PURCHASE AGREEMENT
Exhibit 10.1
THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 19th day of January, 2007 by and among
Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the Investors set forth
on the signature pages affixed hereto (each an “Investor” and collectively the “Investors”).
Recitals
A. The Company and the Investors are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by the provisions of Regulation D (“Regulation
D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities
Act of 1933, as amended; and
B. The Investors wish to purchase from the Company, and the Company wishes to sell and issue
to the Investors, upon the terms and conditions stated in this Agreement, the number of shares (the
“Shares”) of the Company’s Common Stock, par value $0.01 per share (together with any securities
into which such shares may be reclassified, the “Common Stock”), determined in accordance with the
terms of this Agreement at a per share purchase price equal to $3.34 (the “Per Share Purchase
Price”); and
C. Contemporaneous with the sale of the Common Stock, the parties hereto will execute and
deliver a Registration Rights Agreement, in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws with respect to the Securities.
In consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common
control with, such Person.
“Board” means the board of directors of the Company.
“Business Day” means a day, other than a Saturday or Sunday, on which banks in Xxx
Xxxx Xxxx xxx Xxx Xxxxxxxxx, Xxxxxxxxxx are open for the general transaction of business.
“Company’s Knowledge” means the actual knowledge of the executive officers (as defined
in Rule 405 under the 0000 Xxx) of the Company, after due inquiry.
“Confidential Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans, and customer and
supplier lists and related information).
“Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
“Effective Date” means the date on which the initial Registration Statement is
declared effective by the SEC.
“Intellectual Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos,
slogans and Internet domain names, together with all goodwill associated with each of the
foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals
for any of the foregoing; and (v) proprietary computer software (including but not limited to data,
data bases and documentation).
“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), business, or prospects of
the Company, or (ii) the ability of the Company to perform its obligations under the Transaction
Documents.
“Nasdaq” means The Nasdaq Stock Market, Inc.
“Person” means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.
“Purchase Price” means the aggregate purchase price for the Shares to be acquired by
the Investors in accordance with the terms hereof.
“Registration Statement” has the meaning set forth in the Registration Rights
Agreement.
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“SEC Filings” has the meaning set forth in Section 4.6.
“Securities” means the Shares.
“Subsidiary” of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or indirectly by such
first Person.
“Transaction Documents” means this Agreement and the Registration Rights Agreement.
“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations promulgated thereunder.
“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date, each of the Investors shall severally, and not jointly, purchase,
and the Company shall sell and issue to the Investors, the Shares in the respective amounts set
forth opposite the Investors’ names on the signature pages attached hereto in exchange for the
Purchase Price, as specified in Section 3 below.
3. Closing; Payment of Purchase Price. The closing (the “Closing”) of the purchase
and sale of the Shares shall take place on January 23, 2007 (the “Closing Date”) at such time as
the Company and the Investors shall mutually agree. Upon confirmation that the other conditions to
closing specified herein have been satisfied or duly waived, on the Closing Date each Investor
shall cause a wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Investor’s pro rata portion of
the Purchase Price as set forth on the signature pages to this Agreement. Within five (5) Business
Days after the Closing Date, certificates evidencing the Shares shall be delivered by the Company
to the Investors. The Closing of the purchase and sale of the Shares shall take place at the
offices of Xxxxx & Xxxxxxx L.L.P., 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000 or at such other
location and on such other date as the Company and the Investors shall mutually agree.
4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”) or as disclosed in the Company’s SEC Filings:
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4. 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 and has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not had and would not reasonably be expected to have a Material Adverse
Effect. The Company has no Subsidiaries.
4.2 Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and stockholders necessary for
(i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization
of the performance of all obligations of the Company hereunder and under the other Transaction
Documents, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the
Securities. This Agreement constitutes, and the other Transaction Documents will constitute when
executed and delivered, the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability, relating to or
affecting creditors’ rights generally.
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized capital stock
of the Company on the date hereof; (b) the number of shares of capital stock issued and
outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock
plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares) exercisable for, or convertible into or exchangeable for any
shares of capital stock of the Company. All of the issued and outstanding shares of the Company’s
capital stock have been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties. No Person is entitled to pre-emptive or similar
statutory or contractual rights with respect to any securities of the Company. Except as described
on Schedule 4.3, there are no outstanding warrants, options, convertible securities or
other rights, agreements or arrangements of any character under which the Company is or may be
obligated to issue any equity securities of any kind, and except as contemplated by this Agreement
or in connection with incentive compensation arrangements entered into by the Company in the
ordinary course of its business, the Company is not currently in negotiations for the issuance of
any equity securities of any kind. Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held by them. Except as
described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the Company under the
1933 Act, whether on a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.
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The issuance and sale of the Securities hereunder will not obligate the Company to issue
shares of Common Stock or other securities to any other Person (other
than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security.
The Company does not have outstanding stockholder purchase rights or “poison pill” or any
similar arrangement in effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and
shall be free and clear of all encumbrances and restrictions (other than those created by the
Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws.
