EXHIBIT 10.26
MAXIM PHARMACEUTICALS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is entered into as of July 20, 1999, by and among Maxim
Pharmaceuticals, Inc., a Delaware corporation (the "Company") and each of those
persons and entities, severally and not jointly, whose names are set forth on
the Schedule of Purchasers attached hereto as Exhibit A (which persons and
entities are hereinafter collectively referred to as "Purchasers" and each
individually as a "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an aggregate
of Three Hundred Thousand (300,000) shares of its Series A Convertible Preferred
Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchasers on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (i) the sale and issuance
to Purchasers of the Shares and (ii) the issuance of shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
shall have the rights, preferences, privileges and restrictions set forth in the
Certificate of Designations in the form attached hereto as Exhibit B (the
"Certificate of Designations").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue and
sell to each Purchaser, severally and not jointly, and each Purchaser agrees to
purchase from the Company, severally and not jointly, the number of Shares set
forth opposite such Purchaser's name on Exhibit A, at a purchase price of $97.25
per share, such price per share determined based on the average of the closing
bid price for the five days preceding the Closing Date as reported on the
American Stock Exchange multiplied by the number of shares of Common Stock into
which each Share is initially convertible as set forth in the Certificate of
Designations.
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2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 10:00 a.m. on the date
each of the conditions to closing set forth in Section 5 hereof have occurred,
at the offices of Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx
Xxxxx, XX 00000 or at such other time or place as the Company and Purchasers may
mutually agree (such date is hereinafter referred to as the "Closing Date").
Payment for the Shares and delivery of the stock certificates representing the
Shares shall take place no later than five (5) business days after the Closing
Date (the "Settlement Date") and in accordance with Section 2.2 below.
2.2 DELIVERY AND SETTLEMENT. On the Settlement Date, subject to the
terms and conditions hereof, the Company will deliver to the Purchasers
certificates representing the number of Shares to be purchased at the Closing by
each Purchaser, against payment of the purchase price therefor by check, wire
transfer made payable to the order of the Company, cancellation of indebtedness
or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as of the date
of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and to issue and sell the Shares and the Conversion Shares and to
carry out the provisions of this Agreement and the Certificate of Designations
and to carry on its business as presently conducted and as presently proposed to
be conducted. The Company is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in all jurisdictions in which
the nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the assets, liabilities,
financial condition, regulatory condition, capital, properties, results of
operations or prospects of the Company or its business (a "Material Adverse
Effect").
3.2 SUBSIDIARIES. The Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 35,000,000 shares
of Common Stock, (par value $ .001) per share, 10,203,600 shares of which are
issued and outstanding as of the date of this Agreement, 5,000,000 shares of
Preferred Stock, (par value $ .001) per share, 300,000 of which are designated
Series A Preferred Stock, none of which are issued and outstanding as of the
date of this Agreement. All issued and outstanding shares of the Company's
Common Stock (a) have been duly authorized and validly issued and (b) are fully
paid and nonassessable. The
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rights, preferences, privileges and restrictions of the Shares are as stated
in the Certificate of Designations; all such rights, preferences, privileges
and restrictions are valid, binding and enforceable against the Company and
in accordance with applicable laws. The Conversion Shares have been duly and
validly reserved for issuance. Other than the 977,310 shares reserved for
issuance under the Company's 1993 Long Term Incentive Plan and outstanding
warrants to purchase an aggregate of 2,961,104 shares of Common Stock and
44,006 shares reserved for issuance under the Company's 401(k) plan, there
are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or shareholder
agreements, or agreements of any kind authorized or outstanding for the
purchase or acquisition from the Company of any of its securities or any
interest therein. Except as set forth herein, there is no commitment by the
Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
equity securities any evidence of indebtedness or asset. The Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend
(other than dividends payable on the Shares) or to make any other
distribution in respect thereof. When issued in compliance with the
provisions of this Agreement and the Certificate of Designations, the Shares
and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer is
proposed.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the
Certificate of Designations has been taken or will be taken prior to the
Closing. The Agreement when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights;
(b) general principles of equity that restrict the availability of equitable
remedies; and (c) to the extent that the enforceability of the indemnification
provisions in Section 6.2 may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
3.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to each Purchaser a complete
and accurate copy (excluding copies of exhibits) of the Company's (i) Annual
Report of Form 10-K for the year ended September 30, 1998, (ii) Quarterly
Reports on Form 10-Q for the quarters ended December 31, 1998 and Xxxxx 00,
0000, (xxx) Proxy Statement on Schedule 14A dated January 13, 1999, and (iv)
Proxy Statement on Schedule 14A dated June 1, 1999, each filed by the Company
with the Securities and Exchange Commission ("SEC") (collectively, the "Company
SEC Documents"). The Company SEC Documents (i) complied with the
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requirements of the Securities Act or the Exchange Act, as the case may be,
at and as of the times they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
(ii) were filed in a timely manner, and (iii) did not at and as of the time
they were filed (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Each of the sets of financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Documents
(collectively, the "Past Financial Statements") including the Company's
unaudited consolidated balance sheet as of March 31, 1999 (the "March Balance
Sheet") (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes
thereto and, in the case of unaudited interim financial statements, as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments which are not
expected to be material in amount) and (iii) fairly presents the financial
position of the Company as at the respective dates thereof and the results of
operations of the Company and cash flows for the periods indicated.
