EXHIBIT 8
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 31,
2006, is entered into by and between Aksys, Ltd., a Delaware corporation, with
headquarters located at Two Marriott Drive, Lincolnshire, Illinois 60069 (the
"Company"), and Durus Life Sciences Master Fund Ltd., a Cayman Islands company
("Durus" or the "Investor," and, collectively with other investors listed on the
Schedule of Investors attached hereto as Exhibit A, as amended (the "Schedule of
Investors"), the "Investors").
RECITALS
A. The Company desires to issue a series of convertible preferred stock of
the Company designated as Series B Convertible Preferred Stock (the "Preferred
Shares"), the terms of which are set forth in the certificate of designation for
such series of preferred stock in the form attached hereto as Exhibit B (the
"Certificate of Designation"). The Preferred Shares shall be convertible into
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), pursuant to the terms of the Certificate of Designation (such shares of
Common Stock into which the Preferred Shares may be converted hereinafter
referred to as the "Conversion Shares") and otherwise in accordance with the
terms of the Certificate of Designation.
B. The Company also desires to issue warrants (the "Warrants") pursuant to
a Warrant Agreement, substantially in the form attached hereto as Exhibit C (the
"Warrant Agreement"), by and between the Company and the Warrant Agent (as
defined in the Warrant Agreement), which Warrants may be exercised for a period
of five (5) years from their original date of issue to acquire shares of Common
Stock (the "Warrant Shares") at an initial exercise price of $1.10 per share and
otherwise in accordance with the terms of the Warrant Agreement. The Warrants
and the Preferred Shares will be issued in detachable Units ("Units"), each Unit
consisting of (i) one (1) Preferred Share (which initially may be converted into
1000 Conversion Shares pursuant to the terms of the Certificate of Designation)
and (ii) Warrants to purchase 1000 Warrant Shares at an initial exercise price
of $1.10 per share.
C. The Investor wishes to purchase, and the Company wishes to sell to the
Investor, upon the terms and conditions set forth in this Agreement, Units
consisting of (i) that aggregate number of Preferred Shares set forth opposite
the Investor's name on the Schedule of Investors and (ii) Warrants to purchase
that number of Warrant Shares equal to the number of Conversion Shares
underlying the Preferred Shares being purchased and set forth opposite the
Investor's name on the Schedule of Investors.
D. In connection with this Agreement, the Company and the Investor are
entering into a number of other agreements including: (i) a bridge loan
agreement and a loan agreement, substantially in the forms attached hereto as
Exhibits D and E, respectively (the "Bridge Loan" and the "Loan Agreement",
respectively, and hereinafter sometimes referred to collectively as the "Loan
Agreements"), pursuant to which the Company will be issuing certain notes (the
"New Notes") evidencing amounts owed by the Company under the Loan Agreements,
and which Loan Agreements and the obligations thereunder will be secured and
guaranteed as contemplated
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therein; and (ii) an Investor Rights Agreement, substantially in the form
attached hereto as Exhibit F (the "Investor Rights Agreement").
E. The Company has outstanding certain subordinated notes (the
"Outstanding Notes") issued pursuant to that certain Note Purchase Agreement,
dated as of February 23, 2004, by and among the Company, Durus and Artal Long
Biotech Portfolio LLC ("Artal") and is willing to accept the surrender of a
portion of the Outstanding Notes in exchange for the Preferred Shares and the
Warrants.
F. The Units, the Preferred Shares, the Warrants, the New Notes, the
Conversion Shares and the Warrant Shares are sometimes hereinafter referred to
collectively as the "Securities". In consideration of the premises, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
1.1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
1.1.1. On or prior to the Initial Closing, as hereinafter defined, the
Company shall adopt and file the Certificate of Designation
with the Secretary of State of the State of Delaware and
authorize, execute and deliver the Warrant Agreement.
1.1.2. On or prior to the Initial Closing, the Company shall have
authorized (i) the sale and issuance of the Preferred Shares;
(ii) the issuance of the Conversion Shares; (iii) the sale and
issuance of the Warrants; and (iv) the issuance of the Warrant
Shares.
1.1.3. The Preferred Shares shall be issued, and purchased by the
Investors, from time to time in accordance with the terms of
this Agreement in sub series, with the Preferred Shares issued
at the Initial Closing, as hereinafter defined, being
designated as the "Series B-1 Preferred Shares" and the
Preferred Shares issued at the first Subsequent Closing, as
hereinafter defined, being designated as the "Series B-2
Preferred Shares" and so on for each Subsequent Closing as
contemplated in Section 1.3. As provided in and subject to the
Certificate of Designation, all Preferred Shares across all sub
series shall have the same rights, preferences, privileges and
restrictions, except as to voting rights as described in the
Certificate of Designation. As used herein, the term "Preferred
Share" and "Preferred Shares" refers to a Preferred Share of
any sub series and all Preferred Shares across all sub series,
respectively
1.1.4. Subject to the terms and conditions of this Agreement, at the
Initial Closing, the Company shall issue to the Investor Units
consisting of (i) the number of Series B-1 Preferred Shares as
is set forth opposite the Investor's name on the Schedule of
Investors and (ii) Warrants to acquire that number of Warrant
Shares equal to the number of Conversion Shares underlying such
Preferred Shares and set forth opposite the Investor's name on
the Schedule of Investors.
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1.1.5. The Investors shall have the option, as contemplated in Section
1.3 and subject to the terms and conditions of this Agreement,
to purchase at one or more Subsequent Closings, as hereinafter
defined, and the Company agrees to sell and issue to the
Investors upon the exercise of such option, Units consisting of
(i) the number of Preferred Shares as is set forth opposite
each Investor's name on the Notice of Additional Investment as
provided in Section 1.3 and (ii) Warrants to acquire that
number of Warrant Shares equal to the number of Conversion
Shares underlying the Preferred Shares being purchased and set
forth opposite the Investor's name on the Notice of Additional
Investment. At each Subsequent Closing, the Company shall issue
and the Investors shall purchase Preferred Shares in
consecutive sub series as described in Section 1.1.3
1.2. ISSUANCE OF SECURITIES. In consideration of the payment of the purchase
price in the amount and manner contemplated in Section 1.5, the Company
shall deliver to an Investor the Preferred Shares and the Warrants
being purchased, each duly executed on behalf of the Company and
registered in the name of the Investor or its designees.
1.3. ADDITIONAL INVESTMENT.
1.3.1. Following the Initial Closing, the Investor shall have the
option, in its sole discretion, to purchase from the Company,
Units at a purchase price of $1,000 per Unit, each Unit
consisting of additional Preferred Shares and Warrants, for an
aggregate purchase price of up to $15,000,000. The Investor may
from time to time, in its sole discretion, assign this right,
in whole or in part, to one or more additional investors to be
designated by the Investor. Any such designated investor shall
execute and deliver a counterpart signature page to this
Agreement and each of the other Transaction Documents
applicable to a purchaser of Units of Preferred Shares and
Warrants under this Agreement and thereby, without any further
action by the Company or any Investor, become a party to and be
deemed to be an Investor under this Agreement, the Investor
Rights Agreement and each of the other Transaction Documents
applicable to a purchaser of Units of Preferred Shares and
Warrants under this Agreement, and all schedules and exhibits
hereto and thereto shall automatically be updated to reflect
such Investor as a party hereto and thereto.
1.3.2. The Investors may exercise the option to make an additional
investment by duly executing and delivering to the Company a
notice of additional investment in the form attached hereto as
Exhibit G (the "Notice of Additional Investment") setting
forth: (i) the names of the Investors; (ii) a declaration by
the Investors desiring to exercise the option to purchase
additional Units of Preferred Shares and Warrants as
contemplated in this Section 1.3; (iii) the number of Units of
Preferred Shares and Warrants that each Investor desires to
purchase at the Subsequent Closing; and (iv) the Subsequent
Closing Date. This option to purchase additional Units of
Preferred Shares and Warrants shall expire on the one (1) year
anniversary of the date that the Company receives shareholder
approval for the issuance of the Conversion Shares and the
Warrant Shares as contemplated in Section 4.13, and thereafter
shall be of no force and effect.
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1.4. CLOSINGS.
1.4.1. The initial closing of the sale and purchase of Units of Series
B-1 Preferred Shares and Warrants under this Agreement (the
"Initial Closing") shall take place at 10:00 a.m., San
Francisco time, on the fifth Business Day after the
satisfaction or waiver of the conditions to the Initial Closing
set forth in Sections 5 and 6.1, or on such other date or time
as shall be mutually agreed to by the Company and the Investor
(the "Initial Closing Date"). The Initial Closing shall occur
at the offices of Xxxxxxxx & Xxxxxxxx, 000 Xxxxxx Xxxxxx, Xxx
Xxxxxxxxx, XX 00000.
1.4.2. Following the Initial Closing, there may occur one or more
subsequent closings (each a "Subsequent Closing") in connection
with additional purchases of Units of Preferred Shares and
Warrants as contemplated in Section 1.3. A Subsequent Closing
shall take place at the offices of Xxxxxxxx & Xxxxxxxx at such
time and on such date as shall be set forth in the Notice of
Additional Investment or such other time and date as may be
mutually agreed to by the Company and the participating
Investors (each a "Subsequent Closing Date"). The Initial
Closing and a Subsequent Closing are sometimes hereinafter
referred to without distinction as a "Closing".
1.5. PURCHASE PRICE; MANNER OF PAYMENT.
1.5.1. At the Initial Closing, the Investor shall exchange five
million dollars ($5,000,000) in principal amount of Outstanding
Notes for five thousand (5,000) Units, each Unit consisting of
(i) one (1) Series B-1 Preferred Share (which initially may be
converted into 1000 Conversion Shares pursuant to the terms of
the Certificate of Designation) and (ii) Warrants with a term
of five (5) years from the date of issuance to purchase 1000
Warrant Shares at an initial exercise price of $1.10 per share.