4.5 Consents. Except as described on Schedule 4.5, the execution, delivery
and performance by the Company of the Transaction Documents and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, official or stockholders of the Company other than filings that have
been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws which the Company undertakes to file within the applicable time
periods. Subject to the accuracy of the representations and warranties of each Investor set forth
in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale
of the Securities, and (ii) the other transactions contemplated by the Transaction Documents from
the provisions of any stockholder rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute binding on the Company or to
which the Company or any of its assets and properties may be subject and any provision of the
Company’s Certificate of Incorporation or Bylaws that is or would reasonably be expected to become
applicable to the Investors as a result of the transactions contemplated hereby, including without
limitation, the issuance of the Securities and the ownership, disposition or voting of the
Securities by the Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made available to the
Investors through the XXXXX system, true and complete copies of the Company’s most recent Quarterly
Report on Form 10-Q for the quarter ended September 30, 2006 (the “10-Q”), Registration Statement
on Form 8-A dated as of September 26, 2005 (“Form 8-A”), Form 10-K for the year ended December 31,
2005 (“Form10-K”), and all other reports, registration statements and prospectuses filed by the
Company under the 1933 Act and the 1934 Act after the filing of the Form 10-K and prior to the date
hereof (collectively, the “SEC Filings”). The SEC Filings are the only filings required of the
Company pursuant to the 1933 Act and 1934 Act for such period. The Company is engaged in all
material respects only in the business described in the SEC Filings and the SEC Filings contain a
complete and accurate description in all material respects of the business of the Company.
4.7 Use of Proceeds. The net proceeds of the sale of the Shares hereunder shall be
used by the Company for general corporate purposes.
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4.8 No Material Adverse Change. Since September 30, 2006, except as identified and
described in the SEC Filings or as described on Schedule 4.8, there has not been:
(i) any change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included in the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, except for changes in the
ordinary course of business which have not had and would not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or repurchase of any
securities of the Company;
(iii) any damage, destruction or loss, whether or not covered by insurance to any assets or
properties of the Company, in each case in excess of $25,000 individually or $50,000 in the
aggregate;
(iv) any waiver, not in the ordinary course of business, by the Company of a material right or
of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or encumbrance by the Company, except in
the ordinary course of business and which is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is presently conducted);
(vi) (A) any change or amendment to the Company’s Certificate of Incorporation or
Bylaws, or
(B) any material change to any material contract or arrangement that requires the payment by any
Person party thereto of at least $50,000 in the aggregate in any fiscal year by which the Company
is bound or to which any of their respective assets or properties is subject, other than, in the
case of clause (B) above, any such change made in the ordinary course of business;
(vii) any material labor difficulties or labor union organizing activities with respect to
employees of the Company;
(viii) any material transaction entered into by the Company other than in the ordinary course
of business;
(ix) the loss of the services, termination or change of status of any key employee, or
material change in the composition or duties of the senior management of the Company;
(x) the loss of any customer which has had or would reasonably be expected to have a Material
Adverse Effect; or
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(xi) any other event or condition of any character that has had or would reasonably be
expected to have a Material Adverse Effect.
4.9 SEC Filings; S-3 Eligibility.
(a) At the time of filing thereof, the SEC Filings filed by the Company pursuant to the 1934
Act complied as to form in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each registration statement and any amendment thereto filed by the Company since January
1, 2006 pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such
statement or amendment became effective, complied as to form in all material respects with the 1933
Act and did not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue
date and as of the closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.
(c) The Company is currently eligible to use Form S-3 to register the Registrable Securities
(as such term is defined in the Registration Rights Agreement) for resale by the Investors as
contemplated by the Registration Rights Agreement.
4.10 No Conflict, Breach, Violation or Default. The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and sale of the Securities
will not conflict with or result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws,
both as in effect on the date hereof (true and complete copies of which have been made available to
the Investors through the XXXXX system), or (ii)(a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company
or any of its assets or properties, or (b) any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of its assets or properties is subject,
except, in the case of clause (ii) above, for any conflict, breach, violation or default that has
not had or would not reasonably be expected to have a Material Adverse Effect.
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4.11 Tax Matters. The Company has timely prepared and filed all tax returns required
to have been filed by the Company with all appropriate governmental agencies and timely paid all
taxes shown thereon or otherwise owed by it, except where the failure to make such payment or
filing has not had or would not reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material unpaid assessments against
the Company for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company. All taxes and other assessments and levies that
the Company is required to withhold or to collect for payment have been duly withheld and collected
and paid to the proper governmental entity or third party when due, except for any withholding,
collection and payment that has not had or would not reasonably be expected to have a Material
Adverse Effect. There are no tax liens or claims pending or, to the Company’s Knowledge,
threatened against the Company or any of its assets or property. There are no outstanding tax
sharing agreements or other such arrangements between the Company and any other corporation or
entity.
4.12 Title to Properties. Except as disclosed in the SEC Filings, the Company has
good and marketable title to all real properties and all other properties and assets owned by it,
in each case free from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made thereof by them; and except as disclosed in the
SEC Filings, the Company holds any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use made thereof by them.
4.13 Certificates, Authorities and Permits. The Company possess adequate
certificates, authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, except where the failure to so possess has
not had or would not reasonably be expected to have a Material Adverse Effect, individually or in
the aggregate, and the Company has not received any written notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that, if determined
adversely to the Company, would reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.14 Labor Matters.
(a) The Company is not a party to or bound by any collective bargaining agreements or other
agreements with labor organizations. The Company has not violated in any material respect any
laws, regulations, orders or contract terms, affecting the collective bargaining rights of
employees, labor organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and
hours.
(b) (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other
disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions
for election pending or, to the Company’s Knowledge, threatened before the National Labor Relations
Board or any other federal, state or local labor commission relating to the Company’s employees,
(iii) no demand for recognition or certification heretofore made by any labor organization or group
of employees is pending with respect to the Company and (iv) to the Company’s Knowledge, the
Company enjoys good labor and employee relations with its employees and labor organizations.
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(c) The Company is in compliance in all material respects with all applicable laws respecting
employment (including laws relating to classification of employees and independent contractors) and
employment practices, terms and conditions of employment, wages and hours, and immigration and
naturalization. There are no claims pending against the Company before the Equal Employment
Opportunity Commission or any other administrative body or in any court asserting any violation of
Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or
1983 or any other federal, state or local Law, statute or ordinance barring discrimination in
employment.
