transfer provided for in the
Transaction Documents. The Warrant Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock initially issuable
pursuant to this Agreement and the Warrants.
(g) Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g). The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act,
other than pursuant to the exercise of employee stock options under
the Company's stock option plan and pursuant to the conversion or
exercise of outstanding 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, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or 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 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. 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. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the
issuance and sale of the Securities.
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(h) SEC Reports; Financial Statements. Since September 30,
2003, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof (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 and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may
be otherwise specified in such financial statements or the notes
thereto 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. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than
trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice, (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.
(j) Litigation. 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) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer
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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. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company or any Subsidiary to arise, between
accountants and lawyers formerly or presently engaged by the Company
or any Subsidiary and the Company and each Subsidiary is current with
respect to any fees owed to its accountant and lawyers.
(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 could reasonably be expected to result
in 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 except in
each case as could 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 could
not have or reasonably be expected to result in a Material Adverse
Effect ("Material Permits"), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit. The Company
manufactures and distributes, and for the past three years has
manufactured and has distributed, for clinical trial use only,
clinical materials (including any drug products) for its product
candidates in all material respects in accordance with applicable
rules and regulations of the United States Food and Drug
Administration (the "FDA") and the Company's quality control
procedures in effect at the time of manufacture. None of the clinical
trials for the Company's product candidates currently being developed
by the Company has been prohibited by the FDA or by any other
applicable federal, state or, to the best knowledge of the Company,
foreign regulatory agencies. The Company has not received any notice
from the FDA or any other federal, state or foreign regulatory agency
questioning its manufacturing
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practices or threatening to revoke or curtail any clinical trial
clearance or approval, and the Company, to the best of its knowledge,
is not aware of any intent to deliver any such notice.
(n) Title to Assets. The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them
that is material to the business of the Company and the Subsidiaries
and good and marketable title in all personal property owned by them
that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries 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 of which the Company
and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries
own, or have legally enforceable rights to use, all patents, patent
rights, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, trade secrets, inventions,
know-how, licenses and other 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 could have a Material
Adverse Effect (collectively, the "Intellectual Property Rights").
Neither the Company nor any Subsidiary has received a written notice
or has knowledge that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes, or allegedly violates
or allegedly 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 of others.
(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 at least equal to the aggregate Subscription Amount. To the
best knowledge of the Company, such insurance contracts and policies
are accurate and complete. 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 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,
12
or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other
than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company. Except as
described above or in any SEC Reports, none of the officers, directors
or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate
families, are indebted to the Company or any Subsidiary, individually
or in the aggregate, in excess of $60,000 or have any direct or
indirect ownership interest in any firm or corporation with which the
Company or any Subsidiary is affiliated or with which the Company or
any Subsidiary has a business relationship, or any firm or corporation
which competes with the Company or any Subsidiary, other than passive
investments in publicly traded companies (representing less than one
percent (1%) of such company) which may compete with the Company or
any Subsidiary. Except as set forth in any SEC Reports, the Company is
not a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
(r) Xxxxxxxx-Xxxxx; Controls and Procedures. 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
has established and maintains an effective system of internal control
over financial reporting (as such term is defined in the Exchange Act
) regarding the reliability of financial reporting and preparation of
financial statements for external purposes in accordance with GAAP and
includes policies and procedures that (i) pertain to maintenance of
records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the issuer; (ii)
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with GAAP, and that receipts and expenditures of the issuer are being
made only in accordance with authorizations of management and
directors of the issuer; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the issuer's assets that could have a Material
Adverse Effect on the financial statements. The Company has
established and maintains disclosure controls and procedures (as
defined in Exchange Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified
in the SEC's rules and forms, including, without limitation, controls
and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under
the Act is accumulated and communicated to the Company's management,
including its principal executive and principal financial officers, or
persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. The Company's certifying
officers have evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in the applicable SEC Reports
their conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the periods covered by such SEC
Reports based on such evaluation. Since the last such evaluation date,
there has been no change in the Company's internal control over
financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over
financial reporting, and no significant deficiencies or material
13
weaknesses in internal controls over financial reporting, or other
factors that could significantly affect the Company's internal control
over financial reporting, have been identified.
(s) Certain Fees. 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 other than fees payable to Xxxxxx & Xxxxxxx and
Riverbank Capital Securities. 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) Private Placement. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Trading Market.
The Company has not distributed and will not distribute prior to the
Closing Date any offering material in connection with this offering
and sale of the Securities other than the documents of which this
Agreement is a part or the SEC Reports.
