SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December
17, 1998, by and among Enamelon, Inc., a Delaware corporation, with
headquarters located at 00 Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
B. The Company has authorized the following new series of its
preferred stock, par value $0.001 per share: the Company's Series B
Convertible Preferred Stock (the "Preferred Shares"), which shall be
convertible into shares of the Company's Common Stock, par value $0.001 per
share (the "Common Stock") (as converted, the "Conversion Shares"), in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Series B Preferred Stock, substantially in the
form attached hereto as Exhibit A (the "Certificate of Designations");
C. The Buyers wish to purchase, upon the terms and conditions stated
in this Agreement, an aggregate of 500 of the Preferred Shares in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers on the Closing Date (as defined below); and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer and each Buyer severally agrees to purchase
from the Company the respective number of Preferred Shares set forth opposite
such Buyer's name on the Schedule of Buyers, (as defined below) (the
"Closing"). The purchase price (the "Purchase Price") of each Preferred Share
at the Closing shall be $10,000.
b. The Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. Central Time, within three (3) business
days following the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyers).
The Closing
shall occur on the Closing Date at the offices of Xxxxxx Xxxxxx & Zavis, 000
Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000 or such other
place as the parties shall agree.
c. Form of Payment. On the Closing Date, (i) each Buyer
shall pay the Purchase Price to the Company for the Preferred Shares to be
issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions,
and (ii) the Company shall deliver to each Buyer, stock certificates (in the
denominations as such Buyer shall request) (the "Stock Certificates")
representing such number of the Preferred Shares which such Buyer is then
purchasing (as indicated opposite such Buyer's name on the Schedule of
Buyers). Such Stock Certificates shall bear the restrictive legends required
pursuant to Section 2(g).
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only
itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and (ii) upon conversion of the Preferred Shares, will
acquire the Conversion Shares then issuable (the Preferred Shares and the
Conversion Shares collectively are referred to herein as the "Securities"),
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does not agree
to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3), (5) or (6) of Regulation
D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to
its acquisition of the Securities.
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e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering
of the Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Buyer shall have delivered to
the Company an opinion of counsel, in a generally acceptable form to the
Company, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with assurance
reasonably acceptable to the Company that such Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act
(or a successor rule thereto) ("Rule 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined
in the 0000 Xxx) may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to register such
Securities under the 1933 Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and, until such time as
the sale of the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with
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a sale transaction, such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of such Securities may be made without registration
under the 1933 Act, or (iii) such holder provides the Company with reasonable
assurances that such Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date
that can then be immediately sold.
h. Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is
a valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that state or
country specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the
requisite corporate power and authority to own their properties and to carry
on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. As used in this Agreement,
"Material Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations or financial condition
of the Company and its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below) or the Certificate of Designations.
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority
to enter into and perform this Agreement, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents"),
and to issue the Securities in accordance with the terms hereof and thereof,
(ii) the execution and delivery of the Transaction Documents and the
Certificate of Designations by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Preferred Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion thereof, have been
duly authorized by the Company's Board of Directors and no
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further consent or authorization is required by the Company, its Board of
Directors or its stockholders, except for, if required by the Principal Market
(as defined below), approval by its stockholders prior to the issuance of a
number of shares of Common Stock equal to or in excess of 20% of the number of
shares of common Stock outstanding immediately prior to the Closing Date;
(iii) the Transaction Documents have been duly executed and delivered by the
Company, (iv) the Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors' rights and remedies, and (v) the Certificate of
Designations has been filed with the Secretary of State of the State of
Delaware and is in full force and effect, enforceable against the Company in
accordance with its terms. The "Principal Market" shall mean the Nasdaq
National Market.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 30,000,000 shares of Common
Stock, of which as of the date hereof, 10,239,780 shares were issued and
outstanding, 2,112,250 shares are issuable and reserved for issuance pursuant
to the Company's stock option plans, 2,000,000 shares are issuable and
reserved for issuance pursuant to conversions of the Preferred Shares and
784,071 shares are reserved for issuance for any and all other purposes and
(ii) 5,000,000 shares of preferred stock, which as of the date hereof, no
shares were issued and outstanding. All of such outstanding shares have been,
or upon issuance will be, validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule 3(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company, (ii) there are no
outstanding debt securities, (iii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, (iv) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement), (v) 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 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, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement, and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Buyers true
and correct copies of the Company's Articles of Incorporation, as amended and
as in effect on the date hereof (the "Articles of Incorporation"), and the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto.