(d) Except as disclosed in the SEC Filings or as described on Schedule 4.14, the
Company is not a party to, or bound by, any employment or other contract or agreement that contains
any severance, termination pay or change of control liability or obligation, including, without
limitation, any “excess parachute payment,” as defined in Section 2806(b) of the Internal Revenue
Code.
(e) Except as specified in Schedule 4.14, to the Company’s Knowledge, each of the
Company’s employees is a Person who is either a United States citizen or a permanent resident
entitled to work in the United States. To the Company’s Knowledge, the Company has no liability
for the improper classification by the Company of such employees as independent contractors or
leased employees prior to the Closing.
4.15 Intellectual Property. Except as described in Schedule 4.15:
(a) All Intellectual Property of the Company (whether owned by the Company or licensed) and
necessary for the conduct of its business is currently in compliance with all legal requirements
(including timely filings, proofs and payments of fees) and, to the Company’s Knowledge, are valid
and enforceable, subject, in the case of any patent application, to any modification or other
action that may be taken by the Patent and Trademark Office. No Intellectual Property of the
Company which is necessary for the conduct of the Company’s business as currently conducted has
been or is now involved in any cancellation or litigation, and, to the Company’s Knowledge, no such
action is threatened. No patent of the Company has been or is now involved in any interference,
reissue, re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s business as currently
conducted to which the Company is a party or by which any of its assets are bound (other than
generally commercially available, non-custom, off-the-shelf software application programs having a
retail acquisition price of less than $50,000 per license) (collectively, “License Agreements”) are
valid and binding obligations of the Company and, to the Company’s Knowledge, the other parties
thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which will result in a material violation or breach of or constitute (with or
without due notice or lapse of time or both) a default by the Company under any such License
Agreement.
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(c) To the Company’s Knowledge, the Company owns or has the valid and enforceable right to
use
all of the Intellectual Property that is necessary for the conduct of the Company’s business as
currently conducted and for the ownership, maintenance and operation of the Company’s properties
and assets, free and clear of all liens, encumbrances, adverse claims or obligations to license
such owned Intellectual Property and Confidential Information known to or created by the Company,
other than licenses entered into in the ordinary course of the Company’s business. To the
Company’s Knowledge, the Company has a valid and enforceable right to use all third party
Confidential Information used or held for use by the Company
(d) To the Company’s Knowledge, the conduct of the business as currently conducted does
not
infringe or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third
party, or violate any confidentiality obligation owed by the Company to a third party. To the
Company’s Knowledge, the Intellectual Property and Confidential Information of the Company which
are necessary for the conduct of the Company’s business as currently conducted are not being
Infringed by any third party. There is no litigation or order pending or outstanding or, to the
Company’s Knowledge, threatened, that seeks to limit or challenge the ownership, use, validity or
enforceability of any Intellectual Property or Confidential Information of the Company and the
Company’s use of any Intellectual Property or Confidential Information owned by a third party, and,
to the Company’s Knowledge, there is no valid basis for the same.
(e) The consummation of the transactions contemplated hereby and by the other Transaction
Documents will not result in the alteration, loss, impairment of or restriction on the Company’s
ownership or right to use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of the Company’s business as currently conducted.
(f) The Company has taken reasonable steps to protect the Company’s rights in its
Intellectual Property and Confidential Information. Each employee, consultant and contractor who
has had access to Confidential Information which is necessary for the conduct of the Company’s
business as currently conducted has executed an agreement to maintain the confidentiality of such
Confidential Information and has executed appropriate agreements that are substantially consistent
with the Company’s standard forms thereof. Except under confidentiality obligations, there has
been no material disclosure of any of the Company’s Confidential Information to any third party.
4.16 Environmental Matters. The Company (i) is not in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or toxic substances
(collectively, “Environmental Laws”), (ii) does not own or operate any real property contaminated
with any substance that is subject to any Environmental Laws, (iii) is not liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is not subject to any claim
relating to any Environmental Laws, in each case which violation, contamination, liability or claim
has had or would reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s
Knowledge, threatened investigation that might lead to such a claim.
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4.17 Litigation. There are no pending actions, suits or proceedings against or
affecting the Company or any of its properties that have had or would reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate; and to the Company’s Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.18 Financial Statements. The financial statements included in each SEC Filing
present fairly, in all material respects, the financial position of the Company as of the dates
shown and its results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the
notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under
the 1934 Act). Except as set forth in the financial statements of the Company included in the SEC
Filings filed prior to the date hereof, the Company has not incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent (as to amount and
nature) with past practices since the date of such financial statements, none of which,
individually or in the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect.
4.19 Insurance Coverage. The Company maintains in full force and effect insurance
coverage that is customary for comparably situated companies for the business being conducted and
properties owned or leased by the Company, and the Company reasonably believes such insurance
coverage to be adequate against all liabilities, claims and risks against which it is customary for
comparably situated companies to insure.
4.20 Compliance with Nasdaq Continued Listing Requirements. The Company is in
compliance with applicable Nasdaq continued listing requirements. There are no proceedings pending
or, to the Company’s Knowledge, threatened against the Company relating to the continued listing of
the Common Stock on Nasdaq and the Company has not received any notice of, nor to the Company’s
Knowledge is there any basis for, the delisting of the Common Stock from Nasdaq.
4.21 No Directed Selling Efforts or General Solicitation. Neither the Company nor any
Person acting on its behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any of the Securities.
4.22 No Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any
Company security or solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the Securities under the 1933
Act.
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4.23 Private Placement. The offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933 Act.
