EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of May 7,
2003, by and among StemCells, Inc., a Delaware corporation, with headquarters
located at 0000 Xxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxx 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 each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and
Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
B. Each Buyer wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, (i) that aggregate
principal amount of shares of the Company's Common Stock, par value $0.01 per
share (the "COMMON STOCK") set forth opposite such Buyer's name in column (3) on
the Schedule of Buyers (which aggregate amount for all Buyers together shall be
$6,500,000 and shall collectively be referred to herein as the "COMMON SHARES")
and (ii) warrants, in substantially the form attached hereto as Exhibit A (the
"WARRANTS"), to acquire 1,898,000 shares of Common Stock (as exercised,
collectively, the "WARRANT SHARES");
C. Contemporaneously with the consummation of the transactions
contemplated by this Agreement, the parties have agreed to execute and deliver a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company
will agree to provide certain registration rights with respect to the Common
Shares, and the Warrant Shares under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
D. The Common Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the "SECURITIES".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
(a) Purchase of Common Shares and Warrants.
Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6(a) and 7(a) below, the Company shall issue
and sell to each Buyer, and each Buyer severally, but not jointly, agrees to
purchase from the Company on the Closing Date (as defined below), the number of
Common Shares as is set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers, along with Warrants to acquire that number of Warrant Shares
as is set forth opposite such Buyer's name in column (4) on the Schedule of
Buyers (the "CLOSING").
(b) Purchase Price. The purchase price for each Buyer
(the "PURCHASE PRICE") of the Common Shares and related Warrants to be purchased
by each such Buyer at Closing shall be equal to $1.625 for each Common Share and
related Warrants being purchased by such Buyer at the Closing.
(c) Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m., New York City Time, on the second Business
Day after notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and each Buyer).
(d) Form of Payment. On the Closing Date, (i) each Buyer
shall pay its Purchase Price to the Company for the Common Shares and Warrants
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, the Common
Shares (in the amounts as such Buyer shall request) that such Buyer is then
purchasing along with the Warrants (in the amounts as such Buyer shall request)
such Buyer is purchasing, duly executed on behalf of the Company and registered
in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
as of the date hereof and as of the Closing Date that:
(a) No Public Sale or Distribution; Prior Sales. Such
Buyer is (i) acquiring the Common Shares and the Warrants and (ii) upon exercise
of the Warrants will acquire the Warrant Shares issuable upon exercise thereof,
for its own account in the ordinary course of its business for investment
purposes 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 and has no agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities; 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. On each
of May 6, 2003 and May 7, 2003, such Buyer has not sold any shares of Common
Stock.
(b) Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) 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 the Securities.
(d) Information. Such Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances,
prospects and operations of the Company and each Subsidiary 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 herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk and is able to afford a complete loss of such investment. 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.
(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 form reasonably acceptable 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 reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "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 (as defined in Section 3(r)) 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 the Securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. The Securities may be pledged in
connection with a bona fide margin account or other loan secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities 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, including, without limitation, this Section 2(f);
provided, that in order to make any sale, transfer or assignment of Securities,
such Buyer and its pledgee makes such disposition in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.
(g) Legends. Such Buyer understands that the certificates
or other instruments representing the Common Shares and the Warrants and, until
such time as the resale
of the Common Shares and the Warrant Shares have been registered under the 1933
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Common Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "blue sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN] [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 MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
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 a
sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act and that such legend is no longer
required, or (iii) such holder provides the Company with reasonable assurance
that the Securities can be sold, assigned or transferred pursuant to Rule 144
and that such legend is no longer required.
(h) Validity; Enforcement. This Agreement has been, and
the Registration Rights Agreement will be on the Closing Date, duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or 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 country
or state specified below its address on the Schedule of Buyers.
(j) Organization. Such Buyer duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization, and has the requisite power and authorization to execute and
deliver this Agreement and to consummate the transaction contemplated hereby.
(k) No Conflicts. The execution, delivery and performance
of this Agreement and the Registration Rights Agreement by such Buyer and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the constituent documents of such Buyer 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 instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
applicable to such Buyer or by which any property or asset of such Buyer is
bound or affected, except in the case of clauses (ii) and (iii), for such
breaches or defaults as would not be reasonably expected to have a material
adverse effect on such Buyer's ability to consummate the transactions
contemplated hereby.
