EXHIBIT 4.1
COMMON STOCK AND WARRANT PURCHASE
AGREEMENT
DATED AS OF MAY 19, 2006
BY AND AMONG
NUTRITION 21, INC.
AND
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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ARTICLE I Purchase and Sale of Common Stock and Warrants................................................1
Section 1.1 Purchase and Sale of Common Stock and Warrants......................................1
Section 1.2 Purchase Price and Closing..........................................................1
ARTICLE II Representations and Warranties................................................................2
Section 2.1 Representations and Warranties of the Company.......................................2
Section 2.2 Representations and Warranties of the Purchasers...................................13
ARTICLE III Covenants....................................................................................16
Section 3.1 Securities Compliance..............................................................16
Section 3.2 Registration and Listing...........................................................16
Section 3.3 Inspection Rights..................................................................16
Section 3.4 Compliance with Laws...............................................................16
Section 3.5 Keeping of Records and Books of Account............................................17
Section 3.6 Reporting Requirements.............................................................17
Section 3.7 Other Agreements...................................................................17
Section 3.8 Use of Proceeds....................................................................17
Section 3.9 Reporting Status; Form S-3 Eligibility.............................................17
Section 3.10 Disclosure of Transaction..........................................................17
Section 3.11 Disclosure of Material Information.................................................18
Section 3.12 Form D.............................................................................18
Section 3.13 No Integrated Offerings............................................................18
Section 3.14 Pledge of Securities...............................................................18
Section 3.15 Confidentiality....................................................................18
Section 3.16 Best Efforts.......................................................................19
ARTICLE IV Conditions...................................................................................19
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and to Sell the
Securities.........................................................................19
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase
the Securities.....................................................................20
ARTICLE V Certificate Legend...........................................................................21
Section 5.1 Legend.............................................................................21
ARTICLE VI Indemnification..............................................................................22
Section 6.1 General Indemnity..................................................................22
Section 6.2 Indemnification Procedure..........................................................23
ARTICLE VII Miscellaneous................................................................................24
Section 7.1 Fees and Expenses..................................................................24
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue...............................24
Section 7.3 Entire Agreement; Amendment........................................................24
Section 7.4 Notices............................................................................25
Section 7.5 Waivers............................................................................26
Section 7.6 Headings...........................................................................26
Section 7.7 Successors and Assigns.............................................................26
Section 7.8 No Third Party Beneficiaries.......................................................26
Section 7.9 Governing Law......................................................................26
Section 7.10 Survival...........................................................................26
Section 7.11 Counterparts.......................................................................26
Section 7.12 Publicity..........................................................................26
Section 7.13 Severability.......................................................................26
Section 7.14 Further Assurances.................................................................27
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated
as of May 19, 2006 by and among Nutrition 21, Inc., a New York corporation (the
"Company"), and the purchasers listed on Exhibit A hereto (each a "Purchaser"
and collectively, the "Purchasers"), for the purchase and sale of shares of the
Company's common stock, par value $.005 per share (the "Common Stock") by the
Purchasers.
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
Section 1.1 Purchase and Sale of Common Stock and Warrants.
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(a) Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase from the Company,
an aggregate of 5,000,000 shares of Common Stock (the "Shares") at a price per
share of $1.80 (the "Per Share Purchase Price") for an aggregate purchase price
of up to $9,000,000 (the "Purchase Price"). Each Purchaser shall pay the portion
of the Purchase Price set forth opposite its name on Exhibit A hereto. The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities Act"), including
Regulation D ("Regulation D"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder.
(b) Upon the following terms and conditions and for no additional
consideration, each of the Purchasers shall be issued Warrants, in substantially
the form attached hereto as Exhibit B (the "Warrants"), to purchase the number
of shares of Common Stock equal to ___________ percent (___%) of the number of
Shares purchased by each Purchaser pursuant to the terms of this Agreement, as
set forth opposite such Purchaser's name on Exhibit A hereto. The Warrants shall
expire five (5) years from the Closing Date and shall have an exercise price per
share equal to the Warrant Price (as defined in the Warrants). Any shares of
Common Stock issuable upon exercise of the Warrants (and such shares when
issued) are herein referred to as the "Warrant Shares." The Shares, the Warrants
and the Warrant Shares are sometimes collectively referred to herein as the
"Securities."
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Section 1.2 Purchase Price and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares and Warrants set forth opposite their respective names on Exhibit A. The
closing of the purchase and sale of the Shares and Warrants, in each case, to be
acquired by the Purchasers from the Company under this Agreement shall take
place at the offices of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Closing") at such time and on such date
as the Purchasers and the Company may agree upon (the "Closing Date"), provided,
that all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith. The Company
shall deliver or cause to be delivered to each Purchaser (i) a certificate
registered in the name of the Purchaser representing the number of Shares as is
set forth opposite the name of such Purchaser on Exhibit A within three (3)
Trading Days (as defined in Section 3.10 hereof) following the Closing, (ii) a
Warrant to purchase such number of shares of Common Stock as is set forth
opposite the name of such Purchaser on Exhibit A within three (3) Trading Days
following the Closing, and (iii) any other deliveries as required by Article IV
at the Closing. At the Closing, each Purchaser shall deliver its portion of the
Purchase Price by wire transfer to an account designated by the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchasers as follows, as of the
date hereof and the Closing Date, except as set forth in the Commission
Documents (as defined in section 2.1(f) hereof) with respect to each subsection
below or on the Schedule of Exceptions attached hereto with each numbered
Schedule corresponding to the section number herein:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity except as set
forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary (as
defined in Section 2.1(g)) is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect. For the
purposes of this Agreement, "Material Adverse Effect" means any effect on the
business, results of operations, prospects, assets or condition (financial or
otherwise) of the Company that is material and adverse to the Company and its
Subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company from entering into and performing any of its obligations under the
Transaction Documents (as defined below) in any material respect.