4.24 Questionable Payments. Neither the Company nor, to the Company’s Knowledge, any
of its respective current or former stockholders, directors, officers, employees, agents or other
Persons acting on behalf of the Company, has on behalf of the Company or in connection with its
business: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments
to any governmental officials or employees from corporate funds; (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious
entries on the books and records of the Company; or (e) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment of any nature.
4.25 Transactions with Affiliates. Except as disclosed in the SEC Filings or as
disclosed on Schedule 4.25, none of the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company is presently a party to any transaction
with the Company (other than as holders of stock options and/or warrants, and for services as
employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer, director or such
employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner.
4.26 Internal Controls. The Company is in material compliance with the provisions of
the Xxxxxxxx-Xxxxx Act of 2002 currently applicable to the Company. The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with GAAP and
to maintain asset accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and procedures (as
defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company is made known to the
certifying officers by others within the Company, particularly during the period in which the
Company’s most recently filed period report under the 1934 Act, as the case may be, is being
prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s
controls and procedures as of the end of the period covered by the most recently filed periodic
report under the 1934 Act (such date, the “Evaluation Date”). The Company presented in its most
recently filed periodic report under the 1934 Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the
Company’s Knowledge, in other factors that could significantly affect the Company’s internal
controls. The Company maintains and will continue to maintain a standard system of accounting established and administered in
accordance with GAAP and the applicable requirements of the 1934 Act.
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4.27 Disclosures.
(a) Neither the Company nor any Person acting on its behalf has provided the Investors or
their agents or counsel with any information that constitutes material, non-public information,
other than the existence of this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby.
(b) No representation or warranty of the Company contained in this Section 4, as qualified by
the Disclosure Schedules, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein not misleading in light of
the circumstances under which they were made.
5. Representations and Warranties of the Investors. Each of the Investors hereby
severally, and not jointly, represents and warrants to the Company that:
5.1 Organization and Existence. Such Investor is a validly existing corporation,
limited partnership or limited liability company and has all requisite corporate, partnership or
limited liability company power and authority to invest in the Securities pursuant to this
Agreement.
5.2 Authorization. The execution, delivery and performance by such Investor of the
Transaction Documents to which such Investor is a party have been duly authorized, and this
Agreement constitutes, and the other Transaction Documents will constitute when executed and
delivered, the valid and legally binding obligations of such Investor, enforceable against such
Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability, relating to or
affecting creditors’ rights generally.
5.3 Purchase Entirely for Own Account. The Securities to be received by such Investor
hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the 1933 Act, and such
Investor has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s
right at all times to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so registered.
5.4 Investment Experience. Such Investor acknowledges that it can bear the economic
risk and complete loss of its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.
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5.5 Disclosure of Information. Such Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend
or affect such Investor’s right to rely on the Company’s representations and warranties contained
in this Agreement.
5.6 Restricted Securities. Such Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, except as provided below, certificates evidencing
the Securities may bear the following or any similar legend:
(a) “The securities represented hereby may not be transferred unless (i) such
securities have
been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities
may be sold pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably satisfactory to it that such transfer may lawfully be made without registration under
the Securities Act of 1933 or qualification under applicable state securities laws.”
(b) If required by the authorities of any state in connection with the issuance of sale of the
Securities, the legend required by such state authority.
5.8 Accredited Investor. Such Investor is an accredited investor as defined in Rule
501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. Such Investor did not learn of the investment in the
Securities as a result of any public advertising or general solicitation.
5.10 Investor’s Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right, interest or claim against
or upon the Company or an Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of such Investor.
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5.11 Prohibited Transactions. During the last thirty (30) days prior to the date
hereof, neither such Investor nor any Affiliate of such Investor which (x) had knowledge of the
transactions contemplated hereby, (y) has or shares discretion relating to such Investor’s
investments or trading or information concerning such Investor’s investments, including in respect
of the Securities, or (z) is subject to such Investor’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading Affiliates”)
has, directly or indirectly, effected or agreed to effect any short sale, whether or not against the box, established any “put
equivalent position” (as defined in Rule 16a-1(h) under the 0000 Xxx) with respect to the Common
Stock, borrowed or pre-borrowed any shares of Common Stock, granted any other right (including,
without limitation, any put or call option) with respect to the Common Stock or with respect to any
security that includes, relates to or derived any significant part of its value from the Common
Stock or otherwise sought to hedge its position in the Securities (each, a “Prohibited
Transaction”). Prior to the earliest to occur of (i) the termination of this Agreement, or (ii)
the Effective Date, such Investor shall not, and shall cause its Trading Affiliates not to, (A)
engage, directly or indirectly, in a Prohibited Transaction, or (B) effect any sale, assignment,
pledge, hypothecation, put, call, transfer or other disposition of any Securities.
5.12 Ownership. Such Investor, together with its Affiliates and any other party
acting in concert therewith, will not, following its investment in the Securities, beneficially own
more than 19.9% of the currently outstanding shares of Common Stock of the Company.
5.13 Independence. Each Investor acknowledges and agrees that it has acted
independently from all other Investors (other than those under common ownership and control) and
that each such Investor has conducted its own due diligence and reviewed (or had the opportunity to
review) the Transaction Documents with its own independent counsel. Each Investor has
independently determined the merits and risks associated with an investment on the basis set forth
in the Transaction Documents and without any agreements, understandings or arrangements other than
those expressly set forth in the Transaction Documents.
6. Conditions to Closing.
6.1 Conditions to the Investors’ Obligations. The obligation of each Investor to
purchase the Shares at the Closing is subject to the fulfillment to such Investor’s satisfaction,
on or prior to the Closing Date, of the following conditions, any of which may be waived by such
Investor (as to itself only):
(a) The representations and warranties made by the Company in Section 4 hereof qualified
as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the
Closing Date.