3.6 LIABILITIES. The Company has no material liabilities and, to
the best of its knowledge, knows of no material contingent liabilities not
disclosed in the Past Financial Statements, except current liabilities incurred
in the ordinary course of business subsequent to the March Balance Sheet which
have not been, either in any individual case or in the aggregate, materially
adverse.
3.7 CHANGES. Since the March Balance Sheet, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Past Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a Material
Adverse Effect;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, which has a Material Adverse Effect;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
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(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any officer, director or shareholder of the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity involving the Company's
employees;
(j) Any debt, obligation or liability (absolute, accrued or
contingent) incurred, assumed or guaranteed by the Company, except those for
immaterial amounts and for current liabilities incurred in the ordinary course
of business;
(k) Any sale, assignment, pledge or transfer of tangible assets
or any patents, trademarks, copyrights, trade secrets or other intangible
assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which has a Material Adverse Effect; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has a Material Adverse Effect.
3.8 PATENTS AND TRADEMARKS.
(a) To the best of its knowledge, the Company owns or possesses
sufficient rights under all material patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names and know-how
(collectively, "Intellectual Property") described or referred to in the Company
SEC Documents as owned or used by it or that are necessary for the conduct of
its business as now conducted, (ii) the Company has not received any notice of,
or has no knowledge of, any infringement of or conflict with asserted rights of
the Company by others with respect to any Intellectual Property, and (iii) the
Company has not received any notice of, or has no knowledge of, any infringement
of or conflict with asserted rights of a third party with respect to any
Intellectual Property.
(b) In addition to the foregoing, the Company is unaware of any
facts which would preclude the Company from having clear title to the patents
and patent applications referred to or described in the Company SEC Documents
(the "Maxamine Patents"). The Company has complied with the Patent and
Trademark Office ("PTO") duty of candor and good faith in dealing with the PTO,
including the duty to disclose to the PTO all information known to be material
to the patentability of each of such United States patents and patent
applications. To the best of its knowledge, all assignments from each named
inventor to the Company have been executed and recorded with the PTO for each
Maxamine Patent. To the best of its knowledge,
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the Company has maintained all rights with respect to the Maxamine Patents.
The Company has no reason to believe that any of the claims of the Maxamine
Patents is unpatentable, unenforceable or invalid. The Company is not aware
of any pending U.S. or foreign patent applications which, if issued, would
limit, prohibit or materially affect the business now conducted or proposed
to be conducted by the Company as described in the Company SEC Document. The
Company is not aware of any facts which would form the basis for a belief
that the products or processes of any third party infringe the claims of any
Maxamine Patent.
(c) The Company is unaware of any legal or governmental
proceedings pending relating to the Maxamine Patents, other than PTO review of
pending applications for patents, including appeal proceedings, and, to the best
of its knowledge, no such proceedings are threatened or contemplated by
governmental authorities or others.
(d) The Company is unaware of any contracts or other documents
material to the Company's Maxamine Patents or Intellectual Property other than
those described in the Company SEC Documents.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of (i) any term of its Certificate of Incorporation or
Bylaws, each as amended to date, (ii) any provision of any mortgage, indenture,
contract, agreement, instrument or contract to which it is party or by which it
is bound or of any judgment, decree, order, writ, except such violations or
defaults which, alone or in the aggregate, do not have a Material Adverse
Effect, or (iii) to its knowledge, any statute, rule or regulation applicable to
the Company, except such violations or defaults which, alone or in the
aggregate, would not have a Material Adverse Effect. The execution, delivery,
and performance of and compliance with this Agreement and the issuance and sale
of the Shares pursuant hereto and of the Conversion Shares pursuant to the
Certificate of Designations, will not, with or without the passage of time or
giving of notice, result in any such violation, or be in conflict with or
constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.10 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened against
the Company that questions the validity of this Agreement or the right of the
Company to enter into this Agreement, or to consummate the transactions
contemplated hereby, or which might result, either individually or in the
aggregate, in a Material Adverse Effect, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis for
the foregoing. There is no action or suit by the Company pending, threatened or
contemplated against others.
3.11 REGISTRATION RIGHTS. Except for National Securities Corporation
and HealthCap KB and as set forth in Section 6 of this Agreement, the Company is
presently not under any obligation, and has not granted any rights, to register
any of the Company's presently outstanding securities or any of its securities
that may hereafter be issued.
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3.12 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties, except such violations which, alone or in the aggregate, do not have
a Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Shares or the Conversion
Shares, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could have a Material Adverse Effect and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted.
3.13 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
3.14 OTHER AGREEMENTS. Except as set forth under the Company SEC
Documents, the Company is not a party to or otherwise bound by any written or
oral agreement, instrument, commitment or restriction which individually could
reasonably be expected to have a Material Adverse Effect or any other written or
oral:
(a) agreement with any labor union representing employees of the
Company;
(b) agreement for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(c) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(d) guaranty of any obligations for borrowed money or otherwise;
(e) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a registration statement on Form S-1 if the Company were registering
securities under the Securities Act.