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(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and that certain Registration Rights Agreement by and among the Company
and the Purchasers, dated as of the date hereof, substantially in the form of
Exhibit C attached hereto (the "Registration Rights Agreement" and, together
with this Agreement and the Warrants, the "Transaction Documents") and to issue
and sell the Securities in accordance with the terms hereof and to complete the
transactions contemplated by the Transaction Documents. The execution, delivery
and performance of the Transaction Documents by the Company and the consummation
by it of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and, except as set forth on
Schedule 2.1(b), no further consent or authorization of the Company, its Board
of Directors or stockholders is required. When executed and delivered by the
Company, each of the Transaction Documents shall constitute a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company as
of the date hereof is set forth on Schedule 2.1(c) hereto. All of the
outstanding shares of the Common Stock and any other outstanding security of the
Company have been duly and validly authorized and validly issued, fully paid and
nonassessable and were issued in accordance with the registration or
qualification provisions of the Securities Act, or pursuant to valid exemptions
therefrom. Except as set forth in this Agreement and as set forth on Schedule
2.1(c) hereto, no shares of Common Stock or any other security of the Company
are entitled to preemptive rights, registration rights, rights of first refusal
or similar rights and there are no outstanding options, warrants, scrip, rights
to subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth on
Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company. Except as disclosed on Schedule 2.1(c), (i) there are no
outstanding debt securities, or other form of material debt of the Company or
any of its Subsidiaries, (ii) there are no contracts, commitments,
understandings, agreements or arrangements under which the Company or any of its
Subsidiaries is required to register the sale of any of their securities under
the Securities Act, (iii) there are no outstanding securities of the Company or
any of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings, agreements or arrangements
by which the Company or any of its Subsidiaries is or may become bound to redeem
a security of the Company or any of its Subsidiaries, (iv) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities, (v) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements, or
any similar plan or agreement and (vi) as of the date of this Agreement, except
as set forth in filings made with the Commission, to the Company's and each of
its Subsidiaries' knowledge, no Person (as defined below) or group of related
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Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) or has the right to acquire by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the Common Stock. Any Person with any right to purchase securities of the
Company that would be triggered as a result of the transactions contemplated
hereby or by any of the other Transaction Documents has waived such rights or
the time for the exercise of such rights has passed, except where failure of the
Company to receive such waiver would not have a Material Adverse Effect. Except
as set forth on Schedule 2.1(c), there are no options, warrants or other
outstanding securities of the Company (including, without limitation, any equity
securities issued pursuant to any Company Plan) the vesting of which will be
accelerated by the transactions contemplated hereby or by any of the other
Transaction Documents. Except as set forth in Schedule 2.1(c), none of the
transactions contemplated by this Agreement or by any of the other Transaction
Documents shall cause, directly or indirectly, the acceleration of vesting of
any options issued pursuant the Company's stock option plans.
(d) Issuance of Securities. The Shares and the Warrants to be issued
at the Closing have been duly authorized by all necessary corporate action and,
when paid for and issued in accordance with the terms hereof and the Warrants,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate of Incorporation (the "Certificate") or
Bylaws (the "Bylaws"), each as amended to date, or any Subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents or issue and sell the
Securities in accordance with the terms hereof (other than any filings, consents
and approvals which may be required to be made by the Company under applicable
state and federal securities laws, rules or as may be required for the Company
to carry out its obligations under the Registration Rights Agreement).
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(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
on Schedule 2.1(f) hereto, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "Commission") pursuant to the reporting
requirements of the Exchange Act, including pursuant to Sections 13, 14 or 15(d)
thereof (all of the foregoing and all exhibits included therein and financial
statement and schedules thereto, including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). At the times of
their respective filings, the Form 10-Q for the fiscal quarters ended December
31, 2005, September 30, 2005, and March 31, 2005 (collectively, the "Form 10-Q")
and the Form 10-K for the fiscal year ended June 30, 2005 (the "Form 10-K")
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and the Form
10-Q and Form 10-K at the time of their respective filings did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the
Commission Documents were complete and correct in all material respects and
complied with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the Notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person's ownership of the outstanding stock
or other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Neither
the Company nor any Subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary.
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(h) No Material Adverse Change. Since June 30, 2005, the Company has
not experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule
2.1(i) hereto, since June 30, 2005, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
Since June 30, 2005, none of the Company or any of its Subsidiaries has
participated in any transaction material to the condition of the Company which
is outside of the ordinary course of its business.