(l) No Other Representations and Warranties. Each Buyer
acknowledges that, except for the representations and warranties contained in
the Transaction Documents, the Seller is not making any other express or implied
representation or warranty on its behalf.
(m) General Solicitation. Such Buyer is not purchasing
the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as is set forth in the SEC Documents (as defined below)
or the Disclosure Schedules, the Company represents and warrants to each of the
Buyers as of the date hereof and as of the Closing Date that:
(a) Organization and Qualification. Each of the Company
and its Subsidiaries 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 authorization to own their properties
and to carry on their business as now being conducted. Each of the Company and
each Subsidiary 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, 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). For purposes of
this Agreement, "SUBSIDIARY" means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest. The Company has no Subsidiaries other than StemCells
California, Inc., a California corporation.
(b) Authorization; Enforcement; Validity. The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants and each of the other agreements entered into or to be entered into on
the Closing Date 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. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Common Shares and the
Warrants and the reservation for issuance and the issuance of the Warrant Shares
issuable upon exercise thereof have been duly authorized by the Company's Board
of Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders. This Agreement and the other
Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except (i) 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 applicable creditors' rights and
remedies, or (ii) as any rights to indemnity or contribution hereunder may be
limited by federal and state securities laws and public policy consideration. As
of the Closing, the Transaction Documents dated as of the Closing Date and
required to have been executed and delivered with respect to the Closing shall
have been duly executed and delivered by the Company, and shall constitute the
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except (i) 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 applicable creditor's
rights and remedies or (ii) as any rights to indemnity or contribution hereunder
may be limited by federal and state securities laws and public policy
consideration.
(c) Issuance of Securities. The Common Shares and
Warrants are duly authorized and, upon issuance in accordance with the terms
hereof, shall be free from all taxes, liens and charges with respect to the
issue thereof. As of the Closing Date, the Company shall have duly authorized
and reserved for issuance a number of shares of Common Stock which equals the
number of Warrant Shares. The Company shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued Capital Stock, solely for the purpose of effecting the
exercise of the Warrants, 120% of the number of shares of Common Stock issuable
upon exercise of the Warrants. Upon exercise in accordance with the Warrants,
the Warrant 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.
Assuming the accuracy of each of the representations and warranties set forth in
Section 2 hereof, the offer and sale by the Company of the Securities is exempt
from registration under the 1933 Act.
(d) No Conflicts. Assuming the accuracy of all
representations made by the Buyers herein, 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 (including,
without limitation, the issuance of the Common Shares and Warrants and
reservation for issuance and issuance of the Warrant Shares) will not (i) result
in a violation of the certificate of incorporation, any certificate of
designations, preferences and rights of any outstanding series of preferred
stock or Bylaws of the Company or any Subsidiary 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
instrument to which the Company or any Subsidiary is a party, or (iii) 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 NASDAQ SmallCap Market (the "PRINCIPAL MARKET")) applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, except in the case of clauses (ii) and
(iii), for such breaches or defaults as would not be reasonably expected to have
a Material Adverse Effect.
(e) Consents. The Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in
accordance with the terms hereof or thereof. 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 Closing Date other than (i) the filing with the Commission of the
Registration Statement, the application(s) to the Principal Market for the
listing of the Common Shares and Warrant Shares for trading thereon in the time
and manner required thereby, and applicable Blue Sky filings, (b) such as have
already been obtained and the filing of a Form D with the SEC, and (c)
compliance with Rule 4310(c)(17) of the National Association of Securities
Dealers, Inc. The Company and each Subsidiary are unaware of any facts or
circumstances that might prevent the Company from obtaining or effecting any of
the foregoing. Except (i) for the facts that the Common Stock has previously
traded below $1.00 and the Company's shareholders equity is (as of the date
hereof) less than $2.5 million and (ii) as disclosed on Schedule 3(e), the
Company is not in violation of the listing requirements of the Principal Market
and has no knowledge of any facts that would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of
Securities. The Company acknowledges and agrees that each Buyer is acting solely
in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and 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.