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(b) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers (including, without limitation, approval in accordance with applicable law and the
applicable requirements of any stock exchange or market on which the Common Stock is traded or quoted) necessary for consummation of the purchase and sale of the
Securities and the consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect; provided, however, that
it shall not be a condition to each Investor’s obligation to purchase the Shares at the Closing
that the Company obtain the waiver of any “piggyback” registration rights held by the Company’s
securityholders under written agreements entered into by the Company prior to the date hereof.
(c) The Company shall have executed and delivered the Registration Rights Agreement.
(d) The Company shall have taken all action necessary to effect the listing of the Shares on
the Nasdaq Global Market upon official notice of issuance.
(e) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(f) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Chief Executive Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b), (d), (e) (which subsection (e) shall be qualified to
the Company’s Knowledge) and (i) of this Section 6.1.
(g) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board approving
the transactions contemplated by this Agreement and the other Transaction Documents and the
issuance of the Securities, certifying the current versions of the Certificate of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company.
(h) The Investors shall have received an opinion from Xxxxx & Xxxxxxx L.L.P., the
Company’s
outside counsel, dated as of the Closing Date, in form and substance reasonably acceptable to the
Investors and addressing such legal matters as set forth on Exhibit B attached hereto.
(i) No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or any
other governmental or regulatory body with respect to public trading in the Common Stock.
6.2 Conditions to Obligations of the Company. The Company’s obligation to sell and
issue the Shares at the Closing is subject to the fulfillment to the satisfaction of the Company on
or prior to the Closing Date of the following conditions, any of which may be waived by the
Company:
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(a) The representations and warranties made by the Investors in Section 5 hereof, other
than
the representations and warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9 and 5.12
(the “Investment Representations”), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects as of the Closing Date with the same force
and effect as if they had been made on and as of said date. The Investment Representations shall
be true and correct in all respects when made, and shall be true and correct in all respects on the
Closing Date with the same force and effect as if they had been made on and as of said date. The
Investors shall have performed in all material respects all obligations and covenants herein
required to be performed by them on or prior to the Closing Date.
(b) The Investors shall have executed and delivered the Registration Rights Agreement.
(c) The Investors shall have delivered the Purchase Price to the Company in the manner
contemplated by Section 3.
(d) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers (including, without limitation, approval in accordance with applicable law and the
applicable requirements of any stock exchange or market on which the Common Stock is traded or
quoted) necessary or appropriate for consummation of the purchase and sale of the Securities and
the consummation of the other transactions contemplated by the Transaction Documents, all of which
shall be in full force and effect; provided, however, that it shall not be a
condition to the Company’s obligation to sell and issue the Shares that the Company obtain the
waiver of any “piggyback” registration rights held by the Company’s securityholders under written
agreements entered into by the Company prior to the date hereof.
(e) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(f) The Company shall have received gross proceeds from the sale of the Shares as contemplated
hereby of at least $10 million.
6.3 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to
effect the Closing may be terminated as follows:
(i) Upon the mutual written consent of the Company and the
Investors;
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(ii) By the Company if any of the conditions set forth in
Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the Company;
(iii) By an Investor (with respect to itself only) if any of the
conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the
Investor; or
(iv) By either the Company or any Investor (with respect to
itself only) if the Closing has
not occurred on or prior to March 31, 2007;
provided, however, that, except in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other Transaction Documents
if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate
its obligation to effect the Closing.
(b) In the event of termination by any Investor of its obligations to effect the Closing
pursuant to this Section 6.3 (such Investor, a “Terminating Investor”), written notice thereof
shall forthwith be given to the other Investors, and each other Investor shall have the right (but
not the obligation) to purchase at a price per Share equal to the Per Share Purchase Price a pro
rata portion of the Terminating Investor’s allocated portion of the total number of Shares to be
acquired by all Investors under this Agreement (or such greater portion of the Terminated
Investor’s allocated portion of the Shares as otherwise agreed to among each of the other Investors
electing to purchase a portion of the Terminated Investor’s allocated portion of the Shares).
Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach
by such party of the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.
7. Covenants and Agreements of the Company and the Investors.
7.1 Authorized Common Stock. The Company has a sufficient number of authorized and
unissued shares of Common Stock (after taking into account shares reserved for issuance under stock
plans and for other purposes) to permit the issuance of the Shares hereunder.
7.2 No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction Documents.
7.3 Compliance with Laws. The Company will comply in all material respects with all
applicable laws, rules, regulations, orders and decrees of all governmental authorities.
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7.4 Listing of Underlying Shares and Related Matters. The Company has taken all
necessary action to cause the Shares to be listed on the Nasdaq Global Market no later than the
Closing Date. Further, if the Company applies to have its Common Stock or other securities traded
on any other principal stock exchange or market, it shall include in such application the Shares
and will take such other action as is necessary to cause such Common Stock to be so listed. The
Company will use commercially reasonable efforts to continue the listing and trading of its Common
Stock on Nasdaq and, in accordance, therewith, will use commercially reasonable efforts to comply
in all respects with the Company’s reporting, filing and other obligations under the bylaws or
rules of such market or exchange, as applicable.
7.5 Termination of Covenants. The provisions of Sections 7.2 through 7.4 shall
terminate and be of no further force and effect on the date on which the Company’s obligations
under the Registration Rights Agreement to register or maintain the effectiveness of any
registration covering the Registrable Securities (as such term is defined in the Registration
Rights Agreement) shall terminate.