1.5.2. At one or more Subsequent Closings, Investors shall have the
option to purchase up to an aggregate of fifteen thousand
(15,000) additional Units at a price of one thousand dollars
($1,000) per Unit, which purchase price shall be paid via wire
transfer of immediately available funds in accordance with wire
instructions provided by the Company. The number of Units to be
purchased by each Investor at a Subsequent Closing shall be as
set forth opposite the Investor's name on the Notice of
Additional Investment.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Investor that:
2.1. ORGANIZATION AND QUALIFICATION. The Company and its Subsidiaries are
duly organized, validly existing and in good standing under the laws of
the jurisdictions in
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which they are formed and have the requisite power and authority to own
their properties and to carry on their businesses as now being
conducted. The Company and its Subsidiaries are duly qualified as
foreign entities to do business and are in good standing in every
jurisdiction in which the ownership of property or the nature of their
businesses conducted by them makes such qualification necessary and
where the failure to qualify would reasonably be expected to have a
Material Adverse Effect. "Subsidiary" means any corporation,
association, partnership, limited liability company, joint venture or
other entity of which more than 50% of the voting stock or other equity
interest is owned directly or indirectly by any Person or one or more
of the other Subsidiaries of such Person or a combination thereof.
"Material Adverse Effect" means any event, matter, condition or
circumstance (including any such event, matter, condition or
circumstance which would occur upon notice or lapse of time or both)
which (i) has or would reasonably be expected to have a material
adverse effect on (A) the business, prospects, properties, assets,
operations, results of operations or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole, (B) the
intellectual property of the Company and its Subsidiaries, taken as a
whole, (C) the transactions contemplated in this Agreement or the other
Transaction Documents, as hereinafter defined, or by the agreements and
instruments to be entered into in connection herewith or therewith, or
(D) the authority or ability of the Company to perform its obligations
under this Agreement or the other Transaction Documents, or (ii)
materially adversely affects the legality, validity, binding effect or
enforceability of any of this Agreement or the other Transaction
Documents, the rights and remedies of the Investors hereunder and
thereunder, or the validity, perfection or priority of any lien granted
to the Investors under any of the Transaction Documents.
2.2. AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the requisite
power and authority to enter into and perform its obligations under
this Agreement, the Securities, the Certificate of Designation, the
Warrants, the New Notes, the Loan Agreements, the other Loan Documents
(as defined in each of the Bridge Loan and the Loan Agreement), the
Investor Rights Agreement and each of the other agreements and
documents entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (this Agreement, the
Securities, the Certificate of Designation, the Warrants, the New
Notes, the Loan Agreements, the other Loan Documents, the Investor
Rights Agreement and such other agreements and documents being
hereinafter referred to collectively as the "Transaction Documents")
and to issue the Securities in accordance with the terms hereof and
thereof. Except as set forth on Schedule 2.2, the execution and
delivery of this Agreement and the other 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 Preferred Shares, the reservation for issuance and the
issuance of the Conversion Shares, the issuance of the Warrants, the
reservation for issuance and issuance of the Warrant Shares and the
issuance of the New Notes 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 shareholders. This
Agreement and the other Transaction Documents have been, or when
delivered hereunder and thereunder will have been, duly executed and
delivered by the Company and constitute, or when so delivered will
constitute, the legal, valid
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and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and except as
rights to indemnification and to contribution may be limited by federal
or state securities law.
2.3. ISSUANCE OF SECURITIES. The issuance of the Securities is duly
authorized, and the Securities, upon issuance, shall be validly issued,
fully paid and non-assessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof,
and, subject to the filing of the Certificate of Designation, the
Preferred Shares shall be entitled to the rights and preferences set
forth in the Certificate of Designation. As of the Initial Closing, the
Company shall have reserved from its duly authorized capital stock for
the purpose of issuance not less than the sum of (i) 120% of the
maximum number of Conversion Shares issuable upon conversion of the
Preferred Shares (assuming for purposes hereof, that the Preferred
Shares are convertible at the initial conversion price and without
taking into account any limitations on the conversion of the Preferred
Shares that may be set forth in the Certificate of Designation) issued
at the Initial Closing and (ii) 120% of the maximum number of Warrant
Shares issuable upon exercise of the Warrants (without taking into
account any limitations on the exercise of the Warrants set forth in
the Warrants) issuable at the Initial Closing. Upon issuance or
conversion in accordance with the Certificate of Designation or
exercise in accordance with the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly
issued, fully paid and non-assessable and free from all preemptive or
similar rights, 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. Subject to the representations and warranties
of the Investors in this Agreement, the offer and issuance by the
Company of the Securities are exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act").
2.4. NO CONFLICTS. Except as set forth on Schedule 2.4, subject to the
filing of the Certificate of Designation, the execution, delivery and
performance of this Agreement and the other Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) conflict with or result in
a violation of the Company's Certificate of Incorporation, any capital
stock of the Company, the Company's Bylaws or the Certificate of
Designation or (ii) violate, conflict with, result in a breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give rise to any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, license or other instrument to which the Company or
any of its Subsidiaries is a party or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected or (iii)
result in a violation of any law, rule, regulation, order, judgment or
decree or the like (including federal and state securities laws and
regulations and the rules and regulations of any self-regulatory
organizations to which the Company or its securities are subject)
applicable to the Company or any of its Subsidiaries or by
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which any property or asset of the Company or any of its Subsidiaries
is bound or affected, or (iv) except as contemplated by the Transaction
Documents, result in, or require, the creation, or imposition of any
lien upon or with respect to any of the properties or assets of the
Company or any of its Subsidiaries.
2.5. CONSENTS. Except as set forth on Schedule 2.5, the Company is not
required to obtain any approval, consent, license, exemption,
authorization or order of, or make any filing or registration with, any
court, governmental agency or authority or any regulatory or
self-regulatory agency or any other Person in connection with the
execution, delivery or performance of its obligations under or
contemplated by this Agreement and the other Transaction Documents.
Except as set forth on Schedule 2.5, all approvals, consents, licenses,
exemptions, authorizations, orders, filings and registrations which the
Company is required to make or obtain pursuant to the preceding
sentence will be made, obtained or effected on or prior to the Initial
Closing Date, and the Company and its Subsidiaries are unaware of any
facts or circumstances which might prevent the Company from making,
obtaining or effecting any of the registrations, applications or
filings pursuant to the preceding sentence. Except as set forth on
Schedule 2.5, the Company is not in violation of the requirements of
the NASDAQ Capital Market and has no knowledge of any facts which would
reasonably be expected to lead to delisting or suspension of the Common
Stock in the foreseeable future.
2.6. NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. Neither the Company,
nor any of its Subsidiaries or Affiliates, nor any Person acting on its
or their behalf, has engaged in any form of general solicitation or
general advertising 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 the Investors) relating
to or arising out of the transactions contemplated hereby or by the
other Transaction Documents. The Company shall pay, and hold the
Investors 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. "Affiliate" means any Person which,
directly or indirectly, controls, is controlled by or is under common
control with another Person. For purposes of the foregoing, "control,"
"controlled by" and "under common control with" with respect to any
Person shall mean the possession, directly or indirectly, of the power
(i) to vote ten percent (10%) or more of the securities having ordinary
voting power of the election of directors of such Person, or (ii) to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by
contract or otherwise.
2.7. NO INTEGRATED OFFERING. Except as set forth on Schedule 2.7, none of
the Company, its Subsidiaries, any of their Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of
the Securities under the Securities Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable shareholder approval
provisions, including, without limitation, under the rules
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and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated.
2.8. APPLICATION OF TAKEOVER PROTECTIONS; TERMINATION OF RIGHTS AGREEMENT
AND STANDSTILL RESTRICTIONS.
2.8.1. The Company and its board of directors have taken any and all
actions necessary in order to render inapplicable any control
share acquisition, business combination or other similar
anti-takeover provision under the Certificate of Incorporation
or the laws of the jurisdiction of its incorporation which is
or could become applicable to the Investors as a result of the
transactions contemplated by this Agreement and the other
Transaction Documents, including, without limitation, the
Company's issuance of the Securities and the Investors'
ownership of the Securities.
2.8.2. The Company and its board of directors have taken any and all
actions necessary in order to render the Rights Agreement, as
hereinafter defined, inapplicable to the Investors as a result
of the transactions contemplated by this Agreement and the
other Transaction Documents, including, without limitation, the
Company's issuance of the Securities and the Investors'
ownership of the Securities, and in furtherance of the
foregoing, the Company and its board of directors have duly
authorized, executed and delivered an amendment to its Rights
Agreement, dated as of October 28, 1996 and amended as of
February 23, 2004 (the "Rights Agreement"), between the Company
and Computershare Investor Services Inc. (formerly EquiServe
Trust Company, N.A.), as successor Rights Agent to First
Chicago Trust Company of New York, substantially in the form
attached hereto as Exhibit H, effective immediately prior to
the execution and delivery of this Agreement. In furtherance of
the foregoing, the Company and its board of directors have also
taken any and all actions necessary under the Rights Agreement
to redeem all outstanding Rights under the Rights Agreement so
as terminate the right of the holders thereof to exercise such
Rights, with their only remaining right being the right to
receive the Redemption Price, as provided in the Rights
Agreement, and to render the Rights Agreement of no further
force and effect, to be effective immediately prior to the
execution and delivery of this Agreement. Simultaneously with
the execution and delivery of this Agreement, the Company has
delivered to the Investor a certificate, executed by the
Secretary of the Company and dated as of the date hereof,
certifying as to the adoption of resolutions of the Company's
board of directors consistent with the foregoing, which
resolutions are in a form acceptable to the Investor, and as to
the incumbency, authority and signature(s) of the officer(s) of
the Company authorized to execute and deliver the amendment to
the Rights Agreement.
2.8.3. The Company has duly authorized, executed and delivered an
amendment to the Settlement Agreement and Mutual Release, dated
as of February 23, 2004, among the Company, Durus, Artal and
other parties thereto, substantially in the form attached
hereto as Exhibit I and dated as of the date hereof, pursuant
to which amendment the Company has terminated and rendered
inapplicable as of the date
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hereof all standstill, control and other restrictions on Durus
and Artal that may be implicated by the transactions
contemplated by this Agreement and the other Transaction
Documents, including, without limitation, the Company's
issuance of the Securities and the Investor's ownership of the
Securities. Simultaneously with the execution and delivery of
this Agreement, the Company has delivered to the Investors a
certificate, executed by the Secretary of the Company and dated
as of the date hereof, certifying as to the adoption of
resolutions of the Company's board of directors consistent with
the foregoing, which resolutions are in a form acceptable to
the Investors, and as to the incumbency, authority and
signature(s) of the officer(s) of the Company authorized to
execute and deliver the amendment to the Settlement Agreement
and Mutual Release.