(u) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the
Securities, will not be or be an Affiliate of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not
become subject to the Investment Company Act.
(v) Registration Rights. Other than each of the Purchasers, no Person has
any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(w) Listing and Maintenance Requirements. The Company's Common
Stock is registered pursuant to Section 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 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. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(x) Application of Takeover Protections. The Company and its
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
14
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.
(y) Disclosure. The Company confirms that, neither it nor any
other Person acting on its behalf has provided any of the Purchasers
or their agents or counsel with any information that constitutes or
might constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All written statements provided to the
Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, furnished by or on behalf of the Company with respect to
the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(z) 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
the Securities Act or any applicable shareholder approval provisions.
(aa) Solvency. Based on the 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 Company's fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company's
existing liabilities and other obligations (including known contingent
liabilities) as they mature or are otherwise payable; (ii) the
Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that
it will be required to file for reorganization or liquidation under
the bankruptcy or reorganization laws of any jurisdiction, and has no
present intent to so file.
15
(bb) Tax Status. Except for matters that would not, individually
or in the aggregate, have or reasonably be expected to result in 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.
(cc) No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchasers
and certain other "accredited investors" within the meaning of Rule
501 under the Securities Act.
(dd) 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 corrupt 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.
(ee) Accountants. The Company's accountants are set forth on
Schedule 3.1(ee) of the Disclosure Schedule. To the knowledge of the
Company, such accountants, who the Company expects will express their
opinion with respect to the financial statements to be included in the
Company's Annual Report on Form 10-K, or Form 10-KSB, if applicable,
for the year ending December 31, 2005, are an independent registered
public accounting firm as required by the Securities Act and
registered with the Public Company Accounting Oversight Board. The
Company expects such accountants to consent to the inclusion of their
opinion on such financial statements into the registration statement
and the prospectus which forms a part thereof.
(ff) Manipulation of Price. 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, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities (other than for the
placement agent's placement 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.
(gg) 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 as to the Company and with respect to the Transaction
Documents and the transactions contemplated hereby. The Company
further acknowledges
16
that no Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated
hereby is merely incidental to the Purchasers' purchase of the
Securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives
of the transactions contemplated hereby.
(hh) Acknowledgement Regarding Purchasers' Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Section 4.12 hereof), it is understood and
agreed by the Company (i) that none of the Purchasers have been asked
by the Company to agree, nor has any Purchaser agreed with the
Company, 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, including Short Sales, and 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.
(ii) Transfer Taxes. On the Closing Date, all stock transfer or
other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to
the Purchaser hereunder will be, or will have been, fully paid or
provided for by they Company and all laws imposing such taxes will be
or will have been fully complied with. Upon the issuance of the
Warrant Shares pursuant to the Warrant and shares of Common Stock, if
any, pursuant to Section 2(b) of the Registration Rights Agreement
(the "LD Shares"), the all stock transfer or other taxes (other than
income taxes) which are required to be paid in connection therewith
will be, or will have been, fully paid or provided for by the Company
and all laws imposing such taxes will be or will have been fully
complied with.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
17
(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 the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery 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 understands that the Securities are
"restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and 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
arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not
limiting such Purchaser's right to sell the Securities 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. Such Purchaser does not
have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which
it exercises any Warrants for cash, 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.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) Access To Information. Subject to Section 4.6, such Purchaser has
had access to the Company's senior management, has had an opportunity to
ask questions and receive answers from the Company and its senior
18
management regarding matters relevant to the Company and an investment
therein and has had the opportunity to obtain any and all information and
conduct such due diligence review as it has deemed appropriate. Such
Purchaser understands that an investment in the Company is subject to
material risks and such Purchaser has reviewed the Company's SEC Reports
and the following registration statements under the Securities Act: Form
SB-2, File No. 333-122177 and Form S-8, File No. 333-129203; and the risk
factors included therein and has had the opportunity to discuss the SEC
Reports and such registration statements and the risk factors with senior
management of the Company.
(f) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(g) [Reserved].