(g) No General Solicitation; Placement Agent's Fees.
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) in connection with the offer or
sale of the Securities. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor, or at the
direction of any of them) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorney's fees and out-of-pocket expenses) arising in connection with any such
claim.
(h) No Integrated Offering. None of the Company, any
Subsidiary, any of their affiliates, and any Person acting on 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 require
registration of any of the Securities under the 1933 Act or cause this offering
of the 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 any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. None of the Company, any Subsidiary, their affiliates and
any Person acting on their behalf will take any action or steps referred to in
the preceding sentence that would require registration of any of the Securities
under the 1933 Act (other than pursuant to the Registration Rights Agreement) or
cause the offering of the Securities to be integrated with other offerings.
(i) Dilutive Effect. The Company understands and
acknowledges that the number of Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
(j) Application of Takeover Protections; Rights
Agreement. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation (as defined in Section 3(q)) or the laws of the state of its
incorporation which is or could become applicable to any Buyer as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and any Buyer's ownership of the
Securities.
(k) SEC Documents; Financial Statements. Since December
31, 2001, the Company has timely 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 1934 Act (all of the foregoing filed prior to the
date hereof or prior to the date of the Closing, 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, correct and complete copies of the SEC Documents not
available on the XXXXX system. 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 the 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 SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
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 and each Subsidiary 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). After giving effect to the 8-K Filing (as defined
below), 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.
(l) Absence of Certain Changes. Except as disclosed in
Schedule 3(l), since December 31, 2002, 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 any
Subsidiary. Since December 31, 2002, the Company has not (i) declared or paid
any dividends (other than in connection with the Company's 3% Cumulative
Convertible Preferred Stock), (ii) sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
(iii) had capital expenditures, individually or in the aggregate, in excess of
$500,000. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company, after giving effect to the transactions contemplated hereby to
occur at each Closing, will not be Insolvent (as defined below). For purposes of
this Section 3(l), "INSOLVENT" means (i) the present fair saleable value of the
Company's assets is less than the amount required to pay the Company's total
indebtedness, contingent or otherwise, (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(m) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or any
Subsidiary or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the
Company nor any Subsidiary is in violation of any term of or in default under
its Certificate of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or Bylaws
or their organizational charter or bylaws, respectively. Neither the Company nor
any Subsidiary is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or any Subsidiary,
except for possible violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in Section 3(e)
hereof (including Schedule 3(e)) and without limiting the generality of the
foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Except as set
forth in Section 3(e) hereof (including Schedule 3(e)), since December 23, 2002,
(i) the Common Stock has been designated for quotation or listed on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. 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
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of its certificate, authorization or permit.
(o) Foreign Corrupt Practices. Neither the Company, nor
any Subsidiary, nor any director, officer, agent, employee or other Person
acting on behalf of the Company or any Subsidiary has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(p) Transactions With Affiliates. Except as set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 2002,
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or any Subsidiary (other than for ordinary
course services as employees, officers or 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 such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(q) Equity Capitalization. Except for subsequent
issuances of common stock upon exercise or conversion of common stock
equivalents set forth in the Company's most recent periodic report filed with
the SEC, the capitalization of the Company is as set forth in the Company's most
recent periodic report and most recent current report on Form 8-K filed with the
SEC. Except as set forth in the SEC Documents (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 options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of capital stock of the Company or any
Subsidiary or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any Subsidiary; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness (as defined in Section 3(r)) of
the Company or any Subsidiary or by which the Company or any Subsidiary is or
may become bound; (iv) there are no financing statements securing obligations in
any material amounts, either singly or in the aggregate, filed in connection
with the Company; (v) there are no agreements or arrangements under which the
Company or any Subsidiary is obligated to register the sale of their securities
under the 1933 Act (except the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any Subsidiary which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to redeem a security of the Company or any
Subsidiary; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents (as defined herein) but not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company's or any Subsidiary's respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect. The Company has furnished to the Buyer true, correct and complete copies
of the Company's Certificate of Incorporation, as amended and as in effect on
the date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's Bylaws,
as amended and as in effect on the date hereof (the "BYLAWS"), and the terms of
all securities convertible into, or exercisable or exchangeable for, Common
Stock and the material rights of the holders thereof in respect thereto.