2.9. SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed
by it with the Securities and Exchange Commission (the "SEC") pursuant
to the reporting requirements of the Securities Exchange Act of 1934
(the "Exchange Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Investors or their representatives true,
correct and complete copies of each of the SEC Documents not available
on the XXXXX system. As of their respective dates, the SEC Documents
complied with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents 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. The financial
statements of the Company included in the SEC Documents complied as to
form with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto as in effect as of the
time of filing. 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 financial statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and
fairly present the financial position of the Company and its
Subsidiaries 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). The
Company's budget for fiscal year 2006 attached hereto as Exhibit J (the
"Budget") is a true and correct copy of the most recent operating
budget for the Company and its Subsidiaries approved by the Company's
board of directors. All financial projections and forecasts delivered
to the Investors, including the Budget, represent the Company's best
estimates and assumptions as to future performance, which the Company
believes to be fair and reasonable in light of current and reasonably
foreseeable business conditions. No information provided by or on
behalf of the Company to the Investors contains any untrue statement of
a material fact or omits to
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state any material fact necessary in order to make the statements
therein not misleading, in light of the circumstance under which they
are or were made.
2.10. ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 2.10,
since the Company's most recently filed audited financial statements
contained in a Form 10-K, there has been no material adverse change and
no material adverse development in the business, assets, properties,
operations, condition (financial or otherwise), results of operations
or prospects of the Company and its Subsidiaries. Except as set forth
on Schedule 2.10, since the Company's most recently filed audited
financials statements contained in a Form 10-K, neither the Company nor
any of its Subsidiaries has (i) declared or paid any dividends or made
any distributions on its outstanding capital stock (except dividends
paid directly to the Company by its Subsidiaries), (ii) issued any
shares of capital stock; (iii) sold any assets outside of the ordinary
course of business; (iv) had capital expenditures, individually or in
the aggregate, in excess of $50,000; (v) incurred any Indebtedness
individually or in the aggregate in excess of $25,000; (vi) conducted
its business and operations other than in the ordinary course of
business and consistent with past practices or (vii) increased the
compensation of any existing employee, officer, director or consultant,
or paid or awarded any bonus, incentive compensation, service award or
other like benefit to any employee, officer, director or consultant, or
made any severance or termination payments, or entered into or amended
any severance agreement or the like with, any employee, officer or
director, or entered into any new employment, consulting, retention,
incentive compensation, non-competition, retirement, parachute or
indemnification agreement with any officer, director, employee or
agent, or modify any such existing agreement. Except as set forth on
Schedule 2.10, neither the Company nor any of its Subsidiaries has
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, or may have a reasonable basis upon which, to
initiate involuntary bankruptcy proceedings. Except as set forth on
Schedule 2.10, the Company and its Subsidiaries, individually and on a
consolidated basis, after giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents to
occur at the Initial Closing, will not be, Insolvent (as hereinafter
defined). For purposes hereof, "Insolvent" means, with respect to any
Person (i) the present fair saleable value of such Person's assets is
less than the amount required to pay such Person's total Indebtedness
(as defined in Section 2.16), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured, (iii) such Person
intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) such Person 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.
2.11. CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company nor any
of its Subsidiaries is in violation of any term of or in default under
the Certificate of Incorporation, the Certificate of Designation, any
other certificate of designation, the preferences or rights of any
other outstanding series of preferred stock of the Company, the Bylaws
or any Subsidiaries' organizational charter or articles of
incorporation or
10
bylaws (or equivalent organizational documents). Except as set forth on
Schedule 2.11, neither the Company nor any of its Subsidiaries is in
violation of any judgment, decree or order or any statute, ordinance,
rule or regulation applicable to the Company or its Subsidiaries or by
which it or its properties may be bound, and neither the Company nor
any of its Subsidiaries will conduct its business in violation of any
of the foregoing. Without limiting the generality of the foregoing,
except as set forth on Schedule 2.11, the Company is not in violation
of any of the rules, regulations or requirements of the NASDAQ Capital
Market and has no knowledge of any facts or circumstances that would
reasonably be expected to lead to delisting or suspension of the Common
Stock by the NASDAQ Capital Market in the foreseeable future. Except as
set forth on Schedule 2.11, during the two years prior to the date
hereof, (i) the Common Stock has been designated for quotation on the
NASDAQ National Market or the NASDAQ Capital Market, (ii) trading in
the Common Stock has not been suspended by the SEC, the NASDAQ National
Market or the NASDAQ Capital Market and (iii) the Company has received
no communication, written or oral, from the SEC, the NASDAQ National
Market or the NASDAQ Capital Market regarding the suspension or
delisting of the Common Stock. Except as set forth on Schedule 2.11,
the Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
2.12. CORRUPT PRACTICES. Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf
of the Company or any of its Subsidiaries has, in the course of its,
his or her actions for, or on behalf of, the Company or any of its
Subsidiaries (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
using 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.
2.13. XXXXXXXX-XXXXX ACT. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and any and
all applicable rules and regulations promulgated by the SEC thereunder.
2.14. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 2.14,
none of the officers, directors or employees of the Company or any of
its Subsidiaries is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or directors), including, but not
limited to, 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 Subsidiaries or 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.
11
2.15. EQUITY CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock and
1,000,000 shares of preferred stock, par value $0.01 per share, of
which as of the date hereof, 32,177,574 shares of Common Stock are
issued and outstanding, 4,442,286 shares of Common Stock are reserved
for issuance pursuant to securities (other than the Preferred Shares
and the Warrants) exercisable or exchangeable for, or convertible into,
shares of Common Stock, and no shares of preferred stock (other than
the Preferred Shares) are issued and outstanding or reserved for
issuance. All of such outstanding or reserved shares have been, or upon
issuance will be, validly issued, fully paid and non-assessable. Except
as set forth on Schedule 2.15, (i) none of the Company's share capital
is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company and (ii)
there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the
Securities. Except as set forth on Schedule 2.15, (i) 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 share
capital of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any
of its Subsidiaries is or may become bound to issue additional share
capital of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Company or
any of its Subsidiaries; (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities Act;
(iii) there are no outstanding securities or instruments of the Company
or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may
become bound to redeem a security of the Company or any of its
Subsidiaries; (iv) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plans or
agreements; and (v) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC
Documents and not disclosed in the SEC Documents. The Company has
furnished to the Investors true, correct and complete copies of the
Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), and the Company's Bylaws (the
"Bylaws"), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the
material rights of the holders thereof in respect thereto.
The name, capital structure and ownership of each Subsidiary of the
Company on the date of this Agreement are as set forth in Schedule
2.15. All of the outstanding capital stock of, or other interest in,
each such Subsidiary has been validly issued, and is fully paid and
nonassessable. Except for the Subsidiaries set forth on Schedule 2.15,
on the date of this Agreement, the Company has no equity interest in
any Person.
12
2.16. INDEBTEDNESS AND OTHER CONTRACTS. Schedule 2.16 contains a complete
and accurate list of all contracts, agreements, indentures, licenses or
instruments material to the conduct of the Company's business as
currently conducted or as presently contemplated to be conducted or
involving a monetary amount in excess of $25,000. Except as set forth
on Schedule 2.16, neither the Company nor any of its Subsidiaries (i)
has outstanding any debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing
Indebtedness (as defined below) of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or
may become bound; (ii) is a party to any financing statements securing
obligations in any amounts filed in connection with the Company or any
of its Subsidiaries; (iii) is a party to any contract, agreement,
indenture, license or instrument, the violation of which, or default
under which, by the other party(ies) to such contract, agreement,
indenture, license or instrument could reasonably be expected to result
in a Material Adverse Effect; (iv) is in default (and no event has
occurred which with notice or lapse of time or both could place the
Company in default) under any contract, agreement, indenture, license
or other instrument (including any such contract, agreement, indenture,
license or other instrument relating to Indebtedness) to which the
Company or any of its Subsidiaries is a party or by which any property
or asset of the Company or any of its Subsidiaries is bound or
affected; (v) is a party to any contract, agreement, indenture, license
or instrument, the performance of which has or may reasonably be
expected to have a Material Adverse Effect or (vi) has any other
material liabilities, fixed or contingent, that are not reflected in
the financial statements referred to in Section 2.9 or in the notes
thereto. 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, (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, charge, 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; and (y) "Contingent Obligations" 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
13
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.
2.17. ABSENCE OF LITIGATION. Except as set forth in Schedule 2.17, there is
no action, suit, notice of violation, claim, proceeding, inquiry or, to
the Company's knowledge, any investigation before or by any court,
public board, government agency or authority, arbitrator,
self-regulatory organization or body pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries, any of their respective properties, the Common Stock or
any outstanding stock of the Company's Subsidiaries, or any of the
Company's or its Subsidiaries' officers or directors.
2.18. INSURANCE. The properties of the Company and its Subsidiaries are
insured, with financially sound and reputable insurance companies (not
Affiliates of the Company), in such amounts, with such deductibles and
covering such risks as is customarily carried in accordance with sound
business practice by companies engaged in similar businesses and owning
similar properties in the localities where the Company or such
Subsidiaries operate. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for, and neither
the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost
comparable to the current cost for such coverage.
2.19. EMPLOYEE RELATIONS. Except as set forth on Schedule 2.19, neither the
Company nor any of its Subsidiaries 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 employee of the Company or any of its Subsidiaries is, or is
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 employee does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters. Except as set forth on Schedule 2.19, the Company and its
Subsidiaries are in compliance in all material respects with all
federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours. There are no strikes,
lockouts or other labor disputes against the Company or any of its
Subsidiaries, or, to the best of the Company's knowledge, threatened
against or affecting the Company or any of its Subsidiaries.
2.20. TITLE. Except as set forth in Schedule 2.20, the Company and its
Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned
by them which is material to the business of the Company
14
and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except 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 any of its
Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
2.21. INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Schedule 2.21,
the Company and its Subsidiaries own or possess all 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"), free from burdensome restrictions, necessary to conduct their
respective businesses as presently conducted and as presently
contemplated to be conducted in the future. Except as set forth in
Schedule 2.21, none of the Company's or its Subsidiaries' Intellectual
Property Rights have expired, terminated or been abandoned, or are
expected to expire, terminate or be abandoned. Neither the Company nor
any Subsidiary has any knowledge of any infringement by the Company or
any of its Subsidiaries of the Intellectual Property Rights of others.