(j) No Undisclosed Events or Circumstances. Since June 30, 2005,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance exists
with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(k) Indebtedness. The Commission Documents or Schedule 2.1(k) hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$300,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of liabilities for borrowed money of others in excess of $100,000,
whether or not the same are or should be reflected in the Company's balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments in excess of
$25,000 due under leases required to be capitalized in accordance with GAAP.
Neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has
good and valid title to all of its real and personal property reflected in the
Commission Documents, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated on Schedule
2.1(l) hereto or such that, individually or in the aggregate, do not cause a
Material Adverse Effect. All such leases of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or
directors of the Company or any Subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
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(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth on Schedule 2.1(n) hereto or such that,
individually or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The Company and each
of its Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
all taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of the
Company and the Subsidiaries for all current taxes and other charges to which
the Company or any Subsidiary is subject and which are not currently due and
payable. Except as disclosed on Schedule 2.1(o) hereto, none of the federal
income tax returns of the Company or any Subsidiary has been audited by the
Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any Subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. Neither this Agreement or the Schedules hereto nor
any other documents, certificates or instruments furnished to the Purchasers by
or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(r) Operation of Business. Except as set forth on Schedule 2.1(r)
hereto, the Company and each of the Subsidiaries owns or possesses the rights to
use all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict or infringement with the
rights of others.
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(s) Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto, the Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries, except for such instances as would not
individually or in the aggregate have a Material Adverse Effect. The Company and
each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or would be reasonably likely to violate any Environmental Law
after the Closing or that would be reasonably likely to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including, without limitation,
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
(t) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and its
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any
differences and (v) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. Except as set forth
on Schedule 2.1(t) hereto, there are no significant deficiencies or material
weaknesses in the design or operation of internal controls over financial
reporting that would reasonably be expected to adversely affect the Company's
ability to record, process, summarize and report financial information, and
there is no fraud, whether or not material, that involves management or, to the
knowledge of the Company, other employees who have a significant role in the
Company's internal controls and the Company has provided to the Purchaser copies
of any written materials relating to the foregoing.
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(u) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) of this Section 2.1(u) only) or as would not be reasonably
likely to have a Material Adverse Effect, (i) the Company and each of its
Subsidiaries have performed all obligations required to be performed by them to
date under any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, filed or required to be filed with the
Commission (the "Material Agreements"), (ii) neither the Company nor any of its
Subsidiaries has received any notice of default under any Material Agreement
and, (iii) to the best of the Company's knowledge, neither the Company nor any
of its Subsidiaries is in default under any Material Agreement.
(v) Transactions with Affiliates. Except as set forth on Schedule
2.1(v) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder which, in
each case, is required to be disclosed in the Commission Documents or in the
Company's most recently filed definitive proxy statement on Schedule 14A, that
is not so disclosed in the Commission Documents or in such proxy statement.
(w) Securities Act of 1933. Based in material part on the accuracy
and completeness of the representations and warranties of the Purchasers
contained in Section 2.2 hereof, the Company has complied and will comply with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws, and neither the
Company nor any of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of any of the Securities.
(x) Governmental Approvals. Except as set forth on Schedule 2.1(x)
hereto, and except for the filing of any notice prior or subsequent to the
Closing that may be required under applicable state and/or federal securities
laws (which if required, shall be filed on a timely basis), no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Securities, or for the
performance by the Company of its obligations under the Transaction Documents.
9
(y) Employees; Labor Relations. Neither the Company nor any
Subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth on Schedule 2.1(y) hereto. Except as set
forth on Schedule 2.1(y) hereto, neither the Company nor any Subsidiary has any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary required to be disclosed in the Commission
Documents that is not so disclosed. Since June 30, 2005, no officer, consultant
or key employee of the Company or any Subsidiary whose termination, either
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any Subsidiary. Except as could not reasonably be expected to have a
Material Adverse Effect, (i) neither the Company nor any of its Subsidiaries is
engaged in any unfair labor practice, (ii) there is no strike, labor dispute,
slowdown or stoppage pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, and (iii) neither the Company
nor any of its Subsidiaries is a party to any collective bargaining agreement or
contract.
(z) Absence of Certain Developments. Except as disclosed on Schedule
2.1(z) hereto, since June 30, 2005, neither the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any right, options or warrants with respect thereto;
(ii) borrowed any amount in excess of $300,000 or incurred or
become subject to any other liabilities in excess of $100,000 (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
business of the Company and its Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in
excess of $250,000 or paid any obligation or liability (absolute or contingent)
in excess of $250,000, other than current liabilities paid in the ordinary
course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock, in each case in excess of $50,000 individually or $100,000 in the
aggregate;
10
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, in each case in excess of $100,000, except in
the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any material losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any material transaction, whether or not in
the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$10,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(aa) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company and its
Subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Securities will not involve any transaction which is subject to the
prohibitions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended,
provided that, if any of the Purchasers, or any person or entity that owns a
beneficial interest in any of the Purchasers, is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) with respect to which the
Company is a "party in interest" (within the meaning of Section 3(14) of ERISA),
the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met. As used in this Section 2.1(cc), the term "Plan" shall mean an "employee
pension benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
11
(bb) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents and the Company shall not be
excused from performance of its obligations to any Purchaser under the
Transaction Documents as a result of nonperformance or breach by any other
Purchaser. The Company acknowledges that the decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for the placement
agent and such counsel does not represent the Purchasers and the Purchasers have
retained their own individual counsel with respect to the transactions
contemplated hereby. The Company acknowledges that it has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.