(r) Indebtedness and Other Contracts. Except as disclosed
in the SEC Documents, neither the Company nor any Subsidiary (i) has any
material outstanding Indebtedness (as defined below), (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument would
result in a Material Adverse Effect, (iii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. The SEC Documents set forth each of
the Company's "material contracts," as such term is used in Item 601 of
Regulation S-K promulgated by the SEC. For purposes of this Agreement: (x)
"INDEBTEDNESS" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, change, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(s) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by the Principal Market, any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company, the Common Stock or any Subsidiary or any of the Company's or any
Subsidiary's officers or directors in their capacities as such.
(t) Insurance. The Company and its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(u) Employee Relations. (i) Neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company (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. No executive officer of the Company, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any Subsidiary to any liability with
respect to any of the foregoing matters.
(ii) The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(v) Title. The Company and its Subsidiaries have 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 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 and its Subsidiaries. Neither the Company nor any
Subsidiary owns any real property. Any real property and facilities held under
lease by the Company and 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.
(w) 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 other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted. Except as set forth in Schedule 3(w), none of the
Company's issued patents that are assigned to it or any Intellectual Property
Rights that are material to the business of the Company have expired or
terminated, or are expected to expire or terminate within three years from the
date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or any Subsidiary of Intellectual Property Rights of
others except where such infringement would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or any Subsidiary regarding its
Intellectual Property Rights which could have a Material Adverse Effect. The
Company is unaware of any facts or circumstances which might give rise to any of
the foregoing infringements or claims, actions or proceedings. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
(x) Environmental Laws. The Company and its Subsidiaries
(i) are in compliance with any and all Environmental Laws (as hereinafter
defined), (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 foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(y) Subsidiary Rights. The Company has the unrestricted
right to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of each Subsidiary as
owned by the Company.
(z) Tax Status. The Company and each Subsidiary (i) 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, (ii) 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 (iii) 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
reasonable basis for any such claim.
(aa) Internal Accounting Controls. The Company and each
Subsidiary 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 generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. In
addition, the Company has established and maintains disclosure controls and
procedures as defined in Rule 13a-14 under the 1934 Act and in compliance with
Rule 13a-15 under the 1934 Act.
(bb) Disclosure. Except for the existence and terms of
this Agreement and the transactions contemplated hereby, the Company confirms
that neither it nor any other Person acting on its behalf has provided any of
the Buyers or their respective agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The Borrower
understands and confirms that each of the Buyers will rely on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to the Buyers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any Subsidiary or either of its or their respective business, properties,
prospects, operations or financial conditions, 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 (assuming for this purpose
that the Company's reports filed under the Exchange Act of 1934, as amended, are
being incorporated into an effective registration statement filed by the Company
under the 1933 Act). The Company acknowledges and agrees that no Buyer makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.
(cc) Xxxxxxxx-Xxxxx Act. The Company is in compliance with
any and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have a Material Adverse
Effect.
(dd) FDA Compliance. The Company and its Subsidiaries, and
the manufacture, marketing and sales of the Company's products, complies with
any and all applicable requirements of the Federal Food, Drug and Cosmetic Act,
21 U.S.C. ss.301, et seq., any rules and regulations of the Food and Drug
Administration promugulated thereunder, and any similar laws outside of the
United States to which the company is subject, except where such noncompliance
would not have a Material Adverse Effect.
4. COVENANTS.
(a) Reasonable Best Efforts. Each party shall use its
reasonable 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 and Blue Sky. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities 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 (or to obtain an exemption from such qualification), 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 that it reasonably
determines are necessary relating to the offer and sale of the Securities
required under applicable securities or "Blue Sky" laws of the states of the
United States following the Closing Date; provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction.
Each Buyer shall cooperate with the Company in connection with such filings and,
upon the request of the Company, will provide all information relating to the
Buyer reasonably required for such filing.