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d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be
(i) validly issued, fully paid and non-assessable, (ii) free from all taxes,
liens and charges with respect to the issue thereof and (iii) entitled to the
rights and preferences set forth in the Certificate of Designations. Two
million shares of Common Stock have been duly authorized and reserved for
issuance upon conversion of the Preferred Shares. Upon conversion in
accordance with the Certificate of Designations, the Conversion Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. Based in part upon the
representations of the Buyers set forth in Section 2, the issuance by the
Company of the Securities is exempt from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the
Certificate of Designations and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a
violation of the Articles of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws or (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 material agreement, indenture or other instrument to
which the Company or any of its Subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and
regulations of the Principal Market) 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 as disclosed in Schedule 3(e),
neither the Company nor its Subsidiaries is in violation of any term of or in
default under the Articles of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock or the
By-laws or their organizational charter or by-laws, respectively, or any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company
or its Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have a Material Adverse Effect. The business
of the Company and its Subsidiaries is not being conducted in violation of any
law, ordinance, regulation of any governmental entity having authority or
jurisdiction over the Company, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self regulatory agency
in order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or to perform its obligations under
the Certificate of Designations, in each case in accordance with the terms
hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of
the listing requirements of the Principal Market as in effect on the date
hereof and is not aware of any facts which would reasonably lead to delisting
of the Common Stock by the Principal Market in the foreseeable future.
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f. SEC Documents; Financial Statements. Since December 31,
1997, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"1934 Act") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyers or their
respective representatives true and complete copies of the SEC Documents. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents have been
prepared in accordance with generally accepted accounting principles,
consistently applied, 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 exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the light
of the circumstance under which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g) or in the SEC Documents filed at least five (5) days prior to
the date hereof and available on XXXXX, since December 31, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition or results of operations
of the Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or its Subsidiaries have any knowledge
or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries
or any of the Company's or the Company's Subsidiaries' officers or directors
in their capacities as such, except as set forth in Schedule 3(h).
i. Acknowledgment Regarding Buyers' Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's-length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The Company
further acknowledges that no Buyer is acting as a financial advisor or
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fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any of the Buyers or any of their respective representatives or
agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred
or exists with respect to the Company or its Subsidiaries or their respective
business, properties, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly announced.
k. No General Solicitation. 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 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. The Company has not, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
any of the Securities under the 1933 Act or cause this offering of Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Principal Market, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that
relations with their employees are good. No executive officer (as defined in
Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company.
n. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names,
patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their respective businesses as now conducted. Except as set forth on Schedule
3(n), none of the Company's trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights necessary to conduct its business as now or
as proposed to be conducted have expired or terminated, or are expected to
expire or terminate within two years from the date of this
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Agreement. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 3(n), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company
or its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
o. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval where, in
each of the three foregoing cases, the failure to so comply would have,
individually or in the aggregate, a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(p) or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or
any of its Subsidiaries. Any real property and facilities held under lease by
the Company or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
q. Insurance. Neither the Company nor any such Subsidiary
has been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
r. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such items would
not have, individually or in the aggregate, a Material Adverse Effect and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
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s. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or regulation which in
the judgment of the Company's officers has a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is a party to any contract or
agreement which in the reasonable judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
t. Tax Status. Except as set forth on Schedule 3(t), the
Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and has set aside on
its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
u. Certain Transactions. Except as set forth on Schedule
3(u) and in the SEC Documents filed at least ten days prior to the date hereof
and except for arm's-length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers or directors of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer or
director or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner.
v. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares will increase in certain circumstances. The Company further
acknowledges that, subject to such limitations as are expressly set forth in
the Transaction Documents, its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement and the
Certificate of Designations is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.
w. Transactions With Affiliates. Except as set forth on
Schedule 3(w) and in the SEC Documents filed at least ten days prior to the
date hereof and other than the grant of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such
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employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee or partner.
x. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the laws of the state of its
incorporation which is or could become applicable to the Buyers as a result of
the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Buyer's ownership
of the Securities.
y. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect
to the Preferred Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall take such
action as reasonably necessary to qualify the Preferred Shares for, or obtain
exemption for the Preferred Shares for, sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
the states of the United States, and shall provide evidence of any such action
so taken to the Buyers on or prior to the Closing Date. The Company shall make
all filings and reports relating the offer and sale of the Securities required
under the applicable securities or "Blue Sky" laws of the states of the United
States following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date which
is one year after the date as of which the Investors (as that term is defined
in the Registration Rights Agreement) may sell all of the Conversion Shares
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors shall have
sold all the Conversion Shares and (B) none of the Preferred Shares is
outstanding (the "Registration Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from
the sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration
-11-
Period: (i) within five (5) days after the filing thereof with the SEC, a copy
of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB,
any Current Reports on Form 8-K and any registration statements or amendments
(other than on Form S-8) filed pursuant to the 1933 Act; (ii) on the same day
as the release thereof, facsimile copies of all press releases issued by the
Company or any of its Subsidiaries and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to
the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares.
g. Lock-Up Period. Subject to the exceptions described
below, the Company agrees that during the period beginning on the date hereof
and ending on and including February 28, 1999 (the "Lock-Up Period"), neither
the Company nor its subsidiaries will, without the prior written consent of a
majority of the Preferred Shares then outstanding, contract with any party for
any equity financing (including any debt financing with an equity component)
or issue any equity securities of the Company or any Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or
any Subsidiary (including debt securities with an equity component) in any
form (the limitations referred to in this sentence are collectively referred
to as the "Capital Raising Limitation"). The Capital Raising Limitation shall
not apply to (i) a loan from a commercial bank which does not have any equity
feature, (ii) any transaction involving the Company's issuances of securities
(A) as consideration in a merger or consolidation, (B) in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or (C) as consideration for the acquisition of a
business, product or license or other assets by the Company, (iii) the
issuance of Common Stock in a firm commitment, underwritten public offering
with commissions, underwriting discounts and allowances not in excess of 10.0%
of the gross proceeds, (iv) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (v) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option plan, restricted stock plan or stock purchase plan for the benefit of
the Company's employees, consultants or directors or (vi) those transactions
described on Schedule 4(g).
h. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system (including the Principal Market), if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under the
terms of the Transaction Documents and the Certificate of Designations. The
Company shall maintain the Common Stock's authorization for quotation on the
Principal Market. Neither the Company nor any of its Subsidiaries shall take
any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market. The Company shall
promptly provide to each Buyer copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Common Stock for
listing on such Principal Market. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(h).
-12-
i. Expenses. Subject to Section 9(l) below, following the
Closing, the Company shall reimburse the Buyers for the Buyers' reasonable
expenses (including attorneys' fees and expenses) in connection with
negotiating and preparing the Transaction Documents and consummating the
transactions contemplated thereby up to an aggregate of $50,000.
j. Proxy Statement. The Company shall provide each
stockholder entitled to vote at the next meeting of stockholders of the
Company, which shall be not later than June 30, 1999 (the "Stockholder Meeting
Deadline"), a proxy statement, which has been previously reviewed by the
Buyers and a counsel of their choice, soliciting each such stockholder's
affirmative vote at such stockholder meeting for approval of the Company's
issuance of all of the Conversion Shares in excess of the Exchange Cap (as
defined in the Certificate of Designations) as described in this Agreement,
and the Company shall use its best efforts to solicit its stockholders'
approval of such issuance of the Securities and cause the Board of Directors
of the Company to recommend to the stockholders that they approve such
proposal. If the Company fails to hold a meeting of its stockholders by the
Stockholder Meeting Deadline (unless such failure is the result solely of the
actions of the Buyers), then, as partial relief (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each holder of Preferred Shares an amount in cash per
Preferred Share equal to the product of (i) $10,000 multiplied by (ii) .025
multiplied by (iii) the quotient of (x) the number of days after the
Stockholder Meeting Deadline that a meeting of the Company's stockholders is
not held, divided by (y) 30. The Company shall make the payments referred to
in the immediately preceding sentence within five days of the earlier of (I)
the holding of the meeting of the Company's stockholders, the failure of which
resulted in the requirement to make such payments and (II) the last day of
each 30-day period beginning on the day after the Stockholder Meeting
Deadline. In the event the Company fails to make such payments in a timely
manner, such payments shall bear interest at the rate of 2.5% per month (pro
rated for partial months) until paid in full.