(h) Certain Fees. Such Purchaser has not entered into an agreement
whereby brokerage or finder's fees or commissions are or will be payable by
the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or an exemption
from the registration requirements of the Securities Act, including
pursuant to Section 4(2), Rule 144 or any other applicable exemption, to
the Company or to an affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected
by the transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in the following
form:
19
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company and the Purchasers acknowledge and agree that any Purchaser
may, as permitted by law, from time to time pledge pursuant to a bona fide
margin agreement or bona fide grant a security interest in some or all of
the Securities and, if required under the terms of such arrangement, such
Purchaser may, as permitted by law, transfer pledged or secured Securities
to the pledgees or secured parties. So long as such Purchaser is not an
affiliate of the Company, such a pledge or transfer would not be subject to
approval or consent of the Company, provided that, upon the request of the
Company, a legal opinion of legal counsel to the pledgee, secured party or
pledgor shall be obtained. At the Company's expense, so long as the
Securities are subject to the legend required by this Section 4.1, the
Company will use its reasonable commercial efforts to execute and deliver
such reasonable documentation as a pledgee or secured party of Securities
may reasonably request in connection with a pledge or transfer of the
Securities including such amendments or supplements to the Registration
Statement and Prospectus as may be reasonably required. The foregoing does
not affect such Purchaser's obligations pursuant to Section 4.1(a).
(c) Certificates evidencing the Shares, Warrant Shares and LD Shares
shall not contain any legend (including the legend set forth in Section
4.1(b)), (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Shares, Warrant Shares
or LD Shares pursuant to Rule 144, or (iii) if such Shares, Warrant Shares
or LD Shares are eligible for sale under Rule 144(k), or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff
of the Commission). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the Effective Date
if required by the Company's transfer agent to effect the removal of the
legend hereunder. If all or any portion of a Warrant is exercised at a time
20
when there is an effective registration statement to cover the resale of
the Warrant Shares, such Warrant Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a certificate
(in the case of a transfer, in the proper form for transfer) representing
Shares, Warrant Shares or LD Shares, as the case may be, issued with a
restrictive legend (such third Trading Day, the "Legend Removal Date"),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.
(d) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom.
(e) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares, Warrant Shares or LD
Shares (based on the Closing Price of the Common Stock on the date such
Securities are submitted to the Company's transfer agent) delivered for
removal of the restrictive legend, $10 per Trading Day (increasing to $20
per Trading Day five (5) Trading Days after such damages have begun to
accrue) for each Trading Day after two (2) Trading Days following the
Legend Removal Date until such certificate is delivered without a legend.
Nothing herein shall limit such Purchaser's right to pursue actual damages
for the Company's failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser
shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance
and/or injunctive relief.
4.2 Furnishing of Information. The Company covenants that it will timely
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
the Company is not required to file such reports, it will, upon the request of
any Purchaser holding Securities purchased hereunder made after the first
anniversary of the Closing Date, make publicly available such information as
necessary to permit sales pursuant to Rule 144 under the Securities Act), and it
will take such further action as any such Purchaser may reasonably request, all
to the extent required from time to time to enable such Purchaser to sell
Shares, Warrant Shares and LD Shares without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon request, the
Company will provide to an Purchaser written certification of its compliance
with the provisions of this Section 4.2.
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 in a manner that would require the registration under the
21
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall, on or before
5:00 p.m. Eastern time on the third Trading Day following the date hereof, issue
a Current Report on Form 8-K, reasonably acceptable to Xxxxxxx Procter LLP,
counsel to NGN Capital, and Xxxxxxx Xxxx & Xxxxx LLP (each a, "Purchaser
Counsel") disclosing the material terms of the transactions contemplated hereby,
and shall attach the Transaction Documents thereto. The Company and each
Purchaser Counsel 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 as indicated by each Purchaser Counsel, with respect to any press
release of the Company, which consent shall not unreasonably be withheld, 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. Except as may be required by law, no Purchaser shall be named in
a press release or any other public disclosure or announcement to be issued by
another Purchaser or the Company without the prior written consent of the
Purchaser to be named.
4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar 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. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.6 Non-Public Information. 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 agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices) or to redeem any Common Stock or
Common Stock Equivalents.
4.8 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the
Company except solely to the extent of or as a result of a breach by a
Purchaser of any of the representations and warranties made by a
Purchaser herein, relating to such
22
Purchaser's acquisition of the Securities under this Agreement, and the
Purchaser is successful in the Proceeding, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company relating to acquiring the Securities under this Agreement except to the
extent of or as a result of a breach by a Purchaser of any of its
representations and warranties herein.