(c) Reporting Status. Until the date on which the
Investors (as defined in the Registration Rights Agreement) shall have sold all
the Common Shares and Warrant Shares and none of the Warrants is outstanding
(the "REPORTING PERIOD"), the Company shall timely 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 Securities for working capital, general corporate and other
purposes.
(e) Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period (i) unless the following
are filed with the SEC through XXXXX and are available to the public through the
XXXXX system, within one (1) Business Day after the filing thereof with the SEC,
a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as
the public release thereof, facsimile copies of all press releases issued by the
Company or any Subsidiary, 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. As used herein, "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
(f) 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, 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. The Company
shall use its best efforts to maintain the Common Stock's authorization for
quotation on the Principal Market. Neither the Company nor any Subsidiary shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market and shall comply, in all
material respect, with the rules and regulations of the Principal Market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees. The Company shall reimburse the Buyers in the
aggregate $10,000 for the Buyers reasonable expenses incurred in connection with
the preparation, execution and performance of this Agreement and the
transactions contemplated hereunder. The Company shall be responsible for the
payment of any placement agent's fees or broker's commissions relating to or
arising out of the transactions contemplated hereby. Except as otherwise set
forth in this Agreement or in the Registration Rights Agreement, each party to
this Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities 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, including, without limitation, Section 2(f) of this Agreement;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.
(i) Disclosure of Transactions and Other Material
Information. On or before 8:30 a.m., New York City Time, on the third Trading
Day following the Closing Date, the Company shall file a Current Report on Form
8-K describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules to this Agreement), the form of Warrant and the form of Registration
Rights Agreement) as exhibits to such filing (including all attachments, the
"8-K FILING"). From and after the filing of the 8-K Filing with the SEC, no
Buyer shall be in possession of any material, nonpublic information received
from the Company, any Subsidiary or any of its respective officers, directors,
employees or agents, that is not disclosed in the 8-K Filing. The Company shall
not, and shall cause each Subsidiary and each of its respective officers,
directors, employees and agents, not to, provide any Buyer with any material
nonpublic information regarding the Company or any Subsidiary from and after the
filing of the 8-K Filing with the SEC (x) without the express written consent of
such Buyer and (y) unless such Buyer shall have executed a customary and
reasonable written agreement regarding the confidentiality of such information;
provided, however, that an attempt by the Company to comply with the provisions
of Section 4(l) hereof shall not be deemed to violate this Section 4(i). In the
event of a breach of the foregoing covenant by the Company, any Subsidiary, or
its each of respective officers, directors, employees and agents, in addition to
any other remedy provided herein or in the Transaction Documents, a Buyer shall
have the right to demand that the Company make a public disclosure, and if the
Company fails to do so within two Business Days the Buyer may make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information without the prior approval by the
Company, each Subsidiary, or each of its respective officers, directors,
employees or agents. No Buyer shall have any liability to the Company, any
Subsidiary, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure unless such Buyer acts with gross
negligence or willful misconduct. Subject to the foregoing, neither the Company
nor any Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby without the prior written
consent of the Company, in the case of such a press release or public statement
by any Buyer, or the Buyers, in the case of such a press release or public
statement by the Company, such consent not to be unreasonably withheld or
delayed; 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 (i) in substantial conformity with
the 8-K Filing (1) and contemporaneously therewith or (2) in connection with
the Company's periodic reports filed with the Commission and (ii) as is required
by applicable law and regulations, including the applicable rules and
regulations of the Principal Market (provided that in the case of clause (i)
each Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release).
(j) Additional Securities; Additional Registration
Statements. For so long as any Buyer beneficially owns any Warrants, the Company
will not issue any other securities that would cause a breach or default under
the Warrants. Except as disclosed on Schedule 4(j), until such time as the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the SEC, the Company will not file a registration
statement under the 1933 Act relating to securities that are not the Securities.
(k) Corporate Existence. So long as any Buyer
beneficially owns any Warrants, the Company shall not effect a merger or
consolidation or sale of all or substantially all of the Company's assets unless
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose common stock
is quoted on or listed for trading on a Principal Market.