There is no claim, action or proceeding being made or brought, or to
the best knowledge of the Company, being threatened, against the
Company or any of its Subsidiaries regarding Intellectual Property
Rights. The Company is unaware of any facts or circumstances which
might reasonably be expected to give rise to any of the foregoing
infringements or claims, actions or proceedings. No third party
possesses rights to the Intellectual Property Rights of the Company or
any of its Subsidiaries which, if exercised, could enable such third
party to develop products competitive to those of the Company or any of
its Subsidiaries or could have an adverse effect on the ability of the
Company or any of its Subsidiaries to conduct its business as presently
conducted or as presently contemplated to be conducted. The Company and
its Subsidiaries have taken all reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual
Property Rights.
2.22. ENVIRONMENTAL LAWS. Each of the Company and its Subsidiaries is in
compliance in all material respects with all Environmental Laws, and
there are no actions, suits, claims, notices of violation, hearings,
investigations or proceedings pending or, to the best of the Company's
knowledge, threatened against or affecting the Company or any of its
Subsidiaries, or with respect to the ownership, use, maintenance and
operation of the Company's and its Subsidiaries' properties, relating
to any Environmental Laws. The term "Environmental Laws" means all
federal, state or local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative
orders, directives, requests, licenses, authorizations and permits of,
and agreements with (including consent decrees), any governmental
agencies or authorities, in each case relating to or imposing liability
or standards of conduct concerning public health, safety and
environmental protection matters.
15
2.23. SUBSIDIARY RIGHTS. The Company and each of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such
Subsidiary.
2.24. TAX STATUS. Except set forth on Schedule 2.24, the Company and each of
its Subsidiaries (i) has made or filed all foreign, 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 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 claimed to be due by the taxing authority of
any jurisdiction, and, to the Company's knowledge, there is no basis
for any such claim.
2.25. INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS. The Company and each of
its Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with 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. The Company is not an "accelerated filer" as defined in
Rule 12b-2 under the Exchange Act for its fiscal year ending December
31, 2005 and, accordingly, has not complied with Section 404 of the
Xxxxxxxx-Xxxxx Act of 2002. The Company maintains disclosure controls
and procedures that are effective in ensuring that information required
to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the SEC,
including, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated
and communicated to the Company's management, including its principal
executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. During the twelve (12) months immediately preceding the
date hereof neither the Company nor any of its Subsidiaries have
received any notice or correspondence from any accountant relating to
any potential material weakness in any part of the system of internal
accounting controls of the Company or any of its Subsidiaries.
2.26. INVESTMENT COMPANY STATUS. The Company is not, and upon consummation
of the sale of the Securities will not be, an "investment company," a
company controlled by an "investment company" or an "affiliated person"
of, or "promoter" or "principal
16
underwriter" for, an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
2.27. TRANSFER TAXES. On the applicable Closing Date, all stock transfer or
other taxes (other than income or similar taxes) which are required to
be paid in connection with the sale and transfer of the Securities to
be sold to the Investors hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes
will be or will have been complied with.
2.28. DISCLOSURE. All reports, financial and other statements, certificates
and other information and disclosure provided to the Investors
regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby and by the other Transaction
Documents, including the Schedules to this Agreement or any other
Transaction Document, 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 the light of the circumstances under which
they were made, not misleading. Each press release issued by the
Company or its Subsidiaries during the twenty four (24) months
preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they are made, not misleading. Except as set forth on Schedule
2.28, no event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their
businesses, 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
publicly announced or disclosed.
2.29. ERISA. Schedule 2.29 contains a complete and accurate list of all
Plans maintained or sponsored by the Company or any ERISA Affiliate or
to which the Company or any ERISA Affiliate contributes. The Company
and its ERISA Affiliates are in compliance in all material respects
with all applicable provisions and requirements of ERISA with respect
to each Plan, and have performed all their obligations under each Plan;
and no ERISA Event has occurred or is reasonably expected to occur.
2.30. NO STABILIZATION. The Company has not taken, directly or indirectly,
any action designed to or that could cause or result in any
stabilization or manipulation of the price of the Common Stock.
2.31. FDA AND RELATED MATTERS.
2.31.1. Schedule 2.31 sets forth a complete and accurate list,
referencing relevant records and documents, for the last five
(5) years, of (i) all regulatory or warning letters, notices of
adverse findings and similar letters or notices issued to the
Company or any Subsidiary by the Food and Drug Administration
(the "FDA") or any other governmental entity that is concerned
with the safety, efficacy, reliability or manufacturing of the
medical devices developed, manufactured or sold by the Company
or any Subsidiary (hereinafter for purposes of this Section
2.31, "Medical
17
Device Regulatory Agency"); (ii) all reports, filings or
communications made by the Company or any of its Subsidiaries
to or with a Medical Device Regulatory Agency regarding the
medical devices developed, manufactured or sold by the Company
or any Subsidiary (but excluding any reports, filings or
communications in connection with applications seeking approval
from any such Medical Device Regulatory Agency for the
marketing and sale of such medical devices); (iii) all product
recalls and safety alerts conducted by or issued to the Company
or any Subsidiary and any requests from the FDA or any Medical
Device Regulatory Agency requesting the Company or any
Subsidiary to cease to investigate, test, manufacture, market
or sell any product; (iv) any civil penalty actions begun by
the FDA or any Medical Device Regulatory Agency against the
Company or any Subsidiary and all consent decrees issued with
respect to the Company or any Subsidiary; and (v) any other
communications between the Company or any Subsidiary on the one
hand and the FDA or any Medical Device Regulatory Agency on the
other hand. The Company has delivered to the Investors copies
of all documents referred to in Schedule 2.31.
2.31.2. The Company and its Subsidiaries have obtained all consents,
approvals, certifications, authorizations and permits of, and
have made all filings with, or notifications to, all Medical
Device Regulatory Agencies pursuant to applicable requirements
of all federal laws, rules and regulations, and all
corresponding state and foreign laws, rules and regulations
applicable to the Company or any Subsidiary and relating to its
business. The Company and its Subsidiaries are in compliance
with all applicable federal laws, rules and regulations and all
corresponding applicable state and foreign laws, rules and
regulations relating to medical device manufacturers. The
Company has no reason to believe that any of the consents,
approvals, authorizations, registrations, certifications,
permits, filings or notifications that it or any of its
Subsidiaries has received or made to operate their respective
businesses have been or are being questioned, challenged or
revoked. There are no investigations or inquiries by the FDA or
any Medical Device Regulatory Agency pending or threatened
relating to the operation of the Company's or the Company's
Subsidiaries' businesses or the Company's or any Subsidiary's
compliance with applicable laws, rules or regulations relating
to medical device manufacturers.
2.32. RANKING OF PREFERRED SHARES. No issued or outstanding equity
securities of the Company or any Subsidiary will be senior to or pari
passu with the Preferred Shares, when issued, as to dividend rights or
upon the liquidation, winding up or dissolution of the Company.
2.33. BRIDGE LOAN. The Company has duly authorized, executed and delivered
the Bridge Loan, dated as of the date hereof, and has performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions contained therein to be performed, satisfied
or complied with on and as of the date hereof. Simultaneously with the
execution and delivery of this Agreement, the Company has delivered to
the Investor a certificate, executed by the Secretary of the Company
and dated as of the date hereof, certifying as to the adoption of
resolutions of the Company's board of directors consistent with the
foregoing, which resolutions are in a form acceptable to the Investor,
18
and as to the incumbency, authority and signature(s) of the officer(s)
of the Company authorized to execute and deliver the Bridge Loan.
2.34. CHIEF EXECUTIVE OFFICER. The Company has received and accepted a
letter from Xxxxxxx Xxx, substantially in the form attached hereto as
Exhibit K, in which letter Xx. Xxx acknowledges and agrees to having
been removed from his position as CEO of the Company and resigns as a
member of the board of directors of the Company effective on and as of
the date hereof. Simultaneously with the execution and delivery of this
Agreement, the Company has delivered to the Investor a certificate,
executed by the Secretary of the Company and dated as of the date
hereof, certifying as to the adoption of resolutions of the Company's
board of directors consistent with the foregoing, which resolutions are
in a form acceptable to the Investor.
2.35. APPOINTMENT OF ACTING CEO. The Company's board of directors has
appointed Xxxxxxxx Xxxxx as acting CEO and as a member of the board of
directors of the Company effective on and as of the date hereof.
Simultaneously with the execution and delivery of this Agreement, the
Company has delivered to the Investor a certificate, executed by the
Secretary of the Company and dated as of the date hereof, certifying
as to the adoption of resolutions of the Company's board of directors
consistent with the foregoing, which resolutions are in a form
acceptable to the Investor.
2.36. APPOINTMENT OF DURUS BOARD MEMBER. The Company and its board of
directors have taken any and all actions necessary under the
Certificate of Incorporation and Bylaws to appoint to the board of
directors a member designated by Durus as a Class III director.
Simultaneously with the execution and delivery of this Agreement, the
Company has delivered to the Investor a certificate, executed by the
Secretary of the Company and dated as of the date hereof, certifying as
to the adoption of resolutions of the Company's board of directors
consistent with the foregoing, which resolutions are in a form
acceptable to the Investor.
2.37. INDEMNIFICATION AGREEMENTS. The Company has, or prior to the Initial
Closing will have, executed and delivered an indemnification agreement,
substantially in the form attached hereto as Exhibit L (a "New
Indemnification Agreement"), dated as of the date hereof, with each
member of the Company's board of directors, including the Durus
designee to the board of directors as provided in Section 2.36.
Simultaneously with the execution and delivery of this Agreement, the
Company has delivered to the Investor a certificate, executed by the
Secretary of the Company and dated as of the date hereof, certifying as
to the adoption of resolutions of the Company's board of directors
consistent with the foregoing, which resolutions are in a form
acceptable to the Investor, and as to the incumbency, authority and
signature(s) of the officer(s) of the Company authorized to execute and
deliver the New Indemnification Agreements.
2.38. D&O INSURANCE. The Company has provided the Investor with evidence of
and, as of the date hereof, has in full force and effect Directors and
Officers liability insurance coverage for the benefit of each member of
the Company's board of directors, including the Durus designee to the
board of directors as provided in Section 2.36, with
19
such coverage, in such amount, of such duration and with such insurance
carriers as is set forth in Schedule 2.39.