4.9 Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, in consideration of each Purchaser's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company will indemnify, protect and hold the Purchasers and their directors,
officers, shareholders, members, partners, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (each, a "Purchaser Party")
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, actions, causes of action, suits, penalties, fees, costs
and expenses, (irrespective of whether any such Purchaser Party is a party to
the action for which indemnification hereunder is sought), including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation (collectively, the "Indemnified Liabilities")
that any such Purchaser Party may suffer or incur as a result of, arising out
or, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Purchaser Party by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out
of or resulting from (i) the execution, delivery, performance or enforcement of
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, or (iii) the status of such Purchaser or holder of the
Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents (unless, and only to the extent that,
such action is based solely upon a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any conduct by such
Purchaser which constitutes fraud, gross negligence or willful misconduct). To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
23
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. 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 such Purchaser. 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 reasonably acceptable to such Purchaser, 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. 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 any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents. The
Company shall not, without the prior written consent of the applicable Purchaser
Party, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the applicable Purchaser Party of a release from
all liability in respect to such Claim (as defined in the Registration Rights
Agreement) or litigation. The failure to deliver written notice to the Company
within a reasonable time of the commencement of any such action shall not
relieve the Company party of any liability to the Purchase Party under this
Section 4.9, except to the extent that the Company is prejudiced in its ability
to defend such action.
4.10 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, Warrant Shares pursuant to any exercise of the Warrants and LD
Shares, if any, pursuant to the Registration Rights Agreement.
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 to treat for the Company 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 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliates acting on its behalf or pursuant to any understanding with it
will directly or indirectly execute any disposition, or engage or commit to
engage in any transaction, including Short Sales during the period after the
during the period commencing from the time that such Purchaser first received a
term sheet from the Company or any other Person setting forth the material terms
24
of the transactions contemplated hereunder until the date hereof 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
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Each Purchaser understands and
acknowledges, severally and not jointly with any other Purchaser, that the
Commission currently takes the position that coverage of short sales of shares
of the Common Stock "against the box" prior to the Effective Date of the
Registration Statement with the Securities is a violation of Section 5 of the
Securities Act, as set forth in Item 65, Section 5 under Section A, of the
Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.
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.
4.13 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.
4.14 Participation in Future Financing.
(a) Subject to the provisions of Section 4.19, and as further set
forth in this Section 4.14, from the date hereof until the date that is the
18-month anniversary of the Effective Date, upon any financing by the
Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents (a "Subsequent Financing"), each Purchaser shall have the right
to participate in up to an amount of the Subsequent Financing equal to 100%
of the Subsequent Financing less the amount actually elected under rights
of participation existing on the date hereof, listed on Schedule 3.1(g) and
expiring no later than December 6, 2005 (the "Participation Maximum").
(b) At least 5 Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written notice of
its intention to effect a Subsequent Financing ("Pre-Notice"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of
such financing (such additional notice, a "Subsequent Financing Notice").
Upon the request of a Purchaser, and only upon a request by such Purchaser,
for a Subsequent Financing Notice, the Company shall promptly, but no later
than 1 Trading Day after such request, deliver a Subsequent Financing
Notice to such Purchaser. The Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the
amount of proceeds intended to be raised thereunder, the Person with whom
25
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto.
(c) Any Purchaser desiring to participate in such Subsequent
Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the 5th Trading Day after all of the
Purchasers have received the Pre-Notice that the Purchaser is willing to
participate in the Subsequent Financing, the amount of the Purchaser's
participation, and that the Purchaser has such funds ready, willing, and
available for investment on the terms set forth in the Subsequent Financing
Notice. If the Company receives no notice from a Purchaser as of such 5th
Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the 5th Trading Day after
all of the Purchasers have received the Pre-Notice, notifications by the
Purchasers of their willingness to participate in the Subsequent Financing
(or to cause their designees to participate) is, in the aggregate, less
than the total amount of the Subsequent Financing, then the Company may
effect the remaining portion of such Subsequent Financing on the terms and
to the Persons set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the 5th Trading Day after
all of the Purchasers have received the Pre-Notice, the Company receives
responses to a Subsequent Financing Notice from Purchasers seeking to
purchase more than the aggregate amount of the Participation Maximum, each
such Purchaser shall have the right to purchase the greater of (a) their
Pro Rata Portion (as defined below) of the Participation Maximum and (b)
the difference between the Participation Maximum and the aggregate amount
of participation by all other Purchasers. "Pro Rata Portion" is the ratio
of (x) the Subscription Amount of Securities purchased on the Closing Date
by a Purchaser participating under this Section 4.14 and (y) the sum of the
aggregate Subscription Amounts of Securities purchased on the Closing Date
by all Purchasers participating under this Section 4.14.