(l) Right to Match. (i) For a period of 12 months
following the Closing Date, the Company shall not issue, sell or exchange, agree
or obligate itself to issue, sell or exchange or reserve or set aside for
issuance, sale or exchange, (A) any shares of Common Stock, (B) any other equity
security of the Company, including without limitation shares of preferred stock,
(C) any debt security of the Company (other than debt with no equity feature),
including without limitation any debt security which by its terms is convertible
into or exchangeable for any equity security of the Company, (D) any security of
the Company that is a combination of debt and equity, or (E) any option, warrant
or other right to subscribe for, purchase or otherwise acquire any such equity
security or any such debt security of the Company (any security described in the
foregoing (A) through (E) being the "OTHER INVESTORS OFFERED SECURITIES"),
unless in each case the Company shall simultaneously offer to sell to the Buyers
identical securities in identical aggregate amounts, units, or principal
amounts, and in all respects upon terms and conditions, including, without
limitation, unit price and interest rates, identical to the Other Investors
Offered Securities (the "BUYER OFFERED SECURITIES"), as follows: In connection
with any offering of Other Investors Offered Securities, the Company shall offer
to sell to each Buyer (1) that portion of the Buyer Offered Securities as the
number of shares of Common Stock (including all Common Shares and Warrant Shares
on an as-converted basis) then held by such Buyer and acquired pursuant to the
terms of the Transaction Documents, bears to the total number of shares of
Common Stock (including all shares of capital stock convertible into Common
Stock on an as-converted basis) held on such date by all Buyers and acquired
pursuant to the terms of the Transaction Documents (the "BASIC AMOUNT"), and (2)
such additional portion of the Buyer Offered Securities as such Buyer shall
indicate it will purchase should the other Buyers subscribe for less than their
Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT"), at a price and on such other
terms as shall have been specified by the Company in writing delivered to such
Buyer (the "OFFER"), which Offer by its terms shall remain open and irrevocable
for a period of twenty (20) days from receipt of the Offer.
(ii) Notice of each Buyer's intention to accept,
in whole or in part, any
Offer made pursuant to Section 4(l)(i) shall be evidenced by a writing signed by
such Buyer and delivered to the Company prior to the end of the 20-day period of
such offer, setting forth such of the Buyer's Basic Amount as such Buyer elects
to purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the Undersubscription Amount as such Buyer shall elect to purchase (the "NOTICE
OF ACCEPTANCE"). If the Basic Amounts subscribed for by all Buyers are less than
the total Buyer Offered Securities then each Buyer who has set forth
Undersubscription Amounts in its Notice of Acceptance shall be entitled to
purchase all Undersubscription Amounts it has subscribed for; provided, however,
that should the Undersubscription Amounts subscribed for exceed the difference
between the Buyer Offered Securities and the Basic Amounts subscribed for (the
"AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Buyer bears to the total Undersubscription Amounts subscribed for by
all Buyers, subject to rounding by the Board of Directors to the extent it deems
reasonably necessary.
(v) Closing. Upon each closing under this
Section 4(l), which shall include full payment to the Company, simultaneously
with the purchase of the Other Investors Offered Securities, the Buyer shall
purchase from the Company, and the Company shall sell to the Buyer the number of
Buyer Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4(l)(iv) if the Buyers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Buyers of any Buyer
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Buyers of a purchase agreement relating to such
Buyer Offered Securities reasonably satisfactory in form and substance to the
Buyers and their respective counsel.
(vi) Further Sale. In each case, any Buyer
Offered Securities not purchased by the Buyers and any Other Investors Offered
Securities not purchased by any other Person or Persons in accordance with
Section 4 may not be sold or otherwise disposed of until they are again offered
to the Buyers to the same extent, and under the procedures, specified in Section
4(l).
(vii) Exception. The rights of the Buyers under
this Section 4(l) shall not apply to: (A) Common Stock issued as a stock
dividend to holders of Common Stock or upon any subdivision or combination of
shares of Common Stock, (B) shares of Common Stock issued upon exercise of the
Warrants, (C) securities of the Company issued in connection with (1) one or
more strategic partnerships or joint ventures in which there is a significant
commercial relationship with the Company, (2) the acquisition of any other
business or entity, (3) research, licensing, collaboration, joint venture or
similar arrangement, or (4) compensation or similar arrangements with employees,
officers, directors, consultants or service providers (which, in the case of
consultants or service providers, does not involve any cash payment by such
consultant or service provider).