k. Transactions With Affiliates. So long as (i) any
Preferred Shares are outstanding or (ii) any Buyer owns Conversion Shares with
a market value equal to or greater than $500,000, the Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any of
its or any Subsidiary's officers, directors, person who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock, or affiliates or with any
individual related by blood, marriage or adoption to any such individual or
with any entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on an arm's-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, or (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this Agreement means,
with respect to any person or entity, another person or entity that, directly
or indirectly, (i) has a 5% or more equity interest in that person or entity,
(ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common
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control with that person or entity. "Control" or "controls" for purposes
hereof means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
l. Filing of Form 8-K. On or before the second (2nd)
business day following the Closing Date, the Company shall file a Form 8-K
with the SEC attaching the Transaction Documents and otherwise in the form
required by the 1934 Act.
m. Hedging Activity. From February 10, 1999, through and
including February 28, 1999, each Buyer agrees not to engage in, and shall
prohibit any of its respective Affiliates from engaging in, any "short sale"
(as such term is defined in Rule 3b-3 of the 0000 Xxx) or other similar
hedging transaction, involving the Common Stock; provided, however, that a
sale which would otherwise be deemed to be a short sale shall not be
prohibited by this Agreement so long as the selling Buyer submits on the date
of such sale a Conversion Notice (as defined in the Certificate of
Designations) entitling such Buyer to receive a number of shares of Common
Stock at least equal to the number of shares so sold. For so long as a Buyer
holds any Securities, such Buyer will comply with the provisions of Section 9
of the 1934 Act and the rules and regulations promulgated thereunder with
respect to transactions involving the Securities.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each Buyer
to the Company upon conversion of the Preferred Shares (the "Irrevocable
Transfer Agent Instructions"). Prior to registration of the Conversion Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares, prior to registration of
the Conversion Shares under the 0000 Xxx) will be given by the Company to its
transfer agent and that the Securities shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 5
shall affect in any way each Buyer's obligations and agreements set forth in
Section 2(g) to comply with all applicable prospectus delivery requirements,
if any, upon resale of the Securities. If a Buyer provides the Company with an
opinion of counsel, in generally acceptable form, that registration of a
resale by such Buyer of any of such Securities is not required under the 1933
Act, the Company shall permit the transfer, and, in the case of the Conversion
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Buyer and, if such
opinion provides that such legends can be removed, without any restrictive
legends. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and
-14-
transfer, without the necessity of showing economic loss and without any bond
or other security being required. Each of the Buyers acknowledge that the
Company's transfer agent is not a participant in the electronic book entry
transfer program and that such Buyer may not instruct the transfer agent to
make electronic book entry transfers unless the Company gives the Buyers
notice that its transfer agent is a participant in that program.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell
the Preferred Shares to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
a. Such Buyer shall have executed each of the Transaction
Documents and delivered the same to the Company.
b. The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware.
c. Such Buyer shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by such Buyer
at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
d. The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall
have performed, satisfied and complied with the covenants, agreements
and conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Closing
Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Preferred Shares at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer
at any time in its sole discretion:
a. The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
b. The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware, and copies
thereof certified by such Secretary of State shall have been
delivered to such Buyer.
-15-
c. The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been
suspended by the Principal Market or the SEC, at any time beginning
on the date hereof and through and including the Closing Date and the
Company shall not have been notified of any pending or threatened
proceeding or other action to delist or suspend the Common Stock.
d. The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied with the covenants, agreements
and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date,
to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, without limitation,
an update as of the Closing Date regarding the representation
contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially
the form of Exhibit C attached hereto.
f. The Company shall have executed and delivered to such
Buyer the Stock Certificates (in such denominations as such Buyer
shall request) representing the Preferred Shares being purchased by
such Buyer at the Closing.
g. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "Resolutions").
h. As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, a number
of shares of Common Stock equal to at least 200% of the number of
Conversion Shares issuable upon conversion of the Preferred Shares
outstanding on the Closing Date (after giving effect to the Preferred
Shares to be issued on the Closing Date and assuming all such
Preferred Shares were fully convertible or exercisable on such date
regardless of any limitation on the timing or amount of such
conversions or exercises).
i. The Irrevocable Transfer Agent Instructions, in the form
of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
j. The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each Subsidiary in such corporation's state of
incorporation issued by the Secretary of State of such state of
incorporation as of a date within ten days of the Closing Date.