(cc) Anti-takeover Device. Neither the Company nor any of its
Subsidiaries has any outstanding shareholder rights plan or "poison pill" or any
similar arrangement. There are no provisions of any anti-takeover or business
combination statute applicable to the Company, the Certificate of Incorporation
and the Bylaws which would preclude the issuance and sale of the Securities, the
reservation for issuance of the Warrant Shares and the consummation of the other
transactions contemplated by this Agreement or any of the other Transaction
Documents.
12
(dd) 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 security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings if such other offering, if integrated, would
cause the offer and sale of the Securities not to be exempt from registration
pursuant to Regulation D and Rule 506 thereof under the Securities Act. The
Company does not have any registration statement pending before the Commission
or currently under the Commission's review and except as set forth on Schedule
2.1(dd) hereto, since November 1, 2005, the Company has not offered or sold any
of its equity securities or debt securities convertible into shares of Common
Stock.
(ee) Xxxxxxxx-Xxxxx Act(ff) . The Company is in compliance with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are effective
and for which compliance by the Company is required as of the date hereof and
intends to comply with other applicable provisions of the Xxxxxxxx-Xxxxx Act,
and the rules and regulations promulgated thereunder, upon the effectiveness of
such provisions or the date by which compliance therewith by the Company is
required.
(gg) Delisting Notification. Since November 9, 2005, the Company has
not received notice (written or oral) from the Nasdaq Capital Market to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such market and the Company has no reason to believe that it
will be delisted in the foreseeable future.
(hh) Investment Company Act Status. The Company is not, and as a
result of and immediately upon the Closing will not be, an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
Section 2.2 Representations and Warranties of the Purchasers. Each
of the Purchasers hereby represents and warrants to the Company with respect
solely to itself and not with respect to any other Purchaser as follows as of
the date hereof and as of the Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
13
(b) Authorization and Power. Such Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by such Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate, partnership or other action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders,
partners or members, as the case may be, is required. When executed and
delivered by the Purchasers, the other Transaction Documents shall constitute
valid and binding obligations of such Purchaser enforceable against such
Purchaser in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by such Purchaser and the consummation by such Purchaser
of the transactions contemplated thereby and hereby do not and will not (i)
violate any provision of such Purchaser's charter or organizational documents,
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which such Purchaser is a party or by
which such Purchaser's respective properties or assets are bound, or (iii)
result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to such Purchaser or by which any property or
asset of such Purchaser are bound or affected, except, in all cases, other than
violations pursuant to clauses (i) or (iii) (with respect to federal and state
securities laws) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, materially and adversely affect such Purchaser's ability to perform
its obligations under the Transaction Documents.
(d) Acquisition for Investment. Such Purchaser is purchasing the
Shares and Warrants and will purchase any Warrant Shares solely for its own
account for the purpose of investment and not with a view to or for sale in
connection with distribution. Such Purchaser does not have a present intention
to sell any of the Shares, Warrants or Warrant Shares, nor a present arrangement
(whether or not legally binding) or intention to effect any distribution of any
of the Shares, the Warrants or the Warrant Shares to or through any person or
entity; provided, however, that by making the representations herein, such
Purchaser does not agree to hold the Shares, the Warrants or the Warrant Shares
for any minimum or other specific term and reserves the right to dispose of the
Shares, the Warrants or the Warrant Shares at any time in accordance with
Federal and state securities laws applicable to such disposition. Such Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company, (ii) is able to bear the
financial risks associated with an investment in the Securities, (iii) has been
given full access to such records of the Company and the Subsidiaries and to the
officers of the Company and the Subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation and (iv) has reviewed or
has had the opportunity to review the Commission Documents and any other filings
made by the Company with the Commission which are available to the public by
accessing the Commission's website at xxxx://xxx.xxx.xxx, including the risk
factors set forth in the Commission Documents.
14
(e) Rule 144. Such Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Such Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Such Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Such Purchaser understands that the Securities are
being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities. Such Purchaser
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement of
the Securities.
(g) No General Solicitation. Such Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any advertisement,
article, notice or other communication published in any newspaper, magazine, or
similar media, or broadcast over television or radio, or any seminar or meeting
to which such Purchaser was invited by any of the foregoing means of
communications.
(h) Accredited Investor. Such Purchaser is an "accredited investor"
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Such Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk. Such
Purchaser has completed or caused to be completed the Stock Certificate and
Warrant Questionnaire and the Registration Statement/Suitability Questionnaire
attached hereto as Exhibit D and Exhibit E, respectively. Each Purchaser
understands that the Company is relying upon the truth and accuracy of such
information set forth in the Registration Statement/Suitability Questionnaire to
determine the suitability of such Purchaser to acquire the Securities.