(m) Reservation of Shares. The Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, from and after the Closing Date, a number of shares of Common Stock
issuable upon exercise of the Warrants being issued at the Closing in conformity
with Section 3(c).
(n) No Short Sales. Each Buyer agrees, solely as to
itself and its affiliates, that, from and after the date hereof and at any time
that such Buyer holds any Securities, such Buyer shall not engage in short sales
of the Common Stock in amounts that exceed the sum of the number of shares of
Common Stock held by such Buyer and its affiliates and the number of shares of
Common Stock issuable pursuant to the exercise or conversion of any other
security (without regard to limitations on exercise or conversion contained
therein, if any) held by such Buyer and its affiliates.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Warrants), a register for the Warrants, in
which the Company shall record the name and address of the Person in whose name
the Warrants have been issued (including the name and address of each
transferee), and the number of Warrant Shares issuable upon exercise of the
Warrants held by such Person. The Company shall keep the register open and
available at all times during business hours for inspection of any Buyer or its
legal representatives.
(b) Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at DTC, registered in the name of each Buyer or its respective nominee(s), for
the Warrant SHARES in such amounts as specified from time to time by each Buyer
to the Company upon exercise of the Warrants in the form of Exhibit C attached
hereto (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(f) hereof, 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
other Transaction Documents. If a Buyer effects a sale, assignment or transfer
of the Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves Common Shares or Warrant Shares sold, assigned or transferred pursuant
to an effective registration statement or pursuant to Rule 144 where no transfer
restrictions or limitations will apply after such transaction, the transfer
agent shall issue such Common Shares or Warrant Shares, as the case may be, to
the Buyer, assignee or transferee, as the case may be, without any restrictive
legend. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
(a) Closing Date. The obligation of the Company hereunder
to issue and sell the Common Shares and the related Warrants 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:
(i) Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company.
(ii) Such Buyer shall have delivered to the
Company the Purchase Price (less, the amounts withheld pursuant to Section 4(g))
for the Common Shares and the related Warrants being purchased by such Buyer at
the Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The representations and warranties of such
Buyer shall be true and correct in all material respects (except for
representations and warranties that are qualified by materiality, which shall be
true and correct in all 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
speak as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects (except for covenants, agreements and
conditions that are qualified by materiality, which shall be complied with in
all respects) with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date. The Company shall have received a certificate, executed by
an authorized officer of each Buyer, dated as of the Closing Date, to the
foregoing effect in the form attached hereto as Exhibit D.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
(a) Closing Date. The obligation of each Buyer hereunder
to purchase the Common Shares and the related Warrants 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 by providing the
Company with prior written notice thereof:
(i) The Company shall have executed and
delivered to such Buyer (i) each of the Transaction Documents and (ii) the
Common Shares (in such amounts as such Buyer shall request) and the related
Warrants (in such amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement.
(ii) Such Buyer shall have received the opinion
of Ropes & Xxxx LLP, 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 E attached hereto.
(iii) The Company shall have delivered to such
Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of
Exhibit C attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
(iv) The Company shall have delivered to such
Buyer a certificate evidencing the incorporation and good standing of the
Company in its state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within 10 days of the Closing Date.
(v) The Company shall have delivered to such
Buyer a certificate evidencing the Company's qualification as a foreign
corporation and good standing issued by the Secretary of State of the State of
California as of a date within 10 days of the Closing Date.
(vi) The Company shall have delivered to such
Buyer a certified copy of the Certificate of Incorporation as certified by the
Secretary of State of the State of Delaware within 10 days of the Closing Date.
(vii) The Company shall have delivered to such
Buyer a certificate, executed by the Secretary of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section 3(b) as
adopted by the Company's Board of Directors in a form reasonably acceptable to
such Buyer (the "RESOLUTIONS"), (ii) the Certificate of Incorporation and (iii)
the Bylaws, each as in effect at the Closing, in the form attached hereto as
Exhibit F.