-16-
k. The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the
Secretary of State of the State of Delaware within ten days of the
Closing Date.
l. The Company shall have delivered to such Buyer a
secretary's certificate, dated as the Closing Date, as to (i) the
resolutions described in Section 7(g), (ii) the Articles of
Incorporation and (iii) the Bylaws, each as in effect at the Closing.
m. The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the
Transaction Documents and the Certificate of Designations, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder
of the Securities and all of their stockholders, officers, directors,
employees and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
the Certificate of Designations or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or the Certificate of Designations or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of the Transaction
Documents or the Certificate of Designations or any other certificate,
instrument or document contemplated hereby or thereby, (d) any transaction
financed or to be financed in whole or in part, directly or indirectly, with
the proceeds of the issuance of the Securities or (e) the status of such Buyer
or holder of the Securities as an investor in the Company. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. The corporate laws of the State of
Delaware shall govern all issues concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each
-17-
party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction.
b. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of this Agreement may be amended other than by an instrument in writing signed
by the Company and the holders of at least two-thirds (2/3) of the Preferred
Shares then outstanding, and no provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Preferred Shares then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents or
the Certificate of Designations unless the same consideration also is offered
to all of the parties to the Transaction Documents or holders of Preferred
Shares, as the case may be.
-18-
f. Notices. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically generated and
kept on file by the sending party); (iii) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
Enamelon, Inc.
0 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Financial Officer
With a copy to:
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxx, Esq.
If to the Transfer Agent:
North American Transfer Company
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile:000-000-0000
Attention: Xxxxxxx Xxxxxxxxx
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Preferred Shares. Except as in
compliance with Section 3 of the Certificate of Designations, the Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of two-thirds (2/3) of the Preferred
Shares then outstanding including
-19-
by merger or consolidation. Any Buyer may assign this Agreement, any of its
rights and obligations under this Agreement and/or any of the Securities to
affiliates and associates of such Buyer, to any other Buyer and to any other
Buyer's affiliates and associates without the consent of the Company, and to
others, with the consent of the Company, which consent shall no be
unreasonably withheld; provided, however, that any such assignment shall not
release such Buyer from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption. Notwithstanding anything to the contrary contained in the
Transaction Documents, Buyer shall be entitled to pledge the Securities in
connection with a bona fide margin account.
h. 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.
i. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section
8, shall survive each of the Closings. Each Buyer shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations (although
each Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before three (3) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 9(l), the Company shall remain obligated to reimburse
the non-breaching Buyers for the expenses described in Section 4(i) above.
m. Placement Agent. Each of the Company and the Buyers, on
their own behalf, acknowledges that it has not engaged a placement agent in
connection with the sale of the Preferred Shares. The Company shall be
responsible for the payment of any placement agent's fees or broker's
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commissions relating to or arising out of the purchase of the Securities by
the Buyers other than placement agent's fees or broker's commissions relating
to or arising solely and directly from the actions of the Buyers. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
o. Remedies. Each Buyer and each holder of Preferred Shares
or Conversion Shares shall have all rights and remedies set forth in this
Agreement and the Certificate of Designations and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any
person or entity having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Certificate of
Designations or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other person or entity under any law (including,
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
* * * * * *
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IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
ENAMELON, INC. HFTP INVESTMENTS LLC
By: Promethean Investment Group
L.L.C.
Its: Investment Manager
By: /s/ Xx. Xxxxxx X. Xxx By: /s/ Xxxxx X. X'Xxxxx, Xx.
---------------------------------- -----------------------------------
Name: Dr. Xxxxxx Xxx Name: Xxxxx X. X'Xxxxx, Xx.
Its: Chief Executive Officer Its: President
XXXXXX CAPITAL LTD.
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Its: An Authorized Signatory
XXXXXXX CAPITAL LTD.
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Its: An Authorized Signatory
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SCHEDULE OF BUYERS
Number of
Investor Address Preferred Investor's Representatives' Address
Investor Name and Facsimile Number Shares and Facsimile Number
------------------------- ---------------------------------------- --------- ------------------------------------
HFTP Investments LLC c/o Promethean Investment Group, L.L.C. 250 Promethean Investment Group, L.L.C.
00 Xxxx 00xx Xxxxxx, Xxxxx 0000 00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 10019 Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. X'Xxxxx, Xx. Attn: Xxxxx X. X'Xxxxx, Xx.
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Residence: New York Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: 312-902-1061
Xxxxxx Capital Ltd. c/o Citadel Investment Group, L.L.C. 163 Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx 000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx Attention: Xxxxxx Xxxxxxx
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Residence: Cayman Islands
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: 312-902-1061
Xxxxxxx Capital Ltd. c/o Citadel Investment Group, L.L.C. 87 Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx 000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx Attention: Xxxxxx Xxxxxxx
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Residence: Cayman Islands
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: 312-902-1061