(f) The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.14, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent
Financing Notice within 60 Trading Days after the date of the initial
Subsequent Financing Notice.
(g) Notwithstanding the foregoing, this Section 4.14 shall not apply
in respect of an Exempt Issuance.
(h) Exempt Issuances. The rights of the Purchasers under this Section
4.14 shall not apply to the following (each of which shall be an "Exempt
Issuance"):
(i) Common Stock issued as a stock dividend to holders of
Common Stock or upon any subdivision or combination of shares of
Common Stock,
26
(ii) any capital stock or derivative thereof granted to an
employee, director or consultant under a stock plan approved by the
Board of Directors of the Company and its stockholders,
(iii) any securities issued as consideration for the acquisition
of another entity by the Company by merger or share exchange (whereby
the Company owns no less than 51% of the voting power of the surviving
entity) or purchase of substantially all of such entity's stock or
assets, if such acquisition is approved by the Board of Directors,
(iv) any securities issued in connection with a strategic
partnership, joint venture or other similar agreement, provided that
the purpose of such arrangement is not primarily the raising of
capital and that such arrangement is approved unanimously by the Board
of Directors,
(v) any securities issued to a financial institution in
connection with a bank loan or lease with such financial institution
provided that such is approved unanimously by the Board of Directors;
(vi) securities issuable upon the exercise or conversion of
securities outstanding on the Closing, provided such securities are
not amended after the date hereof to increase the number of shares of
Common Stock issuable thereunder or to lower the exercise or
conversion price thereof;
(vii) any securities the issuance of which is approved by
Purchasers holding a majority of the Shares; and
(viii) LD Shares, if any, issued pursuant to the Registration
Rights Agreement.
4.15 Observer Rights. So long as no designee of either such Substantial
Investor is a director of the Company, the Company shall notify each Substantial
Investor of all regular meetings and special meetings of the Board and
committees thereof at the same time that directors are given notice of such
meetings, and shall afford any representative designated by a Substantial
Investor the right and opportunity to attend any such meeting in a non-voting
observer capacity at the Company's expense. The rights and duties of the
non-voting board observer of each Substantial Investor shall arise solely out of
this Agreement, and neither such observer nor any Substantial Investor shall be
deemed to owe any fiduciary duties to the Company or any of its shareholders by
reason of such rights. Such representative shall be entitled to receive all
written materials and other information given to the directors of the Company in
connection with any such meeting at the same time that such materials or
information are given to such directors. Notwithstanding the foregoing, the
Company reserves the right to exclude such representative from (x) access to any
information or materials required to be delivered by the Company to the
Purchaser hereunder or disclosed or discussed at a board meeting and (y)
observation, attendance or presence at any Board or committee meeting or portion
thereof, if, and only to the extent that, such exclusion is necessary in the
27
reasonable opinion of counsel to preserve the attorney-client privilege. The
Company, Board or each committee, as the case may be, shall inform the each
Substantial Investor's representative in advance of the delivery of materials or
the disclosure of material non-public information regarding the Company and
allow the such Substantial Investor's representative, in his or her sole
discretion, to forgo receiving such materials or reuse such representative from
any part of any Board or committee meeting if material non-public information
about the Company is contained in any such materials or is to be disclosed of
any such meeting. Solely with respect to this Section 4.15 and not for any other
purpose, the term "Substantial Investor" shall mean NGN Capital, Wexford Capital
and Erasmus New York City Growth Fund, LP. ("Erasmus") together with any
successor entities or affiliates of any of the foregoing. The rights in this
Section 4.15 shall expire as to (i) Wexford Capital when Wexford Capital,
together with any successor entities or affiliates, no longer holds any of the
Shares originally issued to Wexford Capital pursuant to this Agreement, (ii) NGN
Capital when NGN Capital, together with any successor entities or affiliates, no
longer holds any of the Shares originally issued to NGN Capital pursuant to this
Agreement, and (iii) Erasmus when Erasmus, together with any successor entities
or affiliates, no longer holds any of the Shares originally issued to Erasmus
pursuant to this Agreement.