3. INVESTORS' REPRESENTATIONS AND WARRANTIES.
Each Investor represents and warrants to the Company that:
3.1. ORGANIZATION; AUTHORITY. The Investor is an entity duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority
to enter into and to consummate the transactions contemplated by this
Agreement and the other Transaction Documents to which it is a party
and otherwise to carry out its obligations hereunder and thereunder.
3.2. INVESTMENT PURPOSE. The Investor is purchasing the Securities for its
own account and not with a view to the distribution thereof, provided,
however, that by making the representation herein, the Investor
reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption
from registration under the Securities Act.
3.3. RELIANCE ON EXEMPTIONS. The Investor 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 the Investor's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth herein in order to determine
the availability of such exemptions and the eligibility of the Investor
to acquire the Securities.
3.4. INFORMATION. To the knowledge of the Investor, the Investor and its
advisors, if any, have been furnished with all materials relating to
the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities. The Investor 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 the Investor or its advisors, if any, or
its representatives shall modify, amend or affect the Investor's right
to rely on the Company's representations and warranties contained
herein. The Investor understands that its investment in the Securities
involves a high degree of risk.
3.5. NO GOVERNMENTAL REVIEW. The Investor 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.
3.6. RESTRICTIONS ON TRANSFER OR RESALE; LEGENDS.
3.6.1. RESTRICTIONS ON TRANSFER OR RESALE The Investor understands
that, except as provided in the Investor Rights Agreement: (i)
the Securities have not been and are
20
not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) the resale of the
Securities is registered pursuant to an effective registration
statement under the Securities Act, (B) if requested by the
Company, the Investor shall have delivered to the Company an
opinion of counsel (in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect
that such Securities to be sold, assigned or transferred may
be sold or transferred pursuant to an exemption from such
registration, or (C) the Securities are sold or transferred
pursuant to Rule 144 promulgated under the Securities Act, as
amended, (or a successor rule thereto) ("Rule 144"); (ii) any
sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the
Person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act)
may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC
thereunder; and (iii) except as set forth in the Investor
Rights Agreement, neither the Company nor any other Person is
under any obligation to register the Securities under the
Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder.
3.6.2. LEGENDS. The Investor understands that the certificates or
other instruments representing the Preferred Shares, the
Warrants and the New Notes and, until such time as the resale
of the Conversion Shares, the Warrants and the Warrant Shares
have been registered under the Securities Act as contemplated
by the Investor Rights Agreement, the certificates representing
the Conversion Shares, the Warrants 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):
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, OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
3.7. AUTHORIZATION; ENFORCEMENT. This Agreement, and the other Transaction
Documents to which the Investor is a party, have been duly and validly
authorized, executed and delivered on behalf of the Investor and shall
constitute the legal, valid and binding obligations of the Investor
enforceable against the Investor in accordance with their respective
terms, except as such enforceability may be limited by general
principles
21
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.
3.8. NO CONFLICTS; NO VIOLATION. The execution, delivery and performance by
the Investor of this Agreement and the other Transaction Documents to
which the Investor is a party, and the consummation by the Investor of
the transactions contemplated hereby and thereby, will not (i) result
in a violation of the organizational documents of the Investor 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 agreement, indenture or instrument to which the
Investor is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws) applicable to the Investor, except for, in the case of
clauses (ii) and (iii) above, such conflicts, defaults, rights or
violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability
of the Investor to perform its obligations hereunder.
3.9. RESIDENCY. The Investor is a resident of that jurisdiction specified
below its address on the Schedule of Investors.
4. COVENANTS OF THE PARTIES.
4.1. BEST EFFORTS. Each party shall use its reasonable best efforts to
satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6 of this Agreement.
4.2. REPORTING STATUS. Until the date on which the Investors shall no longer
hold any Securities (the "Reporting Period"), the Company shall timely
file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an
issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would no longer
require or otherwise permit such termination, and the Company shall use
its best efforts to maintain its eligibility to register the Conversion
Shares and the Warrant Shares for resale by the Investors on Form S-3.
4.3. USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Securities exclusively to fund business operating plans approved by the
Company's board of directors, including the approval of the members of
the Company's board of directors designated by the Investors.
4.4. FINANCIAL INFORMATION. Unless filed with the SEC through the XXXXX
System and available to the public through the XXXXX system, the
Company agrees to send the following to the Investors during the
Reporting Period (i) within one Business Day after the filing thereof
with the SEC, a copy of its annual reports and Quarterly Reports on
Form 10-K and 10-Q, any regularly prepared interim reports or any
consolidated balance sheets, income statements, shareholders' equity
statements and/or cash flow statements
22
for any period, any current reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the
Securities Act, (ii) within one (1) Business Day after release thereof,
facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (iii) copies of any notices and other information
made available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders. As used in this Agreement, "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.
4.5. LISTING. The Company will use its best efforts, so long as the
Investors own any of the Securities, to obtain and maintain the listing
and trading of the Common Stock (including the Conversion Shares and
the Warrant Shares) on the NASDAQ Capital Market or, in lieu thereof,
the NASDAQ National Market, and the Company will comply in all respects
with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASDAQ Capital Market or the NASDAQ National
Market, as the case may be, and other exchanges or quotation systems,
as applicable. Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the NASDAQ Capital
Market.
4.6. PLACEMENT AGENT, ADVISORY AND BROKER FEES AND EXPENSES. The Company
shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for
Persons engaged by the Investors) relating to or arising out of the
transactions contemplated hereby or the other Transaction Documents.
The Company shall pay, and hold the Investors harmless against, any
liability, loss or expense (including, without limitation, reasonable
attorney's fees and out-of-pocket expenses) arising in connection with
any claim relating to any such payment.
4.7. VALIDITY AND RESERVATION OF SHARES.
4.7.1. VALIDITY OF SHARES. The Company shall take all actions
necessary to ensure that, upon issuance or conversion in
accordance with the Certificate of Designation or exercise in
accordance with the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be
validly issued, fully paid and non-assessable and free from all
preemptive or similar rights, 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.
4.7.2. RESERVATION OF SHARES. The Company shall at all times have
reserved from its duly authorized capital stock for the purpose
of issuance not less than the sum of (i) 120% of the maximum
number of Conversion Shares issuable upon conversion of the
Preferred Shares (without taking into account any limitations
on the
23
conversion of the Preferred Shares that may be set forth in the
Certificate of Designation) and (ii) 120% of the maximum number
of Warrant Shares issuable upon exercise of the Warrants
(without taking into account any limitations on the exercise of
the Warrants set forth in the Warrants), based upon the
conversion price of the Preferred Shares and the exercise price
of the Warrants in effect from time to time. The Company shall
not reduce the number of shares of Common Stock reserved for
issuance as provided above without the consent of the
Investors. If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of
shares required in the first sentence of this Section 4.7.2,
then the Company will promptly take all corporate action
necessary to authorize and reserve a sufficient number of
shares of Common Stock, including without limitation calling a
special meeting of shareholders to authorize additional shares
of Common Stock to meet the Company's obligations under this
Section 4.7.2, and using its best efforts to obtain shareholder
approval of such increase in shares. Within thirty (30) days
after the Initial Closing, the Company shall call a special
meeting of shareholders to authorize additional shares of
Common Stock to meet the Company's obligations under this
Section 4.7.2 with respect to the Preferred Shares and Warrants
that may be issued at the Subsequent Closings, and use its best
efforts to obtain shareholder approval of such increase in
shares within ninety (90) days after the Initial Closing.
4.8. CONDUCT OF BUSINESS AND COMPLIANCE WITH LAW. Neither the Company nor
any of its Subsidiaries shall violate any term of or be in default
under the Certificate of Incorporation, the Certificate of Designation,
any other certificate of designation, the preferences or rights of any
other outstanding series of preferred stock of the Company, the Bylaws
or any Subsidiaries' organizational charter or articles of
incorporation or bylaws (or equivalent organizational documents). The
business of the Company and its Subsidiaries shall not be conducted in
violation of any applicable judgment, decree, order, statute,
ordinance, rule or regulation applicable to the Company or its
Subsidiaries.
4.9. FILINGS AND CONSENTS. The Company and the Investors will cooperate with
each other with respect to obtaining, as promptly as practicable, all
necessary consents, approvals, authorizations and agreements of, and
the giving of all notices and making of all filings with, any third
parties, including, without limitation, governmental and regulatory
authorities and the NASDAQ Capital Market, necessary to authorize,
approve or permit the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents, including, without
limitation, requesting an exemption from NASDAQ on behalf of the
Company from any applicable NASDAQ Marketplace rules or other
requirements regarding the need for a vote of the Company's
shareholders in order to consummate the transactions contemplated in
this Agreement and the other Transaction Documents. The Company shall
pay any requisite fees arising from actions taken in furtherance of
this Section 4.9.
4.10. REMOVAL OF LEGENDS. Unless otherwise required by applicable state
securities laws, if (i) Securities have been sold under an effective
registration statement filed under the Securities Act, (ii) a holder of
Securities, if requested by the Company, provides the Company with an
opinion of counsel (in form, substance and scope customary for opinions
of counsel in comparable transactions) to the effect that Securities to
be sold,
24
assigned or transferred may be sold or transferred pursuant to an
exemption from registration under the Securities Act or (iii)
Securities can be sold without restriction under Rule 144, then the
Company shall direct the transfer agent for the Securities in question
to issue one or more certificates for such Securities, free from any
restrictive legend, in such name and in such denominations as specified
by the Securities holder.
4.11. NO INTEGRATION. None of the Company, its Subsidiaries, any of their
Affiliates, nor any Person acting on their behalf will make any offers
or sales of any security or solicit any offers to buy any security,
under circumstances that would require registration of any of the
Securities under the Securities Act or cause the offering of the
Securities hereunder to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable
shareholder 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.