The Company, and to the best of its knowledge, each other party thereto have in
all material respects performed all the obligations required to be performed by
them to date (or each non-performing party has received a valid, enforceable and
irrevocable written waiver with respect to its non-performance), have received
no notice of default and are not in default (with due notice or elapse of time
or both) under any agreement, instrument, commitment or plan or arrangement to
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which the Company is a party or by which it or its property may be bound
except such defaults which, alone or in the aggregate, are not reasonably
expected to have a Material Adverse Effect. The Company has no present
expectation or intention of not performing all its material obligations under
each such agreement, instrument, commitment, plan or arrangement, and the
Company has no knowledge of any breach or anticipated breach by the other
party to any agreement, instrument, commitment, plan or arrangement to which
the Company is a party except for such breaches which, alone or in the
aggregate, are not reasonably expected to have a Material Adverse Effect.
The Company is in compliance with all of the material terms of its Charter
and By-Laws, as amended.
3.15 DISCLOSURE. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor any documents furnished or made available to the
Purchasers relating to this Agreement, contains any material misstatement of
fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains any material misstatement of fact or omits to state
a material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. There is no fact
which the Company has not disclosed to the Purchasers and their counsel and of
which the Company is aware which, alone or in the aggregate is reasonably
expected to have a Material Adverse Effect. The financial projections and other
estimates contained in any documents furnished to the Purchasers relating to
this Agreement were prepared by the Company based on the Company's experience in
the industry and on assumptions of fact and opinions as to future events which
the Company believed to be reasonable, but which the Company cannot and does not
assure or guarantee the attainment of in any manner. As of the date hereof, no
facts have come to the attention of the Company which would, in its opinion,
require the Company to materially revise or amplify the assumptions underlying
such projections and other estimates or the conclusions derived therefrom.
3.16 OFFERING OF SHARES. Neither the Company nor any person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Shares or any security of the
Company similar to the Shares has offered the Shares or any such similar
security for sale to, or solicited any offer to buy the Shares or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including, without
limitation, any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of such security with the
Shares under the Securities Act or the rules and regulations of the SEC
thereunder), in either case so as to subject the offering, issuance or sale of
the Shares to the registration provisions of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows:
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4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver and to perform its obligations under this Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement will be valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights and
(b) general principles of equity that restrict the availability of equitable
remedies.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an applicable exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in the
Agreement. Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that, except as set forth in this Agreement,
the Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its Common Stock. Purchaser also understands that there
is no assurance that any exemption from registration under the Securities Act
will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has received and read the
Company SEC Reports and the Past Financial Statements and has had an opportunity
to discuss the Company's business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity to
review the Company's operations
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and facilities. Purchaser has also had the opportunity to ask questions of
and receive answers from the Company and its management regarding the terms
and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state, province or country identified in the address of
the Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 ADDITIONAL REGULATION S REPRESENTATIONS. Each Purchaser who is
not a resident of the United States also represents as follows:
(a) Purchaser certifies that he, she or it is neither a citizen
nor a resident of the United States and that his, her or its address set forth
on Schedule A of this Agreement is correct.
(b) No public offer or solicitation of the Shares was made to
such Purchaser and no offer of the Shares was made to such Purchaser while such
purchaser was present in the United States.
(c) At the time any buy order for the Shares was originated,
such Purchaser was located outside the United States and is outside the United
States on the date of the execution and delivery of this Agreement and will be
outside the United States on the Closing Date.
(d) Purchaser is aware that the Shares and the Conversion Shares
have not been registered under the Securities Act and may only be offered or
sold pursuant to registration under the Securities Act or an available exemption
therefrom, and such Purchaser has not, and will not, engage in any public
offering or distribution of the Shares or Conversion Shares or engage in any
hedging transaction with respect thereto, except in accordance with the
registration or exemption provisions of the Securities Act.
(e) Except to the extent the Shares or Conversion Shares have
been registered under the Securities Act, such Purchaser (i) will not, during
the period commencing on the Closing Date and ending one year after the Closing
Date (the "Distribution Compliance Period"), offer or sell or agree to sell the
Shares or Conversion Shares in the United States, to a
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U.S. Person (as defined in Regulation S promulgated under the Securities Act
("Regulation S")) or for the account or benefit of a U.S. Person other than
in accordance with Regulation S, and (ii) will, after the expiration of the
Distribution Compliance Period, offer, sell, pledge or otherwise transfer the
Shares or Conversion Shares only pursuant to registration under the
Securities Act or an available exemption therefrom and, in any case, in
accordance with applicable United States federal and state securities laws.
(f) Purchaser has been advised of, and is familiar with, has
complied, and will comply, with the offering restrictions, and any other
requirements of Regulation S.
(g) The transactions contemplated by this Agreement (i) have not
been pre-arranged by Purchaser with the view to sell or transfer the Shares or
Conversion Shares to another purchaser located in the United Stated who is a
U.S. Person, and (ii) are not part of a plan or scheme by Purchaser to evade the
registration provisions of the Securities Act.
(h) Neither Purchaser nor any of his, her or its affiliates has
entered, has the intention of entering, or will during the Distribution
Compliance Period enter into, with any U.S. Person, any put option, short
position or other similar instrument or position with respect to the Shares or
Conversion Shares or participate in any other attempt designed to lower the
trading prices of the Shares or Conversion Shares.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Each
Purchaser's obligation to purchase the Shares at the Closing are subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct (except to the extent that the aggregate of
all inaccuracies and breaches thereof would not have a Material Adverse Effect)
as of the Closing Date (except to the extent such representations specifically
relate to an earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date, and in any event subject to
the foregoing materiality qualification) with the same force and effect as if
they had been made as of the Closing Date, and the Company shall have performed
all obligations and conditions herein required to be performed or observed by it
on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. As of the Closing Date, the
Company shall have obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by the
Agreement (except for such as may be properly obtained subsequent to the
Closing).