4.16 Acquisitions; Purchase of Assets; Merger. Until the earlier of (i) the
second anniversary of the Closing, and (ii) the date all Substantial Investors
hold less than 30% of the Shares originally issued to such Substantial Investor
pursuant to this Agreement, in addition to any other vote required by law or the
Certificate of Incorporation of the Company, without the prior written consent
of each Substantial Investor which then holds at least 30% of the Shares
originally issued to such Substantial Investor, the Company will not purchase or
otherwise acquire (including, without limitation, by means of a merger where the
stockholders of the Company control in excess of 51% of the voting stock in the
surviving entity), directly or indirectly or through any subsidiary, the capital
stock, assets comprising product candidates, platform technology, manufacturing
facilities or other similar assets with a purchase price in excess of $500,000,
assets comprising the business of, obligations of, or any interest in, any other
person.
4.17 Creation of Senior or Pari Passu Equity; Issuance of Equity
Securities. So long as a Substantial Purchaser holds at least 30% of the Shares
originally issued to such Substantial Investor pursuant to this Agreement, in
addition to any other vote required by law or the Certificate of Incorporation
of the Company, without the prior written consent of each Substantial Investor,
the Company will not create or authorize the creation of any additional class or
series of shares of stock (or any debt security which by its terms is
convertible into or exchangeable for any equity security of the Company and any
security which is a combination of debt and equity) unless the same ranks junior
to the Common Stock as to dividends and the distribution of assets on the
liquidation, dissolution or winding up of the Company; or issue, or agree to
issue, any equity security (or any security convertible, exercisable or
exchangeable for or into any equity security) of the Company other than
securities set forth in Section 3.1(g).
4.18 Repurchases, Redemptions, Dividends. So long as a Substantial
Investor, or any holds at least 30% of the Shares originally issued to such
Substantial Investor pursuant to this Agreement, in addition to any other vote
required by law or the Certificate of Incorporation of the Company, without the
prior written consent of each Substantial Investor, the Company will not
purchase or redeem, or set aside any sums for the purchase or redemption of, or
28
pay any dividend or make any distribution on, any shares of capital stock of the
Company, except for dividends or other distributions payable on the Common Stock
solely in the form of additional shares of Common Stock, or permit any
Subsidiary to do any of the foregoing, and other than shares of Common Stock
repurchased from employees or consultants at the original purchase price thereof
pursuant to awards granted prior to the date hereof under a stock plan approved
by the Company's Board of Directors.
4.19 Subsequent Equity Sales.
(a) From the date hereof until 90 days after the Effective Date,
neither the Company nor any Subsidiary shall issue shares of Common Stock
or Common Stock Equivalents; provided, however, the 90 day period set forth
in this Section 4.19 shall be extended for the number of Trading Days
during such period in which (i) trading in the Common Stock is suspended by
any Trading Market, or (ii) following the Effective Date, the Registration
Statement is not effective or the prospectus included in the Registration
Statement may not be used by the Purchasers for the resale of the Shares
and Warrant Shares.
(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". The term "Variable Rate Transaction" shall mean 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 4.19 shall not apply
in respect of an Exempt Issuance, except that no Variable Rate Transaction
shall be an Exempt Issuance.
4.20 Stock Splits and Reclassification. Until the one year anniversary of
the Effective Date, the Company shall not undertake a reverse or forward stock
split or reclassification of the Common Stock without the prior written consent
of the Purchasers holding a majority in interest of the Shares.
4.21 Nasdaq Listing. The Company will promptly seek to list all of its
Common Stock, including without limitation the Shares, Warrant Shares and LD
Shares, if any, on Nasdaq's National Market or Capital Market or the American
29
Stock Exchange if it at any time becomes eligible to do so; and at any time when
such Common Stock is listed on the Nasdaq's Capital Market or the American Stock
Exchange, the Company shall promptly seek to list all of its Common Stock on
Nasdaq's National Market, including, without limitation, the Shares, Warrant
Shares and LD Shares, if at any time it becomes eligible to do so. The Company
shall maintain the listing of shares of its Common Stock, including without
limitation, the Shares, Warrant Shares and LD Shares, if any, on the
Over-the-Counter Bulletin Board until such time as it has listed the shares of
Common Stock, including without limitation, the Shares, Warrant Shares and LD
Shares, if any, on Nasdaq's National Market or Capital Market or the American
Stock Exchange and thereafter shall maintain such listing.
4.22 Escrow Agreement. Without the prior written consent of the Purchasers,
the Company shall not amend the Amended and Restated Escrow Agreement dated as
of November 3, 2005 by and among the Company, Xxxxxx & Xxxxxxx, LLC, Riverbank
Capital Securities, Inc. and US Bank National Association Corporation Trust (the
"Escrow Agreement") relating to the closing of the transactions contemplated by
this Agreement.