4.12. OTHER CHANGES. Except as agreed to by the Investor, beginning the date
hereof until the Initial Closing Date, the Company shall not, and shall
not suffer or permit any of its Subsidiaries to (i) make any
expenditures in respect of (A) any lease or any sale and leaseback
(real or personal property) other than rental payments under real
property and personal property leases set forth in Schedule 2.16, (B)
any purchase or other acquisition of any fixed or capital assets or any
other assets other than expenditures in the ordinary course of business
consistent with past practices not in excess of $50,000 individually
and $50,000 in the aggregate, or (C) any other expenditures except in
the ordinary course of business consistent with past practices, (ii)
enter into any new contract, agreement, indenture, license or
instrument or enter into any other transaction except on commercially
reasonable terms and in the ordinary course of business consistent with
past practices, (iii) establish any new Plan or change any Plan except
as required by law, (iv) increase the compensation of any existing
employee, officer, director or consultant, or pay or award any bonus,
incentive compensation, service award or other like benefit to any
employee, officer, director or consultant, or make any severance or
termination payments, or enter into or amend any severance agreement
with, any employee, officer or director, or enter into any new
employment, consulting, non-competition, retirement, parachute or
indemnification agreement with any officer, director, employee or
agent, or modify any such existing agreement; or (v) take any action
that, if taken prior to the date of this Agreement, would have be
disclosed on a disclosure schedule to any of the Company's
representations and warranties contained herein.
4.13. SHAREHOLDER APPROVAL. In order to comply with the Marketplace Rules of
the NASDAQ Capital Market with respect to the issuance of the
Conversion Shares and the Warrant Shares, the Company shall promptly
notice and hold an annual or special meeting of its shareholders (which
meeting shall take place no later than June 30, 2006) in accordance
with all applicable laws and rules and regulations of the SEC and the
NASDAQ Capital Market and the Company's Certificate of Incorporation
and Bylaws, at which meeting the Company shall seek shareholder
approval of resolutions providing for the Company's issuance of the
maximum number of Conversion Shares and Warrant
25
Shares issuable upon the conversion and exercise of the maximum number
of Preferred Shares and Warrants issuable under this Agreement and the
other Transaction Documents (assuming that such Preferred Shares are
converted, and such Warrants are exercised, at their initial conversion
price and initial exercise price, respectively).
4.14. RIGHTS AGREEMENT. Beginning on and as of the date hereof, the Company
shall take any and all actions necessary or advisable to effectuate, as
promptly as practicable after the date hereof, the redemption of the
outstanding Rights under the Rights Agreement as provided in Section
2.8.2 and as contemplated by Section 23 of the Rights Agreement.
Without limiting the generality of the foregoing, the Company shall
cause the Rights Agent to take all actions necessary or advisable in
connection with the foregoing. The Company shall keep Durus informed of
its actions with respect to the foregoing, and shall take all steps in
connection therewith reasonably requested by Durus. All actions in
connection with the Rights Agreement shall be subject to the prior
consent of the Durus, such consent not to be unreasonably withheld.
4.15. FURTHER ASSURANCES. The Company shall undertake such actions and
execute and deliver such additional instruments and documents as may be
reasonably requested by the Investors, before or after any Closing, in
order to consummate the transactions contemplated by, and to confirm
and carry out and to effectuate fully the intent and purposes of, this
Agreement and the other Transaction Documents.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units of
Preferred Shares and Warrants to an Investor at the Initial Closing and a
Subsequent Closing, as the case may be, is subject to the satisfaction by
the Investor, on or before the Initial Closing Date, and by the Investor on
or before the Subsequent Closing Date, as the case may be, of each of the
following conditions (any of which may be waived by the Company in whole or
in part):
5.1. The Investor shall have executed and delivered this Agreement, the Loan
Agreement, the Investor Rights Agreement and any other of the
Transaction Documents required to be executed and delivered by the
Investor at the applicable Closing.
5.2. The Investor shall have delivered at the Closing the purchase price for
the Preferred Shares and the Warrants being purchased at such Closing,
in the amount and manner provided for by this Agreement.
5.3. The representations and warranties of the Investor shall be true and
correct in all material respects as of the date when made and as of the
Initial Closing Date or the Subsequent Closing Date, as the case may
be, as though made at that time, and the Investor shall have performed,
satisfied and complied with in all material respects the covenants,
agreements and conditions required by this Agreement and any of the
other Transaction Documents to be performed, satisfied or complied with
by the Investor at or prior to the Initial Closing Date or the
Subsequent Closing Date, as the case may be.
26
5.4. No statute, rule, regulation, executive order, decree, ruling or
injunction will have been enacted, entered, promulgated or endorsed by
or in any court or governmental or regulatory authority of competent
jurisdiction or any self regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation by the
Investor and the Company of the purchase and sale of the Units to be
acquired by such Investor at the applicable Closing.
6. CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE.
6.1. INITIAL CLOSING. The obligation of an Investor hereunder to purchase
the Units of Series B-1 Preferred Shares and Warrants at the Initial
Closing is subject to the satisfaction, on or before the Initial
Closing Date, of each of the following conditions (any of which may be
waived by the Investor in whole or in part):
6.1.1. EXECUTION AND DELIVERY OF DOCUMENTS AND ISSUANCE OF SECURITIES.
The Company shall have duly executed and delivered this
Agreement, the Loan Agreement, the Investor Rights Agreement,
the Warrant Agreement, the Certificate of Designation and any
other of the Transaction Documents required to be executed and
delivered by the Company at the Initial Closing. The Company
shall have also delivered to the Investor duly executed
certificates, against payment therefor, representing the Series
B-1 Preferred Shares and the Warrants.
6.1.2. DUE DILIGENCE AND OTHER DOCUMENTS. The Investor shall have
completed its due diligence review of the Company to its
satisfaction, as determined by the Investor in its sole
discretion. The Investor shall have received such other
approval, opinions, documents or materials as the Investor may
reasonably request.
6.1.3. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of the Company (before and after
giving effect to the consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents) shall be true and correct in all material respects
as of the date when made and as of the Initial Closing Date as
though made at that time, and the Company shall have performed,
satisfied and complied in all respects with the covenants,
agreements and conditions required by the this Agreement, the
Loan Agreement, the Investor Rights Agreement, the Warrant
Agreement and the other Transaction Documents to be performed,
satisfied or complied with by the Company. The Investor shall
have received a certificate, executed by the Chief Executive
Officer or Chief Financial Officer of the Company, dated as of
the Initial Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the
Investor.
6.1.4. NO RESTRAINTS; APPROVALS.
6.1.4.1. No statute, rule, regulation, executive order, decree,
ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
or regulatory authority of competent jurisdiction, or any
self
27
regulatory organization having authority over the matters
contemplated hereby, which would prohibit the consummation
of any of, or materially adversely affect, the transactions
contemplated by this Agreement or the other Transaction
Documents. No action, suit or proceeding shall have been
instituted and remain pending, or have been threatened,
before a court or other governmental or regulatory body of
competent jurisdiction to restrain, prohibit or otherwise
challenge any of the transactions contemplated by this
Agreement or the other Transaction Documents (or seeking
damages from the Investor, any of its Affiliates or the
Company as a result thereof).
6.1.4.2. Except as contemplated by Section 4.13, the Company shall
have obtained all governmental, regulatory or third party
consents and approvals necessary for the consummation of the
transactions contemplated by this Agreement and the other
Transaction Documents, including, without limitation, the
Company shall have obtained an exemption or other form of
relief or clarification (in form and substance acceptable to
the Investor) from NASDAQ to the effect that any of the
NASDAQ's rules regarding the need for a vote of the
Company's shareholders are inapplicable to the transactions
contemplated in this Agreement and the other Transaction
Documents.
6.1.4.3. The Investor shall have received a certificate, executed
by the Chief Executive Officer or Chief Financial Officer of
the Company, dated as of the Initial Closing Date,
certifying that all (i) authorizations, consents or
approvals of, notices to or filings with any governmental or
regulatory authority and (ii) approvals and consents of any
other Person, required in connection with the consummation
of the transactions contemplated by this Agreement and the
other Transaction Documents, shall have been obtained or
made and that all applicable waiting periods have expired
without notice of any action which seeks to restrain, enjoin
or otherwise prohibit or materially delay the transactions
contemplated by this Agreement and the other Transaction
Documents and as to such other matters as may be reasonably
requested by the Investor.
6.1.5. OPINION OF COMPANY COUNSEL. The Investor shall have received
the opinion of the Company's outside counsel, dated as of the
Initial Closing Date, in substantially the form of Exhibit M
attached hereto.
6.1.6. ORGANIZATIONAL DOCUMENTS; GOOD STANDING. The Company shall have
delivered to the Investor (i) a certificate evidencing the
formation and good standing of the Company and each of its
material Subsidiaries in each such entity's jurisdiction of
formation issued by the Secretary of State (or equivalent) of
such jurisdiction of formation as of a date within five (5)
days of the Initial Closing Date, (ii) a certificate evidencing
the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company conducts
business and is required to so qualify, as of a date within
five (5) days of the Initial Closing Date, (iii) a certified
copy of
28
the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within five (5) days of the
Initial Closing Date and (iv) a certified copy of the
Certificate of Designation as certified by the Secretary of
State of the State of Delaware within five (5) days of the
Initial Closing Date.
6.1.7. RESOLUTIONS; INCUMBENCY. The Company shall have delivered to
the Investor (i) a certificate, executed by the Secretary of
the Company and dated as of the Initial Closing Date, as to (A)
the resolutions adopted unanimously by the Company's board of
directors with respect to the transactions contemplated by this
Agreement and the other Transaction Documents, in a form
acceptable to the Investor, (B) the Certificate of
Incorporation, (C) the Bylaws, each as in effect at the Initial
Closing, and (D) the incumbency, authority and signatures of
each officer of the Company authorized to execute and deliver
this Agreement and the other Transaction Documents to be
executed and delivered at the Initial Closing and act with
respect thereto and (ii) a letter from the Company's transfer
agent certifying the number of shares of Common Stock
outstanding as of a date within five (5) days of the Initial
Closing Date.
6.1.8. CONTINUED LISTING. The Common Stock shall be listed on the
NASDAQ Capital Market and shall not have been suspended, as of
the Initial Closing Date, by the SEC or the NASDAQ Capital
Market from trading on the NASDAQ Capital Market nor shall
proceedings regarding such suspension by the SEC or the NASDAQ
Capital Market have been threatened, as of the Initial Closing
Date, either by the SEC or the NASDAQ Capital Market nor shall
the Company be out of compliance with any of the minimum
maintenance requirements of the NASDAQ Capital Market.