(i) Certain Fees. The Purchasers have not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. Except as may be disclosed in any
filings with the Commission by the Purchasers under Section 13 and/or Section 16
of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for
the purpose of acquiring, holding, voting or disposing of the Securities
purchased hereunder for purposes of Section 13(d) under the Exchange Act, and
each Purchaser is acting independently with respect to its investment in the
Securities.
15
(k) Prohibited Transactions. During the thirty (30) days preceding
the date hereof, no Purchaser nor any affiliate of such Purchaser, foreign or
domestic, has, directly or indirectly, effected or agreed to effect any Short
Sale (as defined below), 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, or 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, (ii) the effective date of the Registration
Statement (as defined in the Registration Rights Agreement) or (iii) the
Effectiveness Date (as defined in the Registration Rights Agreement), each
Purchaser shall not, and shall cause its affiliates not to, engage, directly or
indirectly, in (a) a Prohibited Transaction nor (b) any sale, assignment,
pledge, hypothecation, put, call, or other transfer of any of the shares of
Common Stock, Warrants or other securities of the Company acquired hereunder.
For purposes hereof, "Short Sale" shall mean all "short sales" as defined in
Rule 200 of Regulation SHO under the Exchange Act.
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company shall cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, to comply in all respects with its reporting and filing
obligations under the Exchange Act, to comply with all requirements related to
any registration statement filed pursuant to this Agreement, and to not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock on the
Nasdaq Capital Market or any successor market. The Company will promptly file
the "Listing Application" for, or in connection with, the issuance and delivery
of the Shares and the Warrant Shares.
16
Section 3.3 Inspection RightsSection 3.3 Inspection Rights. The
Company shall permit, during normal business hours and upon reasonable request
and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall be obligated hereunder
to purchase the Shares or shall beneficially own any Shares or Warrant Shares,
which in the aggregate, represent more than two percent (2%) of the total
combined voting power of all voting securities of the Company then outstanding,
for purposes reasonably related to such Purchaser's interests as a stockholder
to examine and make reasonable copies of the records and books of account of,
and visit and inspect the properties, assets, operations and business of the
Company and any Subsidiary, and to discuss the affairs, finances and accounts of
the Company and any Subsidiary with any of its officers, consultants, directors,
and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and
cause each Subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which would be reasonably likely to have a
Material Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company
shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries.
Section 3.6 Reporting Requirements. If the Commission ceases making
the Company's periodic reports available via the Internet without charge, then
the Company shall, promptly after filing with the Commission, furnish the
following to each Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Securities or shall beneficially own Shares or Warrant
Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q;
(b) Annual Reports filed with the Commission on Form 10-K; and
(c) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability of the Company or any Subsidiary to perform its obligations
under any Transaction Document.
Section 3.8 Use of Proceeds. The net proceeds from the sale of the
Shares will be used by the Company for working capital and general corporate
purposes and not to redeem any Common Stock or securities convertible,
exercisable or exchangeable into Common Stock or to settle any outstanding
litigation.
17
Section 3.9 Reporting Status; Form S-3 Eligibility. So long as a
Purchaser beneficially owns any of the Securities, the Company shall timely file
all reports required to be filed with the Commission pursuant to the Exchange
Act, and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination. Subject to the terms of
the Transaction Documents, the Company further covenants that it will take such
further action as the Purchasers may reasonably request, all to the extent
required from time to time to enable the Purchasers to sell the Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act. Upon the
request of the Purchasers, the Company shall deliver to the Purchasers a written
certification of a duly authorized officer as to whether it has complied with
such requirements. The Company currently meets, and will use its best efforts to
take all necessary action to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 applicable to
"resale" registrations on Form S-3 during the Effectiveness Period (as defined
in the Registration Rights Agreement).
Section 3.10 Disclosure of Transaction. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") as soon as practicable after the Closing Date but
in no event later than one hour after the Closing; provided, however, that if
the Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing Date. The Company shall also file with the
Commission a Current Report on Form 8-K (the "Form 8-K") describing the material
terms of the transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, the Registration Rights Agreement, the form of Warrant and the
Press Release) as soon as practicable following the Closing Date but in no event
more than two (2) Trading Days following the Closing Date, which Press Release
and Form 8-K shall be subject to prior review and comment by the Purchasers.
"Trading Day" means any day during which the Nasdaq Capital Market (or other
principal exchange on which the Common Stock is traded) shall be open for
trading.
Section 3.11 Disclosure of Material Information. The Company
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
Section 3.12 Form D. The Company agrees to file a Form D with
respect to the Securities as required by Rule 506 under Regulation D and to
provide a copy thereof to the Purchasers promptly after such filing.
Section 3.13 No Integrated Offerings. The Company shall not make any
offers or sales of any security (other than the Securities being offered or sold
hereunder) under circumstances that would require registration of the Securities
being offered or sold hereunder under the Securities Act.