11
(d) FILING OF CERTIFICATE OF DESIGNATIONS. On the Settlement
Date, the Certificate of Designations shall have been filed with the Secretary
of State of the State of Delaware.
(e) RESERVATION OF CONVERSION SHARES. As of the Closing Date,
the Conversion Shares issuable upon conversion of the Shares shall have been
duly authorized and reserved for issuance upon such conversion.
(f) WRITTEN ASSURANCE FROM AMEX. As of the Closing Date, the
Company shall have received written assurance from the American Stock Exchange
to the effect that the issuance of the Shares contemplated hereby will not
result in a violation of the listing requirements of the American Stock
Exchange.
(g) LEGAL OPINION. On the Settlement Date, the Purchasers shall
have received from legal counsel to the Company an opinion addressed to them,
dated as of the Settlement Date, in substantially the form attached hereto as
Exhibit C.
(h) COMPLIANCE CERTIFICATE. The Company shall have delivered a
certificate, executed by the President of the Company, dated the Settlement
Date, stating that the conditions set forth in paragraphs (a), (c), (d), (e) and
(f) have been complied with and that between the date of execution of this
Agreement and the Settlement Date, there has been no material adverse change
affecting the Company or its business which, alone or in the aggregate, shall
have a Material Adverse Effect.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by those Purchasers acquiring Shares in Section 4 hereof
shall be true and correct (except to the extent that the aggregate of all
inaccuracies and breaches thereof would not have a Material Adverse Effect) at
the Closing Date (except to the extent such representations specifically relate
to an earlier date, in which case such representations and warranties shall be
true and correct as of such earlier date, and in any event subject to the
foregoing materiality qualification), with the same force and effect as if they
had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) FILING OF CERTIFICATE OF DESIGNATIONS. On the Settlement
Date, the Certificate of Designations shall have been filed with the Secretary
of State of the State of Delaware.
(d) CONSENTS, PERMITS, AND WAIVERS. As of the Closing Date, the
Company shall have obtained any and all consents, permits and waivers necessary
or appropriate
12
for consummation of the transactions contemplated by the Agreement (except
for such as may be properly obtained subsequent to the Closing).
(e) WRITTEN ASSURANCE FROM AMEX. As of the Closing Date, the
Company shall have received written assurance from the American Stock Exchange
to the effect that the issuance of the Shares contemplated hereby will not
result in a violation of the listing requirements of the American Stock
Exchange.
6. REGISTRATION.
6.1 REGISTRATION REQUIREMENTS.
(a) The Company shall prepare and file, not later than thirty
(30) days after the Closing Date, a registration statement on Form S-3 or
another available form (the "Registration Statement") with the SEC under the
Securities Act to register the resale of the Conversion Shares by the Purchasers
and thereafter shall use its best efforts to secure effectiveness of the
Registration Statement within ninety (90) days after the Closing Date. In the
event the Company fails to secure effectiveness of the Registration Statement
within ninety (90) days after the Closing Date, the dividend rate on the Series
A Preferred shall be increased to 15% per annum for the period the Registration
Statement remains ineffective, and at such time as the Registration Statement
becomes effective, the dividend rate on the Series A Preferred shall revert to
12% per annum. In order to have shares included in the Registration Statement,
each Purchaser must complete and deliver to the Company not later than ten (10)
days after the Closing, a Registration Statement Questionnaire in the form
attached hereto as Exhibit D.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all of its respective Selling Expenses
(as defined below) and other expenses that are not Registration Expenses
relating to the Shares resold by such Purchaser. "Registration Expenses" shall
mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions herein described, including, without
limitation, all registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, blue sky fees
and expenses and the expense of any special audits incidents to or required by
any such registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Conversion Shares
and all fees and disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its reasonable
best efforts to: (i) keep such registration effective until the earlier of (A)
such date as all of the Conversion Shares have been resold or (B) the date on
which each Purchaser is entitled to sell all of its Conversion Shares pursuant
to Rule 144(k) promulgated under the Securities Act; (ii) prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Conversion Shares covered by the Registration Statement;
(iii) cause the Conversion Shares to be listed on each securities exchange
13
and quoted on each quotation service on which similar securities issued by
the Company are then listed or quoted; (iv) provide a transfer agent and
registrar for all Conversion Shares registered pursuant to the Registration
Statement and a CUSIP number for all such Conversion Shares; (v) comply with
all applicable rules and regulations of the SEC governing such registration;
and (vi) file the documents required of the Company by, and otherwise use its
reasonable best efforts to maintain requisite blue sky clearance in, (X) all
jurisdictions in which any of the Shares are originally sold and (Y) all
other states specified in writing by a Purchaser; provided, however, that as
to clause (Y), the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is now so qualified or
has not so consented.
(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of the prospectus
used in connection with the Registration Statement as may be necessary in order
to facilitate the public sale or other disposition of all or any of the
Conversion Shares held by the Purchaser.