6.1.9. BOARD AND EMPLOYEE MATTERS.
6.1.9.1. The Company's Bylaws shall provide that its Board of
Directors shall consist of seven (7) members as of the
Initial Closing Date and the Investor shall have designated
at least four (4) of the Company's seven (7) board members,
and such designees, on and as of the Initial Closing Date,
shall have been appointed to the Company's board of
directors in accordance with the Certificate of
Incorporation and Bylaws such that one (1) designee is a
Class I director, one (1) designee is a Class II director
and two (2) designees are Class III directors, and any
necessary consents, approvals, authorizations and agreements
of, and the giving of all notices and making of all filings
with, any third parties in connection with the appointment
of such designees to the Company's board of directors shall
have been received or made, as the case may be, including,
without limitation, the provision of any information to the
Company's shareholders in accordance with Rule 14f-1 of the
Exchange Act regarding the right of the Investor to
designate a majority of the members of the Company's board
of directors.
29
6.1.9.2. The Company shall have executed and delivered a New
Indemnification Agreement for each of the Investor's
designees to the Company's board of directors.
6.1.9.3. The Company shall have provided the Investor with
evidence of Directors and Officers liability insurance
coverage for the benefit of the Investor's designees to the
Company's board of directors, with coverage of the type,
amount, duration and with such insurance carriers acceptable
to the Investor.
6.1.9.4. The Company shall have duly authorized, executed and
delivered agreements, in substantially the form attached
hereto as Exhibit N, with members of the Company's existing
board of directors to be designated by the Investor,
pursuant to which agreements such designated members of the
board shall have resigned from the board of directors of the
Company on and as of the Initial Closing Date in order to
create four vacancies therein that will have then been
filled by appointment of the Investor's designees as
provided in this Agreement.
6.1.9.5. Any disclosures to be made by the Company in connection
with changes in the management and members of the board of
directors of the Company shall be satisfactory to the
Investor in its sole discretion.
6.1.9.6. The Company shall have entered into a consulting
agreement with Xxxxxxx Xxx substantially in the form
attached hereto as Exhibit O, pursuant to which agreement
Xx. Xxx shall have resigned as an employee of the Company on
and as of the Initial Closing Date and agreed to provide
certain consulting services to the Company in exchange for
certain consideration as provided therein.
6.1.10. RIGHTS AGREEMENT. The Company shall have effectuated and
consummated the redemption of the outstanding Rights under the
Rights Agreement, as provided in Sections 2.8.2 and 4.14, in
accordance with Section 23 of the Rights Agreement.
6.1.11. MUTUAL RELEASE. The Company shall have duly authorized,
executed and delivered a Mutual Release among the Company,
Durus and Artal, substantially in the form attached hereto as
Exhibit P and effective on and as of the Initial Closing Date.
6.1.12. OTHER MATTERS.
6.1.12.1. The Company shall have delivered to the Investor such
other documents relating to the transactions contemplated by
this Agreement and the other Transaction Documents as the
Investor or its counsel may reasonably request.
30
6.1.12.2. No event or events shall have occurred since the date
hereof that, taken individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
6.1.12.3. The Company shall have paid, via wire transfer of
immediately available funds or other acceptable payment
mechanism, the fees and expenses incurred by the Investor as
provided in Section 10.3.
6.1.12.4. The Company shall have entered into an amendment to its
Research, Development, and License Agreement with DEKA
Research and Development Corporation, in form and substance
mutually agreed to by the Company and the Investor.
6.2. SUBSEQUENT CLOSINGS. In connection with any Subsequent Closing, an
Investor electing to purchase additional Units of Preferred Shares and
Warrants at a Subsequent Closing shall be entitled to receive evidence
of the satisfaction, on or before the Subsequent Closing Date, of each
of the following conditions (any of which may be waived by the Investor
in whole or in part):
6.2.1. ISSUANCE OF SECURITIES. The Company shall have delivered to the
Investor duly executed certificates, against payment therefor,
representing the Preferred Shares and the Warrants.
6.2.2. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of the Company (before and after
giving effect to the consummation of the transactions
contemplated by the Transaction Documents) shall be true and
correct in all material respects as of the date when made and
as of the Subsequent Closing Date as though made at that time
(except to the extent, and only to the extent, that the
Company's representations and warranties may change as a result
of the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents on the Initial
Closing Date) and the Company shall have performed, satisfied
and complied in all respects with the covenants, agreements and
conditions required by this Agreement and the other Transaction
Documents to be performed, satisfied or complied with by the
Company. The Investor shall have received a certificate,
executed by the Chief Executive Officer or Chief Financial
Officer of the Company, dated as of the Subsequent Closing
Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Investor(s).
6.2.3. NO RESTRAINTS.
6.2.3.1. No statute, rule, regulation, executive order, decree,
ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
or regulatory authority of competent jurisdiction, or any
self regulatory organization having authority over the
matters contemplated hereby, which would prohibit the
consummation of any of, or materially adversely
31
affect, the transactions contemplated by this Agreement or
the other Transaction Documents. No action, suit or
proceeding shall have been instituted and remain pending, or
have been threatened, before a court or other governmental
or regulatory body of competent jurisdiction to restrain,
prohibit or otherwise challenge any of the transactions
contemplated by this Agreement or the other Transaction
Documents (or seeking damages from the Investor, any of its
Affiliates or the Company as a result thereof).
6.2.3.2. Except as contemplated by Section 4.13, the Company shall
have obtained all governmental, regulatory or third party
consents and approvals necessary for the consummation of the
transactions contemplated by this Agreement and the other
Transaction Documents, including, without limitation, the
Company shall have obtained an exemption or other form of
relief or clarification (in form and substance acceptable to
the Investor) from NASDAQ to the effect that any of the
NASDAQ's rules regarding the need for a vote of the
Company's shareholders are inapplicable to the transactions
contemplated in this Agreement and the other Transaction
Documents.
6.2.3.3. The Investor shall have received a certificate, executed
by the Chief Executive Officer or Chief Financial Officer of
the Company, dated as of the Subsequent Closing Date,
certifying that all (i) authorizations, consents or
approvals of, notices to or filings with any governmental or
regulatory authority and (ii) approvals and consents of any
other Person, required in connection with the consummation
of the transactions contemplated by this Agreement and the
other Transaction Documents, shall have been obtained or
made and that all applicable waiting periods have expired
without notice of any action which seeks to restrain, enjoin
or otherwise prohibit or materially delay the transactions
contemplated by this Agreement and the other Transaction
Documents and as to such other matters as may be reasonably
requested by the Investors.
6.2.4. OPINION OF COMPANY COUNSEL. The Investor shall have received
the opinion of the Company's outside counsel, dated as of the
Subsequent Closing Date, in substantially the form of Exhibit Q
attached hereto.
6.2.5. ORGANIZATIONAL DOCUMENTS; GOOD STANDING. The Company shall have
delivered to the Investor (i) a certificate evidencing the
formation and good standing of the Company and each of its
material Subsidiaries in each such entity's jurisdiction of
formation issued by the Secretary of State (or equivalent) of
such jurisdiction of formation as of a date within five (5)
days of the Subsequent Closing Date, (ii) a certificate
evidencing the Company's qualification as a foreign corporation
and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company
conducts business and is required to so qualify, as of a date
within five (5) days of the Subsequent Closing Date and (iii) a
certified copy of the Certificate of Incorporation as certified
by the Secretary of State of the State of Delaware within five
(5) days of the Subsequent Closing Date.
32
6.2.6. RESOLUTIONS; INCUMBENCY. The Company shall have delivered to
the Investor (i) a certificate, executed by the Secretary of
the Company and dated as of the Subsequent Closing Date, as to
(A) the resolutions adopted by the Company's board of directors
with respect to the transactions contemplated by this Agreement
and the other Transaction Documents, in a form acceptable to
the Investor, (B) the Certificate of Incorporation, (C) the
Bylaws, each as in effect at the Subsequent Closing, and (D)
the incumbency, authority and signatures of each officer of the
Company authorized to execute and deliver this Agreement and
the other Transaction Documents to be executed and delivered at
the Subsequent Closing and act with respect thereto and (ii) a
letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five
(5) days of the Subsequent Closing Date.
6.2.7. CONTINUED LISTING. The Common Stock shall be listed on the
NASDAQ Capital Market and shall not have been suspended, as of
the Subsequent Closing Date, by the SEC or the NASDAQ Capital
Market from trading on the NASDAQ Capital Market nor shall
proceedings regarding such suspension by the SEC or the NASDAQ
Capital Market have been threatened, as of the Subsequent
Closing Date, either by the SEC or the NASDAQ Capital Market or
by falling below the minimum maintenance requirements of the
NASDAQ Capital Market.
6.2.8. OTHER MATTERS.
6.2.8.1. The Company shall have delivered to the Investor(s) such
other documents relating to the transactions contemplated by
this Agreement and the other Transaction Documents as the
Investor or its counsel may reasonably request.
6.2.8.2. No event or events shall have occurred since the date
hereof that, taken individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
6.2.8.3. The Company shall have paid, via wire transfer of
immediately available funds or other acceptable payment
mechanism, the fees and expenses incurred by the Investor(s)
as provided in Section 10.3.
7. INDEMNIFICATION
In consideration of an Investor's execution and delivery of this Agreement
and the other Transaction Documents and the acquisition of the Securities,
and in addition to all of the Company's other obligations under this
Agreement, the Loan Agreements, the Investor Rights Agreement, the Preferred
Shares, the Warrants, the New Notes and the other Transaction Documents, the
Company hereby acknowledges and agrees that it shall defend, protect,
indemnify and hold harmless the Investor and each other holder of the
Securities and each and all of their respective shareholders, partners,
members, officers, directors, employees, managers and direct and indirect
investors and any of the foregoing Persons'
33
agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement
and the other Transaction Documents) (collectively the "Indemnitees") from
and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages and expenses as incurred in
connection therewith (regardless of whether any such Indemnitee is a party
to the action for which indemnification is sought), and including reasonable
attorney's fees and disbursements (the "Indemnified Liabilities"), incurred
by an Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation by the Company or any breach of any representation or
warranty made by the Company herein or in any other Transaction Document or
in any certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company
contained herein or in any other Transaction Document or in any 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 breach by the Company, or the enforcement by the
Investor, of this Agreement or any other Transaction Document or any
certificate, instrument or document contemplated hereby or thereby or (ii)
the status of such Indemnitee as an investor in the Company. To the extent
that the foregoing indemnification obligations on the part of 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 that is permissible under applicable law.