Section 3.14 Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged by a Purchaser in connection with a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Common Stock. The pledge of Common Stock shall not be deemed to
be a transfer, sale or assignment of the Common Stock hereunder, and no
Purchaser effecting a pledge of Common Stock shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document; provided that a
Purchaser and its pledgee shall be required to comply with the provisions of
Article V hereof in order to effect a sale, transfer or assignment of Common
Stock to such pledgee. At the Purchasers' expense, the Company hereby agrees to
execute and deliver such documentation as a pledgee of the Common Stock may
reasonably request in connection with a pledge of the Common Stock to such
pledgee by a Purchaser.
18
Section 3.15 Confidentiality. Each party agrees that it will not
disclose and it will cause its officers, directors, employees, representatives,
agents, and advisers not to disclose, any Confidential Information (as
hereinafter defined) with respect to the other party furnished, at any time or
in any manner, provided that (i) any disclosure of such information may be made
to which the Company and Purchaser consent in writing; and (ii) such information
may be disclosed if so required by law or regulatory authority. "Confidential
Information" means information or knowledge obtained in any due diligence or
other investigation relating to the negotiation and execution of this Agreement,
information relating to the terms of the transactions contemplated hereby and
any information identified as confidential in writing from one party to the
other; provided, however, that Confidential Information shall not include
information or knowledge that (a) becomes generally available to the public
absent any breach of this Section 3.15, (b) was available on a non-confidential
basis to a party prior to its disclosure pursuant to this Agreement, or (c)
becomes available on a non-confidential basis from a third party who is not
bound to keep such information confidential.
Section 3.16 Best Efforts. Each of the parties hereto shall use its
best efforts to satisfy each of the conditions to be satisfied by it as provided
in Sections 4.1 and 4.2 of this Agreement.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Securities. The obligation hereunder of the Company to
close and issue and sell the Securities to the Purchasers at the Closing Date is
subject to the satisfaction or waiver, at or before the Closing of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing Date.
19
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchasers shall have delivered
to the Company the Purchase Price for the Shares to be purchased by each
Purchaser.
(e) Delivery of Transaction Documents. The Transaction Documents to
which the Purchasers are a party shall have been duly executed by the Purchasers
and delivered to the Company.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Securities. The obligation hereunder of each
Purchaser to purchase the Securities and consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver, at or
before the Closing Date, of each of the conditions set forth below. These
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all respects as of
the Closing Date, except for representations and warranties that speak as of a
particular date, which shall be true and correct in all respects as of such
date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the Nasdaq Capital Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
20
(f) Opinion of Counsel. The Purchasers shall have received an
opinion of counsel to the Company, dated the date of such Closing, substantially
in the form of Exhibit F hereto, with such exceptions and limitations as shall
be reasonably acceptable to counsel to the Purchasers.
(g) Shares and Warrants. Within three (3) Trading Days following the
Closing Date, the Company shall have delivered to the Purchasers certificates
representing the Shares (in such denominations as each Purchaser may request)
and the Warrants (in such denominations as each Purchaser may request) duly
executed by the Company, in each case, being acquired by the Purchasers at the
Closing.
(h) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(i) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of the Closing Date, confirming the accuracy of
the Company's representations, warranties and its compliance with covenants as
of the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in paragraphs (b)-(e) of this Section 4.2 as of
the Closing Date (provided that, with respect to the matters in paragraphs (d)
and (e) of this Section 4.2, such confirmation shall be based on the knowledge
of the executive officer after due inquiry).
(j) Registration Rights Agreement. As of the Closing Date, the
Company shall have duly executed and delivered the Registration Rights Agreement
in the form of Exhibit C attached hereto.
(k) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Securities
shall be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required by applicable state
securities or "blue sky" laws):
21
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR NUTRITION
21, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO NUTRITION 21, INC. THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
The Company agrees, upon a Purchaser's reasonable request, to reissue
certificates representing any of the Shares or Warrant Shares, without the
legend set forth above (i) while a registration statement (including the
Registration Statement to be filed pursuant to the Registration Rights
Agreement) providing for the resale of such Securities is effective under the
Securities Act, (ii) following any sale of such Securities pursuant to Rule 144
(assuming the transferor is not an affiliate of the Company), (iii) if such
Securities are eligible for sale under Rule 144(k) (to the extent that such
Purchaser provides a certification or legal opinion to the Company to that
effect), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including controlling judicial interpretations and
pronouncements issued by the Commission). Following the effective date of the
Registration Statement (as defined in the Registration Rights Agreement) or at
such earlier time as a legend is no longer required for the Registrable
Securities (as defined in the Registration Rights Agreement), the Company will,
promptly following the delivery by a Purchaser to the Company or the Company's
transfer agent of a legended certificate representing such Securities, deliver
or cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive legends. The restrictions on
transfer contained in this Section 5.1 shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Shares or
Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of delivering physical certificates representing the Shares or Warrant Shares,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Company shall
cause its transfer agent to electronically transmit the Shares or Warrant Shares
to a Purchaser by crediting the account of such Purchaser's Prime Broker with
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system (to the
extent not inconsistent with any provisions of this Agreement).