(e) With a view to making available to the Purchasers the
benefit of Rule 144 and Form S-3 and any other rule or regulation of the SEC
that may at any time permit a Purchaser to sell shares to the public without
registration, the Company covenants and agrees to use its reasonable best
efforts to: (i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) the date on which
each Purchaser is entitled to sell all of its Conversion Shares pursuant to Rule
144(k) promulgated under the Securities Act or (B) such date as all of the
Conversion Shares shall have been resold; (ii) file with the SEC in a timely
manner all reports and other documents required of the Company under the
Exchange Act; and furnish to any Purchaser upon request, as long as the
Purchaser owns any Shares or Conversion Shares, (A) a written statement by the
Company that it has complied with the reporting requirement of the Exchange Act,
(B) a copy of the most recent annual or quarterly report of the Company, and (C)
such other information as may be reasonably requested in order to avail any
Purchaser of any rule or regulation of the SEC that permits the selling of any
such Shares or Conversion Shares without registration or pursuant to such
registration statement on Form S-3.
(f) The Company may suspend the use of the Registration
Statement and refuse to permit the Purchasers to resell any Conversion Shares
pursuant to the Registration Statement for a period not to exceed 20 days in any
twelve month period; PROVIDED, HOWEVER, that in order to exercise this right,
the Company must notify the Purchasers to the effect that such action is
necessary because there then exists material, non-public information relating to
the Company, which, in the reasonable opinion of the board of directors of the
Company would not be appropriate for disclosure during that time. In such an
event, the Company shall use its best efforts to amend the Registration
Statement as necessary and to take all other actions necessary to allow such
sales and shall notify the Purchasers promptly after it has determined that such
sales have become permissible.
6.2 INDEMNIFICATION.
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(a) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, on the effective date
thereof, the omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, any violation by the
Company of any rule or regulation promulgated under the Securities Act, the
Exchange Act or state securities laws applicable to the Company in connection
with such registration, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement, and the Company will, as
incurred, reimburse such Purchaser for any reasonable legal or other expenses
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement, (ii) the failure of such Purchaser to
comply with the covenants and agreements contained in Section 6.3 hereof, or
(iii) any untrue statement in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon an untrue statement made in
such Registration Statement in reliance upon and in conformity with written
information furnished by such Purchaser on Exhibit D hereto for use in
preparation of the Registration Statement; PROVIDED, HOWEVER, that no Purchaser
shall be liable in any such case for any untrue statement included in any
Prospectus which statement has been corrected, in writing, by such Purchaser and
delivered to the Company before the sale from which such loss occurred, and each
Purchaser, severally and not jointly, will, as incurred, reimburse the Company
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; PROVIDED, FURTHER,
HOWEVER, that in no event shall any indemnity under this Section 6.2(b) exceed
the net proceeds from the offering received by the applicable Purchaser or
Purchasers from the sale of the Conversion Shares.
(c) Promptly after receipt by any indemnified person of a notice
of a claim to the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 6.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and subject to the provisions hereinafter
stated, in case any such action shall be brought against an indemnified person
and the indemnifying person shall have been notified thereof, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall wish, to
15
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the
defense thereof, the indemnifying person shall not be liable to such
indemnified person for any legal expense subsequently incurred by such
indemnified person in connection with the defense thereof; PROVIDED, HOWEVER,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the
same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying
person. No indemnifying person shall, without the prior written consent of
the indemnified person (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and
indemnification could have been sought hereunder by such indemnified party.
(d) The obligations of the Company and the Purchasers under this
Section 6.2 shall be in addition to any liability which the Company and each
respective Purchaser may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Securities Act.
(e) In order to provide for just and equitable contribution to
joint liability in any case in which a claim for indemnification is made
pursuant to this Section 6 but it is judicially determined (by entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding that this
Section 6 provides for indemnification in such case, the Company and each
Purchaser shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
proportion to the relative fault of the Company on the one hand, and the
Purchasers, severally, on the other hand; provided, however, that in any such
case, no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was no guilty of such fraudulent misrepresentation
and; provided, further, that in no event shall any contribution under this
Section 6.2(e) on the part of any seller exceed the net proceeds received by
such seller from the sale of Conversion Shares.
6.3 TRANSFER OF CONVERSION SHARES AFTER REGISTRATION. Each
Purchaser hereby covenants with the Company not to make any sale of the
Conversion Shares except either (a) in accordance with the Registration
Statement, in which case the Purchaser covenants to comply with the requirements
of delivering a current prospectus, (b) in accordance with Rule 144, in which
case Purchaser covenants to comply with Rule 144, or (c) subject to such
conditions as the Company shall reasonably impose, in accordance with another
exemption from the registration requirements of the Securities Act. Each
Purchaser also covenants that it will not make any sale of the Conversion Shares
pursuant to the Registration Statement during any period in which the Company
has suspended use of the Registration Statement pursuant to Section 6.1(f) of
this Agreement. Each Purchaser further acknowledges and agrees that such
Conversion
16
Shares are not transferable on the books of the Company unless the
certificate submitted to the Company's transfer agent evidencing such
Conversion Shares is accompanied by such additional certification,
documentation or information as the Company shall reasonably require in order
to effect such sale in accordance with the Registration Statement, Rule 144
or such other exemption from the registration requirements of the Securities
Act.