(viii) The representations and warranties of the
Company shall be true and correct in all material respects (except for
representations and warranties that are qualified by materiality, which shall be
true and correct in all 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
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects (except for covenants, agreements and
conditions that are qualified by materiality, which shall be complied with in
all respects) 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 in the form attached hereto as Exhibit G.
(ix) The Company shall have delivered to such
Buyer a letter from the Company's transfer agent certifying the number of shares
of Common Stock outstanding as of a date within five days of the Closing Date.
(x) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Common Shares and the Warrants, including,
without limitation, the expiration or waiver of the 15-day period set forth in
Rule 4310(c)(17) of the National Association of Securities Dealers, Inc.
(xi) 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. TERMINATION. In the event that the Closing shall not have
occurred with respect to a Buyer on or before forty-five (45) 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 8, the Company shall remain obligated to reimburse the Buyers for the
expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All
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 party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, 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.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(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 party; 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 Common Shares representing at least a majority of
the amount of the Common Shares, or, if prior to the Closing Date, the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least a
majority of the amount of the Common Shares. 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 Common 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 unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Common Shares or holders of the Warrants,
as the case may be. 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.
(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 or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier 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:
StemCells, Inc.
0000 Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx XxXxxxx
with a copy to:
Ropes & Xxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx Xxxxx
If to the Transfer Agent:
EquiServe Trust Company, L.P.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers, or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(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 Common Shares or the
Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of Common
Shares representing at least a majority of the number of the Common Shares. A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.
(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 8, 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 shall survive the Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) 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.
(k) 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, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(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 to the extent resulting
from or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, or (iii) the status of such 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. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.
(l) 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.
(m) Remedies. Each Buyer and each holder of the
Securities shall have all rights and remedies set forth in the Transaction
Documents 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 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.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under this Agreement, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company
makes a payment or payments to the Buyers hereunder or pursuant to any of the
other Transaction Documents 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 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.
(o) Independent Nature of Buyers' Obligations and Rights.
The obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitations, the rights arising out of this Agreement or out of any
other Transaction Documents, and it shall not be necessary for any other Buyer
to be joined as an additional party in any proceeding for such purpose.
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
STEMCELLS, INC. THE RIVERVIEW GROUP, LLC
By: /s/ Xxxx Xxxxx By: /s/ Xxxxx Xxxxxx
--------------------------- ---------------------------------
Name: Xxxx Xxxxx Name: Xxxxx Xxxxxx
Title: General Counsel Title: Chief Operating Officer
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
NUMBER OF
COMMON NUMBER OF LEGAL REPRESENTATIVE'S
BUYER ADDRESS AND FACSIMILE NUMBER SHARES WARRANTS ADDRESS AND FACSIMILE NUMBER
---------------------------------------------------------------------------------------------------------------------------------
THE RIVERVIEW GROUP, 000 Xxxxx Xxxxxx, 0xx xxxxx 4,000,000 1,898,000 Xxxxxxx Xxxx & Xxxxx LLP
LLC Xxx Xxxx, Xxx Xxxx 00000 000 Xxxxx Xxxxxx
Attention: Manager Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000 Attn: Xxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
Residence: New York Telephone: (000) 000-0000
EXHIBITS
Exhibit A Form of Warrants
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Irrevocable Transfer Agent Instructions
Exhibit D Form of Buyer Certificate
Exhibit E Form of Company Counsel Opinion
Exhibit F Form of Secretary's Certificate
Exhibit G Form of Officer's Certificate
SCHEDULES
Schedule 3(e) Consents
Schedule 3(l) Absence of Certain Changes
Schedule 3(w) Intellectual Property
Schedule 4(j) Additional Registration Statements
SCHEDULE 3(e)
The Company received a letter from Nasdaq on April 22, 2003 informing it that
the Company's closing bid price was below $1.00 for thirty consecutive days.
SCHEDULE 3(l)
None.
SCHEDULE 3(w)
None.
SCHEDULE 4(j)
Pursuant to an Agreement dated April 9, 2003 between the Company and Riverview
Group, L.L.C. ("Riverview"), the Company will file a registration statement
covering the resale by Riverview of shares of the Company's common stock.