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
November 7, 2005; provided, however, that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties). If the
Closing has not occurred as of the close of business on November 7, 2005, the
Company shall direct the Escrow Agent to return the Escrow Funds (as such term
is defined in the Escrow Agreement) paid by each Purchaser to such Purchaser
pursuant to Section 4(b) of the Escrow Agreement.
5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Xxxxxx and Xxxxxxx and Riverbank Capital Securities ("Placement Agent") the
non-accountable sum of $35,000, for its actual, reasonable, out-of-pocket legal
fees and expenses, none which shall have been paid prior to the Closing. The
Company shall reimburse NGN Capital in an amount not to exceed $110,000 for its
fees and expenses incurred in connection with the transactions contemplated in
the Transaction Documents, including for the conduct of due diligence on the
Company and its assets and related travel expenses, consultants engaged for due
diligence purposes and for legal expenses of Xxxxxxx | Procter LLP, counsel to
NGN Capital, for its fees and expenses incurred in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and other Transaction Documents. The Company shall reimburse Xxxxxxx Xxxx &
Xxxxx LLP for its fees and expenses incurred in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
transactions contemplated in the Transaction Documents (as well as review of any
registration statement under the Registration Rights Agreement) in an amount not
to exceed $50,000. The Company shall deliver, prior to the Closing, a completed
30
and executed copy of the Closing Statement, attached hereto as Annex A. 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.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
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. A notice delivered to the Purchasers must be delivered to each Purchaser
hereto in accordance with this Section 5.4.
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 each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
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. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 Successors and Assigns. This Agreement, including all covenants and
agreements contained in, shall be binding upon and inure to the benefit of the
parties and their successors and assigns (including without limitation
transferees of any Securities), whether so expressed or not. The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser. Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or
31
transfers any Securities (including any partner, retired partner, partnership,
member, former member, shareholder or affiliate of a party hereto), provided
that the Company has been given written notice thereof.
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 4.9.
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 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 manner permitted by law. The parties hereby waive all
rights to a trial by jury. 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 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 Securities.
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 each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
32
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
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, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
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 described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
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
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 of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
33
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. 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 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.
(Signature Pages Follow)
34
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.
JAVELIN PHARMACEUTICALS, INC. Address for Notice:
-------------------
By:/s/ Xxxxxx X. Xxxx 000 Xxxx 00xx Xxxxxx
------------------------------ Xxx Xxxx, XX 00000
Name: Xxxxxx X. Xxxx MD
Title: Chief Executive Officer
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
35
PURCHASER SIGNATURE PAGES TO
JAVELIN PHARMACEUTICALS, INC. 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:
-----------------------------------------------------
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount:$
-------------------------------
Shares:
------------------------------------
Warrant Shares:
----------------------------
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
36
ANNEX A
CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase at least $30,000,000 of Common Stock and
Warrants from Javelin Pharmaceuticals, Inc. (the "Company"). All funds will be
wired into an escrow account maintained by US Bank Trust National Association.
All funds will be disbursed in accordance with this Closing Statement.
DISBURSEMENT DATE: November ___, 2005
--------------------------------------------------------------------------------
I. PURCHASE PRICE
--------------
GROSS PROCEEDS TO BE RECEIVED IN TRUST $
II. DISBURSEMENTS
-------------
$
$
$
$
$
TOTAL AMOUNT DISBURSED: $
WIRE INSTRUCTIONS:
-----------------
To:
---------------------------------------
To:
---------------------------------------
37
Schedule I
----------
SCHEDULE OF PURCHASERS
----------------------
Investor Shares Purchase Price Warrant Shares
-------- ------ -------------- --------------
--------- -------------
TOTALS $
-------------------
38
DISCLOSURE SCHEDULE
This Disclosure Schedule has been prepared and delivered in connection with the
execution of the Securities Purchase Agreement, dated November 3, 2005 (the
"Agreement"), made by and among JAVELIN PHARMACEUTICALS, INC. (the "Company")
and each purchaser identified on the signature pages of the Agreement (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
This Disclosure Schedule relates to certain matters concerning the disclosures
required and transactions contemplated by the Agreement. The sections contained
in this Disclosure Schedule are not intended to constitute, and shall not be
construed as constituting, representations or warranties of the Sellers, except
as and to the extent provided in the Agreement. No implication should be drawn
that any information provided in this Disclosure Schedule is necessarily
material or otherwise required to be disclosed or that the inclusion of such
information establishes or implies a standard of materiality, a standard for
what is or is not considered to be part of the ordinary course of business, or
any other standard set forth in the Agreement.