6.4 ADDITIONAL PURCHASER COVENANTS. Each Purchaser covenants that
it will promptly notify the Company of any changes in the information set forth
in the Registration Statement regarding such Purchaser or such Purchaser's "Plan
of Distribution," including, without limitation, the information contained in
the Registration Statement Questionnaire attached hereto as Exhibit D relating
to such Purchaser. Each Purchaser shall provide the Company in writing with
such change or additional information necessary so that the information set
forth in the Registration Statement regarding such Purchaser will be true and
correct as of the effective date of the Registration Statement and until the
Company is no longer required to keep the Registration Statement effective
pursuant to Section 6.1(c) of this Agreement.
6.5 TERMINATION. All registration rights granted under this Section
6 shall expire and be of no further force and effect if all Shares or Conversion
Shares held by or issuable to each Purchaser (and its affiliates, partners,
former partners, members and former members) may be sold under Rule 144(k)
promulgated under the Securities Act.
7. CO-SALE RIGHTS
7.1 The following definitions shall apply to this Section 7:
(a) "Co-Sale Shares" shall mean shares of the Company's Common
Stock now owned or subsequently acquired by the Key Holders.
(b) "Key Holders" shall mean Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxx and
Xxxx Gehlson.
(c) "Purchaser Common Stock" shall mean the shares of Common
Stock into which the Shares are convertible (excluding shares of Common Stock
which have already been issued upon conversion of the Shares or shares of Common
Stock acquired by a Purchaser other than under this Agreement).
7.2 If one or more Key Holders proposes to sell or transfer any
Co-Sale Shares in one or more related transactions which will result in the
transferee of such shares holding more than 50% of the voting stock of the
Company, then such Key Holder(s) shall promptly give written notice (the
"Notice") to the Company and to each of the Purchasers at least 20 days prior
to the closing of such sale or transfer. The Notice shall describe in
reasonable detail the proposed sale or transfer including, without
limitation, the number of Co-Sale Shares to be sold or transferred, the
nature of such sale or transfer, the consideration to be paid, and the name
and address of each prospective purchaser or transferee. In the event that
the sale or transfer is being made pursuant to the provisions of Section 7.9
hereof, the Notice shall state under which subsection the sale or transfer is
being made.
17
7.3 Each Purchaser shall have the right, exercisable upon written
notice to such Key Holder(s) within 15 days after receipt of the Notice, to
participate in such sale on a pro rata basis on the same terms and conditions
specified in the Notice. To the extent that one or more of the Purchasers
exercise such co-sale right in accordance with the terms and conditions set
forth below, the number of Co-Sale Shares that the Key Holder(s) may sell in the
transaction shall be correspondingly reduced.
7.4 Each Purchaser may sell all or any part of that number of
shares of Purchaser Common Stock equal to the product obtained by multiplying
(i) the aggregate number of Co-Sale Shares covered by the Notice by (ii) a
fraction, the numerator of which is the number of shares of Purchaser Common
Stock owned by the Purchaser at the time of the sale or transfer and the
denominator of which is the total number of shares of voting stock and Purchaser
Common Stock owned by the Key Holder(s) and the Purchasers, respectively, at the
time of the sale or transfer.
7.5 Each Purchaser shall effect its participation in the sale by
promptly delivering to the Key Holder(s) for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent that number of shares of Series A Preferred which is at such time
convertible into the number of shares of Purchaser Common Stock which such
Purchaser elects to sell; PROVIDED, HOWEVER, that if the prospective
purchaser objects to the delivery of Series A Preferred in lieu of Common
Stock, such Purchaser shall convert such Series A Preferred into Purchaser
Common Stock and deliver Purchaser Common Stock as provided above. The
Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the purchaser and that such a conversion shall not
terminate such Purchaser's co-sale rights with respect to the Shares
converted.
7.6 The stock certificate or certificates that the Purchaser
delivers to the Key Holder(s) pursuant to Section 7.4 shall be transferred to
the prospective purchaser in consummation of the sale of the voting stock
pursuant to the terms and conditions specified in the Notice, and the Key
Holder(s) shall concurrently therewith remit to such Purchaser that portion
of the sale proceeds to which such Purchaser is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser, or
purchasers, prohibits such assignment or otherwise refuses to purchase
Purchaser Common Stock from a Purchaser exercising its rights of co-sale
hereunder, the Key Holder(s) shall not sell to such prospective purchaser or
purchasers any Co-Sale Shares unless and until, simultaneously with such
sale, the Key Holder(s) shall purchase such Purchaser Common Stock from such
Purchaser.
7.7 The exercise or non-exercise of the rights of the Purchasers
hereunder to participate in one or more sales of Co-Sale Shares made by the Key
Holders shall not adversely affect their rights to participate in subsequent
sales of Co-Sale Shares subject to Section 7.2.
7.8 If none of the Purchasers elects to participate in the sale of
the Co-Sale Shares subject to the Notice, the Key Holder(s) may, not later than
thirty (30) days following delivery to the Company and each of the Purchasers of
the Notice, enter into an agreement providing for the closing of the transfer of
the Co-Sale Shares covered by the Notice on terms
18
and conditions not more favorable to the transferor than those described in
the Notice. Any proposed transfer on terms and conditions more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Shares by the Key Holder(s), shall again be subject to the
co-sale rights of the Purchasers and shall require compliance by the Key
Holder(s) with the procedures described in this Section 7.