ARTICLE VI
INDEMNIFICATION
Section 6.1 General Indemnity. The Company agrees to indemnify and
hold harmless the Purchasers (and their respective directors, officers, agents,
managers, partners, members, shareholders, affiliates, successors and assigns)
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Purchasers and their directors, officers,
agents, managers, partners, members, shareholders, affiliates, successors and
assigns as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. Each Purchaser severally but
not jointly agrees to indemnify and hold harmless the Company and its directors,
22
officers, affiliates, agents, successors and assigns from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by the Company and its directors, officers, affiliates, agents,
successors and assigns as a direct result of any inaccuracy in or breach of the
representations, warranties or covenants made by such Purchaser herein. The
maximum aggregate liability of each Purchaser pursuant to its indemnification
obligations under this Article VI shall not exceed the portion of the Purchase
Price paid by such Purchaser hereunder.
Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VI except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action, proceeding or claim is brought against an indemnified party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to participate in and, unless in the reasonable judgment of the
indemnifying party a conflict of interest between it and the indemnified party
exists with respect to such action, proceeding or claim (in which case the
indemnifying party shall be responsible for the reasonable fees and expenses of
one separate counsel for the indemnified parties), to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. In the event that
the indemnifying party advises an indemnified party that it will not contest
such a claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
reasonable costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent
which consent shall not be unreasonably withheld. Notwithstanding anything in
this Article VI to the contrary, the indemnifying party shall not, without the
indemnified party's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VI shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
23
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
and the Purchasers hereby agree that the prevailing party in any suit, action or
proceeding arising out of or relating to this Agreement or the other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents are not performed in accordance
with their specific terms or are otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury.
24
Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
Following the Closing, no provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and the Purchasers
holding at least a majority of all Shares then held by the Purchasers. Any
amendment or waiver effected in accordance with this Section 7.3 shall be
binding upon each Purchaser (and their permitted assigns) and the Company.
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile
(evidenced by a successful transmission) at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Nutrition 21, Inc.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000-0000
Attention: Chief Executive Officer and General
Counsel
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Xxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth on
Exhibit A to this Agreement, with copies to
Purchaser's counsel as set forth on Exhibit A
or as specified in writing by such Purchaser
with copies to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other parties hereto.
25
Section 7.5 Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Subject to Section 5.1 hereof, the Purchasers may assign the Securities and its
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto without the consent of the Company so long as the
transferee is an "accredited investor" as defined in Regulation D under the
Securities Act and agrees to be bound by all of the provisions of this Agreement
and the other Transaction Documents.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
Section 7.10 Survival. The representations, warranties and covenants
of the Company and the Purchasers shall survive the execution and delivery
hereof and the Closing.
Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
Section 7.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the names of the
Purchasers without the consent of the Purchasers, which consent shall not be
unreasonably withheld or delayed, or unless and until such disclosure is
required by law, rule or applicable regulation, and then only to the extent of
such requirement.
26
Section 7.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the Warrants
and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
NUTRITION 21, INC.
By:________________________
Name:
Title:
PURCHASER:
By:________________________
Name:
Title:
EXHIBIT A
LIST OF PURCHASERS
NAMES AND ADDRESSES NUMBER OF SHARES &
OF PURCHASERS WARRANTS PURCHASED
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EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
FORM OF STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
NUTRITION 21, INC.
Pursuant to the Common Stock and Warrant Purchase Agreement (the "Agreement") to
be entered into among Nutrition 21, Inc. (the "Company") and certain purchasers,
including the undersigned, please provide the information below. All capitalized
terms not defined in this Questionnaire shall have the meanings assigned to them
in the Agreement.
The exact name that the Purchaser's Shares and Warrants are to be
registered in (this is the name that will appear on your stock certificate(s)).
A nominee name may be used if appropriate:
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The relationship between the Purchaser of the Shares and the Warrants and
the registered holder listed in response to Item 1 above:
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The mailing address of the registered holder listed in response to Item 1
above:
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The Social Security Number or Tax Identification Number of the registered
holder listed in response to Item 1 above:
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EXHIBIT E
REGISTRATION STATEMENT/SUITABILITY QUESTIONNAIRE
NUTRITION 21, INC.
Pursuant to the Common Stock and Warrant Purchase Agreement (the "Agreement") to
be entered into among Nutrition 21, Inc. (the "Company") and certain purchasers,
including the undersigned, please provide the information below. All capitalized
terms not defined in this Questionnaire shall have the meanings assigned to them
in the Agreement.
PART A
In connection with the preparation of the Registration Statement (as defined in
the Registration Rights Agreement), please provide us with the following
information:
Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state the Purchaser's name exactly as it should appear in the
Registration Statement:
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Please provide the number of shares of Common Stock that the Purchaser
will own immediately after Closing, including those shares of Common Stock
purchased by the Purchaser pursuant to the Agreement and those shares of Common
Stock purchased by the Purchaser through other transactions:
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Please explain the nature of the beneficial ownership of the shares of
Common Stock owned by the Purchaser organization, including any shares of Common
Stock not held of record by the Purchaser:
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If the Purchaser is not a natural person, please identify each natural
person who will exercise sole or shared voting and/or dispositive power with
respect to the shares of Common Stock owned by the Purchaser immediately after
the Closing. Please also specify in what capacity such person(s) will exercise
their voting and/or dispositive power with respect to such shares.