7.6 Removal of Legends. Upon the earlier of (i) the sale of any Shares under a
registration statement, (ii) Rule 144(k) becoming available with respect to the Shares, (iii) any
sale pursuant to Rule 144 (assuming the transferor is not an Affiliate of the Company) or (iv) such
time as a legend is no longer required under applicable requirements of the 1933 Act (including
controlling judicial interpretations and pronouncements issued by the SEC), the Company shall (A)
deliver to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable instructions
that the Transfer Agent shall reissue a certificate representing shares of Common Stock without
legends upon receipt by such Transfer Agent of the legended certificates for such shares, together
with either (1) a customary representation by the Investor that all conditions permitting the
removal of the legends have been met, including that Rule 144(k) applies to the shares of Common
Stock represented thereby or that the shares have been sold pursuant to Rule 144 or (2) in
connection with any sale of Common Stock by any Investor pursuant to the registration contemplated
by the Registration Rights Agreement, a statement by such Investor that it has sold the shares of
Common Stock represented thereby in accordance with the Plan of Distribution contained in the
Registration Statement, and (B) cause its counsel to deliver to the Transfer Agent one or more
blanket opinions to the effect that the removal of such legends in such circumstances may be
effected under the 1933 Act. From and after the earlier of such dates, upon an Investor’s written
request, the Company shall promptly cause certificates evidencing the Investor’s Securities to be
replaced with certificates which do not bear such restrictive legends.
8. Survival and Indemnification.
8.1 Survival. The representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing of the transactions contemplated by this Agreement;
provided, however, that any claim for Losses as a result of a breach of a representation or
warranty contained herein must be must be made, if at all, within twenty-four (24) months of the
Closing.
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8.2 Indemnification. The Company agrees to indemnify and hold harmless each Investor
and its Affiliates and their respective directors, officers, employees, attorneys and agents from
and against, without duplication, (a) any and all losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorneys fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action, claim or proceeding,
pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the Transaction Documents.
8.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person
(the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or investigation in respect of
which indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the
payment of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its obligations
hereunder except to the extent that the Company is materially prejudiced by such failure to notify.
In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless:
(i) the Company and the Indemnified Person shall have mutually agreed to the retention of such
counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of
both parties by the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably withheld, but if
settled with such consent, or if there be a final judgment for the plaintiff, the Company shall
indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment. Without the prior written consent
of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not
effect any settlement of any pending or threatened proceeding in respect of which any Indemnified
Person is or could have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of such Indemnified
Person from all liability arising out of such proceeding.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investors, as applicable, provided,
however, that an Investor may assign its rights and delegate its duties hereunder in whole or in
part to an Affiliate or to a third party acquiring some or all of its Securities in a private
transaction without the prior written consent of the Company or the other Investors, after notice
duly given by such Investor to the Company provided, that no such assignment or obligation shall
affect the obligations of such Investor hereunder. The provisions of this Agreement shall inure to
the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement (including in Section 9.6).
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9.2 Counterparts; Faxes. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed via facsimile, which shall be deemed an
original.
9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed
given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by ten days’ advance
written notice to the other party:
If to the Company:
Avalon Pharmaceuticals, Inc.
00000 Xxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Ph.D. President and CEO
Telephone: (000) 000-0000
00000 Xxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Ph.D. President and CEO
Telephone: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
If to any Investor:
to such Investor’s address(es) set forth on the signature pages hereto.
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9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection
herewith. In the event that legal proceedings are commenced by any party to this Agreement against
another party to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable and
documented out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.
9.6 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Investors. Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.
9.7 Publicity. Except as set forth below, no public release or announcement
concerning the transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or announcement by the
Investors) or the Investors (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities exchange or securities
market, in which case the Company or the Investors, as the case may be, shall allow the Investors
or the Company, as applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such issuance. On the
trading day immediately following the date hereof, the Company shall issue a press release
disclosing the execution and delivery of this Agreement. No later than the fourth Business Day
following the date hereof, the Company will file a Current Report on Form 8-K disclosing such
matters relating to the transactions contemplated hereby as are required to be disclosed by such
date. On the trading day immediately following the Closing Date, the Company shall issue a press
release disclosing the consummation of the transactions contemplated by this Agreement. In
addition, the Company will make such other filings and notices in the manner and time required by
the SEC or Nasdaq. Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Investor, or include the name of any Investor in any filing with the SEC (other than such
Forms 8-K, the Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the 0000 Xxx) or any regulatory
agency or Nasdaq, without the prior written consent of such Investor, except to the extent such
disclosure is required by law or trading market regulations.
9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
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9.9 Entire Agreement. This Agreement, including the Exhibits and the Disclosure
Schedules, and the other Transaction Documents constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the subject matter
hereof and thereof.
9.10 Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry
out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.
9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.
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9.12 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor independently of
any other Investor. Nothing contained herein or in any Transaction Document, and no action taken
by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges that each of the
Investors has been provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Investors and not because it was required or requested to do so by any
Investor.