7.9 EXEMPT TRANSFERS. Notwithstanding the foregoing, the
provisions of this Section 7 shall not apply to (i) any pledge of Co-Sale
Shares made pursuant to a bona fide loan transaction that creates a mere
security interest; (ii) any transfer to the ancestors, descendants or spouse
of a Key Holder or to trusts for the benefit of such persons or a Key Holder;
or (iii) any bona fide gift; provided that (A) the transferring Key Holder
shall inform the Purchasers of such pledge, transfer or gift prior to
effecting it and (B) the pledgee, transferee or donee shall furnish the
Purchasers with a written agreement to be bound by and comply with all the
terms of this Agreement, including the provisions of Section 7.2. Such
transferred Co-Sale Shares shall remain "Co-Sale Shares" hereunder, and such
pledgee, transferee or donee shall be treated as a "Key Holder" for purposes
of this Agreement.
7.10 TERMINATION OF CO-SALE RIGHTS. The co-sale rights established
by this Section 7 shall terminate as to each Purchaser at such time as all of
such Purchaser's Series A Preferred has been converted into Common Stock.
8. RIGHTS OF FIRST REFUSAL
8.1 SUBSEQUENT OFFERINGS. Each Purchaser shall have a right of
first refusal to purchase its PRO RATA share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 8.4 hereof. Each Purchaser's PRO RATA share is equal to the
ratio of (a) the number of shares of the Common Stock issuable upon conversion
of the Shares (and excluding those shares of Common Stock already issued upon
conversion of the Shares and any other Common Stock acquired by a Purchaser
other than under this Agreement) which such Purchaser is deemed to be a holder
immediately prior to the issuance of such Equity Securities to (b) the total
number of shares of the Company's outstanding Common Stock (including all shares
of Common Stock issued or issuable upon conversion of the Shares or upon the
exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security convertible, with or without
consideration, into any Common Stock or Preferred Stock (including any option to
purchase such a convertible security), (ii) any security carrying any warrant or
right to subscribe to or purchase any Common Stock or Preferred Stock or (iii)
any such warrant or right.
8.2 Exercise of Rights. If the Company proposes to issue any
Equity Securities, it shall give each Purchaser written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Purchaser shall have fifteen
(15) days from the giving of such notice to agree to purchase its PRO RATA share
of the Equity Securities for the price and upon the terms and
19
conditions specified in the notice by giving written notice to the Company
and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Purchaser who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer
or sale.
8.3 Issuance of Equity Securities to Other Persons. If the
Purchasers do not exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which the Purchaser's rights were not exercised, at a price and upon general
terms and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the Purchaser's pursuant to Section 8.2
hereof. If the Company has not sold such Equity Securities within ninety (90)
days of the notice provided pursuant to Section 8.2, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Purchaser's in the manner provided above.
8.4 Excluded Securities. The rights of first refusal established
by this Section 8 shall have no application to any of the following Equity
Securities:
(a) any shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights and shares of Common Stock issued upon the
exercise or conversion thereof) issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary of the
Company, pursuant to its 1993 Long Term Incentive Plan;
(b) stock issued pursuant to any rights or agreements (including
options or warrants) outstanding as of the date of this Agreement;
(c) any Equity Securities issued pursuant to any acquisition by
the Company;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution;
(g) shares of the Company's Common Stock or Preferred Stock
issued in connection with any licensing arrangement entered into by the Company,
including strategic transactions involving the Company and other entities, such
as joint ventures, manufacturing, marketing or distribution arrangements or
technology transfer or development arrangements.
8.5 Termination of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall terminate as to each Purchaser at
such time as all such Purchaser's Series A Preferred has been converted into
Common Stock
20
9. MISCELLANEOUS.
9.1 DIVIDEND GROSS-UP PAYMENT. The Company shall pay any and all
United States withholding tax on foreign persons imposed in connection with
dividends paid or payable on the Shares (including any United States withholding
tax imposed on such additional payments), and the amount of dividends otherwise
payable to a holder of Shares with respect to which the Company makes such a
payment shall not be reduced. The intention of this provision is that each
Purchaser who is a foreign person shall receive dividend payments from the
Company with respect to the Shares, net of United States withholding taxes,
equal to the dividend provided in the Certificate of Designations.
9.2 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Shares to further current clinical trials, for other activities
associated with the commercialization of its product candidates and for general
corporate purposes.
9.3 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
9.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
9.5 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto and the other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
9.6 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
9.7 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least fifty percent (50%) of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold by such holder).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under this Agreement may be waived only
with the written consent of the holders of at least fifty percent (50%) of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold by such holder).
21
9.8 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
9.9 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement; provided, however, that the Company shall reimburse the
reasonable fees of and expenses of one special counsel for the Purchasers, not
to exceed $30,000.