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NATURAL PERSON(S) RELATIONSHIP TO PURCHASER
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Disclose the details of any rights to acquire shares of Common Stock that
the Purchaser may have:
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Has the Purchaser had any material relationship within the past three
years with the Company or its affiliates?
Yes |_| No |_|
If yes, please indicate the nature of any such relationships below:
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Is the Purchaser a broker-dealer registered with the SEC?
Yes |_| No |_|
Is the Purchaser affiliated with any registered broker-dealer?
Yes |_| No |_|
If yes, please identify such broker-dealer and explain the relationship
that such registered broker-dealer has with the Purchaser (including details of
any affiliation or other relationship).
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REGISTERED BROKER-DEALER RELATIONSHIP TO PURCHASER
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PART B
Please provide us with the following information, and we will use the
Purchaser's responses to qualify the Purchaser for purposes of federal and state
securities laws:
I. IDENTIFICATION
Name:
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Address of principal place of business:
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State (or Country) of formation or incorporation:
Contact Person:
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Telephone Number:
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Facsimile Number:
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Email Address:
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Type of Entity (corporation, partnership, trust, etc.):
Social Security or Taxpayer or Employer Identification Number:
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II. STATUS AS AN ACCREDITED INVESTOR
Please confirm that the Purchaser is an "accredited investor" as defined under
the Securities Act of 1933, as amended (the "Act"), by checking all applicable
boxes to indicate the exemption qualifying you as an accredited investor, as
provided in Rule 501(a) under the Securities Act of 1933, as amended.
|_| a corporation, organization described in Section 501(c)(3) of
the Internal Revenue Code, a Massachusetts or similar business trust or a
partnership, in each case, not formed for the purpose of this investment, with
total assets in excess of $5,000,000;
|_| a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
|_| a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
|_| an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act;
|_| a bank as defined in Section 3(a)(2) or a savings and loan
association or other institution defined in Section 3(a)(5)(A) of the Act acting
in either an individual or fiduciary capacity;
|_| an insurance company as defined in Section 2(13) of the
Securities Act;
|_| an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 whose investment decision is
made by a fiduciary which is either a bank, savings and loan association,
insurance company, or registered investment advisor, or whose total assets
exceed $5,000,000, or, if a self-directed plan, a plan whose investment
decisions are made solely by persons who are accredited investors;
|_| a director, executive officer or general partner of the issuer
of the securities being offered or sold;
|_| a natural person whose individual net worth, or joint net worth
with your spouse, at the time of purchase exceeds $1,000,000;
|_| a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with your spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
|_| a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the
Securities Act;
|_| an entity in which all the equity owners are accredited
investors; or
|_| other - Please describe:
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III. RESIDENCE INFORMATION
Please indicate the jurisdiction in which the Purchaser resides, if
the Purchaser is a natural person, or in which the Purchaser is chartered
and the jurisdiction in which it maintains its principal offices:
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IV. INVESTMENT REPRESENTATION
Is the Purchaser purchasing the securities offered for its and for
investment purposes only?
Yes |_| No |_|
If no, please state for whom is the Purchaser investing and/or the reason
for investing.
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V. SIGNATURE
The above information is true and correct in all material respects and the
undersigned recognizes that the Company and its counsel are relying on the
truth and accuracy of such information in reliance on the exemption under
the Securities Act. The undersigned agrees to notify the Company promptly
of any changes in the foregoing information which may occur prior to the
investment.
Executed at ________________,_____________on ___________ , 2006.
Name of Entity:___________________________________________________________
By: __________________________________
(Signature)
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(Name and title of signatory)
IF THE INVESTMENT WILL BE MADE BY MORE THAN ONE ENTITY, WHETHER OR NOT
AFFILIATED, PLEASE COMPLETE A COPY OF THIS QUESTIONNAIRE FOR EACH ENTITY.
EXHIBIT F
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Shares and the Warrants. The execution, delivery and performance of each of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required. Each of the
Transaction Documents have been duly executed and delivered and each of the
Transaction Documents constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms.
The Shares are not subject to any preemptive rights under the Certificate of
Incorporation or the Bylaws.
3. The Shares and the Warrants have been duly authorized and, the Shares
when delivered against payment in full as provided in the Purchase Agreement,
will be validly issued, fully paid and nonassessable. The shares of Common Stock
issuable upon exercise of the Warrants have been duly authorized and reserved
for issuance, and when delivered against payment in full as provided in the
Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Shares and the
Warrants do not (a) violate any provision of the Certificate of Incorporation or
Bylaws, (b) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party and
which is known to us, (c) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment known to us to
which the Company is a party or by which the Company is bound or by which any of
its respective properties or assets are bound, or (d) result in a violation of
any Federal, state, local or foreign statute, rule, regulation, order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except, in all cases other than violations
pursuant to clauses (a) and (d) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Shares and the Warrants other than filings as may
be required by applicable Federal and state securities laws.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto. There is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Shares and the Warrants are exempt
from the registration requirements of the Securities Act of 1933, as amended.
Assuming that each Purchaser is an accredited investor at the time of exercise
of the Warrants, the offer, issuance and sale of the Warrant Shares will be
exempt from the registration requirements of the Securities Act of 1933, as
amended.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