[Signature pages follow]
-24-
IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.
| The Company: | AVALON PHARMACEUTICALS, INC. | |||||
| By: Name: |
/s/ Xxxxxxx X. Xxxxxx, Ph.D.
|
|||||
| Title: | President and Chief Executive Officer | |||||
Signature Page to Purchase Agreement
| Investor: | MERLIN NEXUS II, L.P. | |||||
| By: Name: |
/s/ Xxxxxx Xxxxxxxxx
|
|||||
| Title: | Chief Financial Officer | |||||
| Aggregate Purchase Price: $1,903,800 | ||||||
Number of Shares: 570,000 |
||||||
| Address for Notice: | 000 Xxxx Xxx., Xxxxx 000 | |||||
| Xxx Xxxx, XX 00000 | ||||||
| with a copy to: | ||||||
| Xxxxxxxxx Xxxxx | ||||||
| c/o Merlin Nexus II, LLC | ||||||
| 000 Xxxx Xxx., Xxxxx 000 | ||||||
| Xxx Xxxx, XX 00000 | ||||||
| Facsimile: 000-000-0000 | ||||||
Signature Page to Purchase Agreement
| Investor: | SEDNA PARTNERS LP | |||||
| By: Name: |
/s/ Xxxx Xxxx
|
|||||
| Title: | Managing Member, Sedna Capital Management LLC | |||||
| Aggregate Purchase Price: $736,019.10 | ||||||
Number of Shares: 220,365 |
||||||
| Address for Notice: | Sedna Capital Management LLC | |||||
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||||||
| Xxx Xxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | SEDNA PARTNERS (QP) LP | |||||
| By: Name: |
/s/ Xxxx Xxxx
|
|||||
| Title: | Managing Member, Sedna Capital Management LLC | |||||
Aggregate Purchase Price: $451,651.50 |
||||||
Number of Shares: 135,225 |
||||||
| Address for Notice: | Sedna Capital Management LLC | |||||
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||||||
| Xxx Xxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | SEDNA OFFSHORE, LTD. | |||||
| By: Name: |
/s/ Xxxx Xxxx
|
|||||
| Title: | Managing Member, Sedna Capital Management LLC | |||||
Aggregate Purchase Price: $157,063.50 |
||||||
Number of Shares: 47,025 |
||||||
| Address for Notice: | Sedna Capital Management LLC | |||||
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||||||
| Xxx Xxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | WOODMONT INVESTMENTS LIMITED | |||||
| By: Name: |
/s/ Xxx X. Xxxxxxx
|
|||||
| Title: | Woodmont Investments, Ltd. Manager | |||||
Aggregate Purchase Price: $79,134.62 |
||||||
Number of Shares: 23,693 |
||||||
| Address for Notice: | Sedna Capital Management LLC | |||||
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||||||
| Xxx Xxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | BIOTECHNOLOGY VALUE FUND, L.P. | |||||||
| By: | BVF Partners, L.P., its general partner | |||||||
| By: | BVF Inc., its general partner | |||||||
| By: Name: |
/s/ Xxxx X. Xxxxxxx
|
|||||||
| Title: | President | |||||||
Aggregate Purchase Price: $237,474 |
||||||||
Number of Shares: 71,100 |
||||||||
| Address for Notice: | Xxx Xxxxxxx Xxxxxx | |||||||
| 00xx Xxxxx | ||||||||
| Xxx Xxxxxxxxx, XX 00000 | ||||||||
| with a copy to: | ||||||||
| Xxxxxxxx X. Xxxxxx, Esq. | ||||||||
| X.X Xxx 000000 | ||||||||
| Xxx Xxxxxxxxx, XX 00000-0000 | ||||||||
| Facsimile: 000.000.0000 | ||||||||
Signature Page to Purchase Agreement
| Investor: | BIOTECHNOLOGY VALUE FUND II, L.P. | |||||||
| By: | BVF Partners, L.P., its general partner | |||||||
| By: | BVF Inc., its general partner | |||||||
| By: Name: |
/s/ Xxxx X. Xxxxxxx
|
|||||||
| Title: | President | |||||||
Aggregate Purchase Price: $163,660 |
||||||||
Number of Shares: 49,000 |
||||||||
| Address for Notice: | Xxx Xxxxxxx Xxxxxx | |||||||
| 00xx Xxxxx | ||||||||
| Xxx Xxxxxxxxx, XX 00000 | ||||||||
| with a copy to: | ||||||||
| Xxxxxxxx X. Xxxxxx, Esq. | ||||||||
| X.X Xxx 000000 | ||||||||
| Xxx Xxxxxxxxx, XX 00000-0000 | ||||||||
| Facsimile: 000.000.0000 | ||||||||
Signature Page to Purchase Agreement
| Investor: | INVESTMENT 10, L.L.C. | |||||||
| By: | BVF Partners, L.P., its attorney-in-fact | |||||||
| By: | BVF Inc., its general partner | |||||||
| By: Name: |
/s/ Xxxx X. Xxxxxxx
|
|||||||
| Title: | President | |||||||
Aggregate Purchase Price: $70,140 |
||||||||
Number of Shares: 21,000 |
||||||||
| Address for Notice: | Xxx Xxxxxxx Xxxxxx | |||||||
| 00xx Xxxxx | ||||||||
| Xxx Xxxxxxxxx, XX 00000 | ||||||||
| with a copy to: | ||||||||
| Xxxxxxxx X. Xxxxxx, Esq. | ||||||||
| X.X Xxx 000000 | ||||||||
| Xxx Xxxxxxxxx, XX 00000-0000 | ||||||||
| Facsimile: 000.000.0000 | ||||||||
Signature Page to Purchase Agreement
| Investor: | BVF INVESTMENTS, L.L.C. | |||||||
| By: | BVF Partners, L.P., its manager | |||||||
| By: | BVF Inc., its general partner | |||||||