9.10 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
9.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.13 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
9.14 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
22
IN WITNESS WHEREOF, the parties hereto have executed the SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
MAXIM PHARMACEUTICALS, INC. ----------------------------
[PRINT NAME OF PURCHASER]
By: /s/ Xxxxx Xxxxxxxxx By:
-------------------------- -------------------------
Xxxxx Xxxxxxxxx, President
Title:
----------------------
KEY HOLDERS:
/s/ Xxxxx X. Xxxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxx Xxxxxx
---------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxxxx
---------------------------
Xxxx Xxxxxxx
MAXIM PHARMACEUTICALS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
MAXIM PHARMACEUTICALS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
1. AGREEMENT TO SELL AND PURCHASE.............................................. 1
1.1 Authorization of Shares................................................ 1
1.2 Sale and Purchase...................................................... 1
2. CLOSING, DELIVERY AND PAYMENT............................................... 2
2.1 Closing................................................................ 2
2.2 Delivery and Settlement................................................ 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 2
3.1 Organization, Good Standing and Qualification.......................... 2
3.2 Subsidiaries........................................................... 2
3.3 Capitalization; Voting Rights.......................................... 2
3.4 Authorization; Binding Obligations..................................... 3
3.5 SEC Filings; Financial Statements...................................... 3
3.6 Liabilities............................................................ 4
3.7 Changes................................................................ 4
3.8 Patents and Trademarks................................................. 5
3.9 Compliance with Other Instruments...................................... 6
3.10 Litigation............................................................. 6
3.11 Registration Rights.................................................... 6
3.12 Compliance with Laws; Permits.......................................... 7
3.13 Offering Valid......................................................... 7
3.14 Other Agreements....................................................... 7
3.15 Disclosure............................................................. 8
3.16 Offering of Shares..................................................... 8
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................ 8
4.1 Requisite Power and Authority.......................................... 9
4.2 Investment Representations............................................. 9
4.3 Additional Regulation S Representations................................ 10
5. CONDITIONS TO CLOSING....................................................... 11
5.1 Conditions to Purchasers' Obligations at the Closing................... 11
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.2 Conditions to Obligations of the Company................................ 12
6. REGISTRATION................................................................. 13
6.1 Registration Requirements............................................... 13
6.2 Indemnification......................................................... 14
6.3 Transfer of Conversion Shares After Registration........................ 16
6.4 Additional Purchaser Covenants.......................................... 17
6.5 Termination............................................................. 17
7. CO-SALE RIGHTS............................................................... 17
8. RIGHTS OF FIRST REFUSAL...................................................... 19
9. MISCELLANEOUS................................................................ 21
9.1 Dividend Gross-Up Payment............................................... 21
9.2 Use of Proceeds......................................................... 21
9.3 Governing Law........................................................... 21
9.4 Successors and Assigns.................................................. 21
9.5 Entire Agreement........................................................ 21
9.6 Severability............................................................ 21
9.7 Amendment and Waiver.................................................... 21
9.8 Notices................................................................. 22
9.9 Expenses................................................................ 22
9.10 Attorneys' Fees......................................................... 22
9.11 Titles and Subtitles.................................................... 22
9.12 Counterparts............................................................ 22
9.13 Pronouns................................................................ 22
9.14 California Corporate Securities Law..................................... 22
ii
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
Certificate of Designations Exhibit B
Form of Legal Opinion Exhibit C
Registration Statement Questionnaire Exhibit D
iii
LIST OF EXHIBITS
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
SHARES OF COMMON STOCK AGGREGATE
NAME AND ADDRESS SHARES OF INTO WHICH THE SERIES A PURCHASE
SERIES A PREFERRED IS CONVERTIBLE PRICE
PREFERRED (AT THE INITIAL
CONVERSION PRICE)
---------------- --------- ------------------------ -------------
DVG Deutsche 41,131 411,310 $3,999,989.75
Vermogensbildungsgesellschaft mbH
x/x Xxxxxx Xxxxxxxx
XxxxxxxxxxxxXx 00
00000 Xxxxxxxxx
Xxxxxxx
Wechsler & Co., Inc. 3,084 30,840 $ 299,919.00
000 Xxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
The Aries Master Fund 7,044 70,440 $ 685,029.00
Aries Domestic Fund, L.P. 3,136 31,360 $ 304,976.00
Aries Domestic Fund II, L.P. 103 1,030 $ 10,016.75
x/x Xxxxxxxxx Xxxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxx Family Revocable Trust 1,542 15,420 $ 149,959.50
0000 Xxxx Xxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Xxxxxxxx-Xxxxx Global Healthcare Fund 5,141 51,410 $ 499,962.25
Carnegie Fund - Medical Sub-Fund 5,141 51,410 $ 499,962.25
0 Xxxxx xx xx Xxxx
X.X. Xxx 0000
X-0000 Xxxxxxxxxx
Xxxxxx Enterprises 2,570 25,700 $ 249,932.50
0000 Xxxxxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx 1,542 15,420 $ 149,959.50
00 Xxxxxxx Xxxxx, Xxxxx 00
Xxxxxxxx, XX 00000
iv
LIST OF EXHIBITS
(CONTINUED)
SHARES OF COMMON STOCK AGGREGATE
NAME AND ADDRESS SHARES OF INTO WHICH THE SERIES A PURCHASE
SERIES A PREFERRED IS CONVERTIBLE PRICE
PREFERRED (AT THE INITIAL
CONVERSION PRICE)
---------------- --------- ------------------------ -------------
RGC International Investors, LDC 30,848 308,480 $2,999,968.00
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
Three Xxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
--------- ------------------------ -------------
TOTAL: 101,282 1,012,820 $9,849,577.25
--------- ------------------------ -------------
--------- ------------------------ -------------
v