Unless the context otherwise requires, all capitalized terms used in this
Disclosure Schedule shall have the respective meanings assigned in the
Agreement. No disclosure in this Disclosure Schedule relating to any possible
breach or violation of any agreement, law or regulation shall be construed as an
admission or indication that any such breach or violation exists or has actually
occurred.
Headings have been inserted for convenience of reference only and shall not have
the effect of amending or changing the content or meaning of the information
disclosed in the schedules contained in this Disclosure Schedule.
SCHEDULE 3.1(a)
SUBSIDIARIES
------------
1. Innovative Drug Delivery Systems, Inc.
Delaware corporation
100% owned by the Company
2. Innovative Drug Delivery Systems (UK) Limited
England and Wales corporation (Company No. 5239402)
100% owned by the Company.
SCHEDULE 3.1(b)
ORGANIZATION AND QUALIFICATION
------------------------------
The Company and Innovative Drug Delivery Systems, Inc. are qualified as
foreign corporations in Massachusetts and New York.
SCHEDULE 3.1(g)
CAPITALIZATION
--------------
The authorized capital stock consists of 100,000,000 shares of Common
Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001 par
value.
At October 28, 2005, the Company had outstanding 26,182,761 shares of
Common Stock, and no shares of Preferred Stock. At such date, there were
outstanding options for the purchase of 3,786,555 shares under the Company's
Omnibus Stock Incentive Plan, options for the purchase of 1,184,058 shares
granted outside of such plan and placement options for the purchase of 409,581
shares. In addition, there were outstanding warrants for the purchase of an
aggregate of 1,268,444 shares.
The purchasers under the Securities Purchase Agreement, dated November 4,
2004, have preemptive rights under Section 4.13 thereof until November 4, 2005,
and the purchasers under the Subscription Agreement for the December 2004
placement have preemptive rights under Section 6(k) thereof until December 6,
2005. The Company has provided these purchasers with the requisite notices under
the applicable preemptive rights provisions. Some of such purchasers have
elected to participate in the offering contemplated by the Agreement. At the
Closing no such purchaser will have any further rights with respect to the
offering contemplated by the Agreement.
SCHEDULE 3.1(j)
LITIGATION
----------
1. West Pharmaceutical Services Inc. v. Innovative Drug Delivery Systems,
Inc., [Court of Common Pleas of Xxxxxxx County, Pennsylvania, No.
05-06081]. Action for declaratory judgment under Side Letter Agreement,
dated February 8, 2005, that West fully performed under said Agreement.
West is not seeking any damages in the suit. Removed to US District Court
for the Eastern District of Pennsylvania on September 12, 2005. On
September 16, IDDS answered and filed a counterclaim seeking at least
$1,391,993 for alleged breaches by West under said Agreement.
2. Wachovia Capital Markets LLC commenced an arbitration before the American
Arbitration Association against IDDS seeking a commission of $750,000
arising from an Engagement Letter, dated February 3, 2004, between Wachovia
and IDDS. On September 16, IDDS filed its response to the arbitration
denying all of Wachovia's claims.
SCHEDULE 3.1(q)
TRANSACTIONS WITH AFFILIATES AND EMPLOYEES
------------------------------------------
In August 2005, the Company retained Two River Group Holding LLC to provide
investment relations services through December 31, 2005, and the fee was the
grant of warrants to purchase 20,000 shares of the Company's Common Stock at
$3.00 per share exercisable for five years.
In September 30, 2005, the Company retained Riverbank Capital Securities
and another entity to act as placement agents for this Offering.
Xxxxx Xxxx, a director of the Company, is affiliated with Two River Group
Holding LLC and Riverbank Capital Securities.
SCHEDULE 3.1(v)
REGISTRATION RIGHTS
-------------------
1. Common Stock Purchase Warrants, dated November 4, 2004, issued in
connection with bridge financing, give the holders piggy-back registration
rights [Section 5(p)].
2. Registration Rights Agreement, dated as of December 6, 2004, with the
purchasers in December 2004 placement.
The persons having registration rights under the above agreements were
included as selling stockholders as to their registrable shares in the
Company's Registration Statement on Form SB-2 (No. 333-122177). The
securities held by such persons will not be included in the registration
statement to be filed by the Company relating to the Shares and the Warrant
Shares.
SCHEDULE 3.1(ee)
ACCOUNTANTS
-----------
PricewaterhouseCoopers LLP