| By: Name: |
/s/ Xxxx X. Xxxxxxx
|
|||||||
| Title: | President | |||||||
Aggregate Purchase Price: $530,726 |
||||||||
Number of Shares: 158,900 |
||||||||
| Address for Notice: | Xxx Xxxxxxx Xxxxxx | |||||||
| 00xx Xxxxx | ||||||||
| Xxx Xxxxxxxxx, XX 00000 | ||||||||
| with a copy to: | ||||||||
| Xxxxxxxx X. Xxxxxx, Esq. | ||||||||
| X.X Xxx 000000 | ||||||||
| Xxx Xxxxxxxxx, XX 00000-0000 | ||||||||
| Facsimile: 000.000.0000 | ||||||||
Signature Page to Purchase Agreement
| Investor: | CAMBER CAPITAL FUND L.P. | |||||
| General Partner: Camber Capital Partners LLC | ||||||
| By: Name: |
/s/ Xxxxxxx X. Du Bois
|
|||||
| Title: | Managing Member | |||||
Aggregate Purchase Price: $300,600 |
||||||
Number of Shares: 90,000 |
||||||
| Address for Notice: | Camber Capital Partners LLC | |||||
| 000 Xxxxxxxx Xxxxxx, 0xx Xxxxx | ||||||
| Xxxxxx, XX 00000 | ||||||
| with a copy to: | ||||||
| Facsimile: 000-000-0000 | ||||||
Signature Page to Purchase Agreement
| Investor: | PASSPORT GLOBAL MASTER FUND SPC LTD FOR AND ON BEHALF OF PORTFOLIO A — GLOBAL STRATEGY | |||||
| By: | /s/ Xxxxxxxxx Xxxxx | |||||
| Name: | ||||||
| Title: | Controller of Passport Management, LLC, as investment manager | |||||
Aggregate Purchase
Price: $1,903,800 Number of Shares: 570,000 |
||||||
| Address for Notice: | 000 Xxxxxxx Xx. | |||||
| Xxx Xxxxxxxxx, XX 00000 | ||||||
| Attn: Xxxxxxx Xxxxxxxx | ||||||
| with a copy to: | ||||||
| Facsimile: 000-000-0000 | ||||||
Signature Page to Purchase Agreement
| Investor: | THE XXX XXXXXXX MASTER L.P. | |||||
| By: | /s/ Xxx X. Xxxxxxx | |||||
| Name: | Xxx X. Xxxxxxx | |||||
| Title: | Member, The Xxx Xxxxxxx Master L.P. | |||||
Aggregate Purchase Price: $79,131.28
Number of Shares: 23,692
Number of Shares: 23,692
| Address for Notice: | Sedna Capital Management LLC | |||||
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||||||
| Xxx Xxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | XMARK OPPORTUNITY FUND, L.P. | |||||
| By: | /s/ Xxxxxxxx Xxxx | |||||
| Name: | Xxxxxxxxx Xxxx | |||||
| Title: | Chief Executive Officer | |||||
| Xmark Opportunity GP LLC, General | ||||||
| Partner to Xmark Opportunity Fund LP | ||||||
Aggregate Purchase Price: $318,218.50
Number of Shares: 95,275
Number of Shares: 95,275
| Address for Notice: | Xmark Opportunity Fund LP | |||||
| 000 Xxxxxxx Xxxx. | ||||||
| Xxxxx 0000 | ||||||
| Xxxxxxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | XMARK OPPORTUNITY FUND, LTD. | |||||
| By: | /s/ Xxxxxxxx Xxxx | |||||
| Name: | Xxxxxxxxx Xxxx | |||||
| Title: | Chief Executive Officer | |||||
| Xmark Opportunity Manager LLC, | ||||||
| Investment Manager to Xmark Opportunity | ||||||
| Fund Ltd. | ||||||
Aggregate Purchase Price: $633,681.50
Number of Shares: 189,725
Number of Shares: 189,725
| Address for Notice: | Xmark Opportunity Fund Ltd. | |||||
| 000 Xxxxxxx Xxxx. | ||||||
| Xxxxx 0000 | ||||||
| Xxxxxxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | XMARK JV INVESTMENT PARTNERS, LLC | |||||
| By: | /s/ Xxxxxxxx Xxxx | |||||
| Name: | Xxxxxxxxx Xxxx | |||||
| Title: | Chief Executive Officer | |||||
| Xmark Opportunity Partners LLC, | ||||||
| Investment Manager to Xmark JV | ||||||
| Investment Partners | ||||||
Aggregate Purchase Price: $951,900
Number of Shares: 285,000
Number of Shares: 285,000
| Address for Notice: | Xmark JV Investment Partners | |||||
| 000 Xxxxxxx Xxxx. | ||||||
| Xxxxx 0000 | ||||||
| Xxxxxxxx, XX 00000 | ||||||
Signature Page to Purchase Agreement
| Investor: | FEDERATED XXXXXXXX FUND, A | |||||
| PORTFOLIO OF FEDERATED EQUITY FUNDS | ||||||
| By: | /s/ Xxxx Xxxxxx | |||||
| Name: | Xxxx Xxxxxx | |||||
| Title: | VP, Portfolio Manager | |||||
Aggregate Purchase Price: $1,487,302
Number of Shares: 445,300
Number of Shares: 445,300
| Address for Notice: | 000 Xxxx 00xx Xx. | |||||
| Xxx Xxxx, XX 00000 | ||||||
| with a copy to: | ||||||
| Facsimile: 000-000-0000 | ||||||
Signature Page to Purchase Agreement
| Investor: | FEDERATED XXXXXXXX FUND II, A | |||||
| PORTFOLIO OF FEDERATED INSURANCE SERIES | ||||||
| By: | /s/ Xxxx X. Xxxx | |||||
| Name: | Xxxx X. Xxxx | |||||
| Title: | VP, Portfolio Manager | |||||
Aggregate Purchase Price: $15,698
Number of Shares: 4,700
Number of Shares: 4,700
| Address for Notice: | 000 Xxxx 00xx Xx. | |||||
| Xxx Xxxx, XX 00000 | ||||||
| with a copy to: | ||||||
| Facsimile: 000-000-0000 | ||||||
Signature Page to Purchase Agreement