The indemnification obligations on the part of the Company contained in this
Section 7 do not apply to amounts paid in settlement of Indemnified
Liabilities if such settlement is made without the prior written consent of
the Company, which consent shall not be unreasonably withheld. The Company
may participate in, and assume and control, the defense of any claim with
counsel mutually satisfactory to the Company and the Indemnitee. If, in the
reasonable opinion of counsel mutually satisfactory to the Company and the
Indemnitee, the representation by such counsel of the Company and the
Indemnitee is inappropriate due to actual or potential conflicts of
interests between the Indemnitee and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or
targets of, any such action including the Indemnitee, and any such
Indemnitee reasonably determines that there may be legal defenses available
to such Indemnitee that are different from or in addition to those available
to the Company, then the Indemnitee is entitled to assume such defense and
may retain its own counsel, with fees and expenses to be paid by the
Company.
8. DEFINITIONS
"Affiliate" has the meaning set forth in Section 2.6.
"Agreement" means this Securities Purchase Agreement dated as of March 31, 2006
entered into by and between the Company and the Investor.
"Artal" has the meaning set forth in Recital E.
34
"Bridge Loan" has the meaning set forth in Recital D.
"Business Day" has the meaning set forth in Section 4.4.
"Bylaws" has the meanings set forth in Section 2.15.
"Certificate of Designation" has the meaning set forth in Recital A.
"Certificate of Incorporation" has the meaning set forth in Section 2.15.
"Closing" has the meaning set forth in Section 1.4.
"Common Stock" means the Company's common stock, par value $0.01 per share
"Company" means Aksys, Ltd.
"Conversion Shares" has the meaning set forth in Recital A.
"Environmental Laws" has the meaning set forth in Section 2.22.
"ERISA" means the Employee Retirement Income Security Act of 1974, including
(unless the context otherwise requires) any rules or regulations promulgated
thereunder.
"ERISA Affiliate" means each business or entity which is, or within the last six
years was, a member of a "controlled group of corporations", under "common
control" or an "affiliated service group" with the Company within the meaning of
Section 414(b), (c) or (m) of the Internal Revenue Code, required to be
aggregated with the Company under Section 414(o) of the Internal Revenue Code,
or is, or within the last six years was, under "common control" with the
Company, within the meaning of Section 4001(a)(14) of ERISA.
"ERISA Event" means (i) a reportable event as defined in Section 4043 of ERISA
with respect to a Pension Plan, excluding, however, such events as to which the
PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that
it be notified within 30 days of the occurrence of such event; (ii) the
applicability of the requirements of Section 4043(b) of ERISA with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, to any Pension
Plan where an event described in paragraph (9), (10), (11), (12) or (13) of
Section 4043(c) of ERISA is reasonably expected to occur with respect to such
plan within the following 30 days; (iii) a withdrawal by the Company or any
ERISA Affiliate thereof from a Pension Plan or the termination of any Pension
Plan resulting in liability under Sections 4063 or 4064 of ERISA; (iv) the
withdrawal of the Company or any ERISA Affiliate thereof in a complete or
partial withdrawal (within the meaning of Section 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefore, or the
receipt by the Company or any ERISA Affiliate thereof of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA; (v) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination under Section 4041
or 4041A of ERISA, or the
35
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (vi) the imposition of liability on the Company or any ERISA
Affiliate thereof pursuant to Sections 4062(e) or 4069 of ERISA or by reason of
the application of Section 4212(c) of ERISA; (vii) the failure by the Company or
any ERISA Affiliate thereof to make any required contribution to a Plan, or the
failure to meet the minimum funding standard of Section 412 of the Internal
Revenue Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Internal Revenue Code) or the failure to
make by its due date a required installment under Section 412(m) of the Internal
Revenue Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan; (viii) an event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; (ix) the imposition of any liability under
Title I or Title IV of ERISA, other than PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon the Company, or any ERISA Affiliate thereof;
(x) an application for a funding waiver under Section 303 of ERISA or an
extension of any amortization period pursuant to Section 412 of the Internal
Revenue Code with respect to any Pension Plan; (xi) the occurrence of a
non-exempt prohibited transaction under Sections 406 or 407 of ERISA for which
the Company or any Subsidiary thereof may be directly or indirectly liable;
(xii) a violation of the applicable requirements of Section 404 or 405 of ERISA
or the exclusive benefit rule under Section 401(a) of the Internal Revenue Code
by any fiduciary or disqualified person for which the Company or any ERISA
Affiliate thereof may be directly or indirectly liable; (xii) the occurrence of
an act or omission which could give rise to the imposition on the Company or any
ERISA Affiliate thereof of fines, penalties, taxes or related charges under
Chapter 43 of the Internal Revenue Code or under Sections 409, 502(c), (i) or
(1) or 4071 of ERISA; (xiii) the assertion of a material claim (other than
routine claims for benefits) against any Plan or the assets thereof, or against
the Company, or any Subsidiary thereof in connection with any such plan; (xiv)
receipt from the IRS of notice of the failure of any Qualified Plan to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust
forming part of any Qualified Plan to fail to qualify for exemption from
taxation under Section 501(a) of the Internal Revenue Code; (xv) the imposition
of any lien on any of the rights, properties or assets of the Company or any
ERISA Affiliate thereof, in either case pursuant to Title I or IV of ERISA or to
Section 401(a)(29) or 412 of the Internal Revenue Code; or (xvi) the
establishment or amendment by the Company or any Subsidiary thereof of any
"welfare plan", as such term is defined in Section 3(1) of ERISA, that provides
post-employment welfare benefits in a manner that would increase the liability
of the Company.
"Exercise Price" has the meaning set forth in the Warrant Agreement.
"Indebtedness" has the meaning set forth in Section 2.16.
"Initial Closing" has the meaning set forth in Section 1.4.1.
"Initial Closing Date" has the meaning set forth in Section 1.4.1.
"Insolvent" has the meaning set forth in 2.10.
36
"Investor" and the "Investors" have the meaning set forth in the first paragraph
of this Agreement.
"Investor Rights Agreement" has the meaning set forth in Recital D.
"Loan Agreement" has the meaning set forth in Recital D.
"Loan Agreements" has the meaning set forth in Recital D.
"Material Adverse Effect" has the meaning set forth in Section 2.1.
"Multiemployer Plan" means a "multiemployer plan" (within the meaning of Section
3(37) of ERISA) to which the Company or any ERISA Affiliate thereof makes, is
making, or is obligated or has ever been obligated to make, contributions.
"New Notes" has the meaning set forth in Recital D.
"Notice of Additional Investment" has the meaning set forth in Section 1.3.2.
"Outstanding Notes" has the meaning set forth in Recital E.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"Pension Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan (i) that is or was at any time maintained
or sponsored by the Company or any ERISA Affiliate thereof or to which the
Company, or any ERISA Affiliate thereof has ever made, or was obligated to make,
contributions, and (ii) that is or was subject to Section 412 of the Internal
Revenue Code, Section 302 of ERISA or Title IV of ERISA.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or any other entity
of whatever nature or any governmental agency or authority.
"Plan" means (i) an employee benefit plan (as defined in Section 3(3) of ERISA)
other than a Multiemployer Plan which is or was at any time maintained or
sponsored by the Company or any Subsidiary thereof or to which the Company or
any Subsidiary thereof has ever made, or was obligated to make, contributions,
(ii) a Pension Plan, or (iii) a Qualified Plan.
"Preferred Shares" has the meaning set forth in Recital A.
"Qualified Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan (i) that is or was at any time maintained
or sponsored by the Company or any ERISA Affiliate thereof or to which the
Company or any ERISA Affiliate thereof has ever made, or was ever obligated to
make, contributions, and (ii) that is intended to be tax-qualified under Section
401(a) of the Internal Revenue Code.
37
"Redemption Price" has the meaning set forth in the Rights Agreement.
"Rights Agreement" has the meaning set forth in Section 2.8.2.
"Schedule of Investors" has the meaning set forth in the first paragraph of this
Agreement.
"SEC" has the meaning set forth in Section 2.9.
"SEC Documents" has the meaning set forth in Section 2.9.
"Securities" has the meaning set forth in Recital F.
"Securities Act" has the meaning set forth in Section 2.3.
"Subsequent Closing" has the meaning set forth in Section 1.4.2.
"Subsequent Closing Date" has the meaning set forth in 1.4.2.
"Subsidiary" has the meaning set forth in Section 2.1.
"Transaction Documents" has the meaning set forth in Section 2.2.
"Units" has the meaning set forth in Recital B.
"Warrant Agent" has the meaning given to such term set forth in the Warrant
Agreement.
"Warrants" has the meaning set forth in Recital B.
"Warrant Agreement" has the meaning set forth in Recital B.
"Warrant Shares" has the meaning set forth in Recital B.
9. TERMINATION. In the event that the Initial Closing shall not have occurred
on or before the date that is sixty (60) days following the date hereof due
to the Company's failure to satisfy the conditions set forth in Sections 6
(and Durus does not waive such unsatisfied condition(s)), Durus may, in its
sole discretion, terminate this Agreement at any time after such date
without any liability whatsoever to the Company; provided, however, if this
Agreement is terminated pursuant to this Section 9, the Company shall remain
obligated to the Investors under Section 10.3.
10. MISCELLANEOUS
10.1. PRESS RELEASES AND ANNOUNCEMENTS. All press releases and announcements
concerning the transactions contemplated by this Agreement and the
other Transaction Documents shall be mutually agreed to by the Company
and the Investors, except for any such disclosure required by law
which, in the case of such disclosure by the
38
Company, shall, to the extent practicable under the circumstances, be
first discussed with the Investors and, in the case of such disclosure
by the Investors, shall, to the extent practicable under the
circumstances, be first discussed with the Company.
10.2. INTERPRETATION.
10.2.1. The various section headings are inserted for purposes of
reference only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
10.2.2. Each party hereto acknowledges that it has been represented by
competent counsel and participated in the drafting of this
Agreement and the other Transaction Documents and agrees that
any applicable rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall
not be applied in connection with the construction or
interpretation of this Agreement and the other Transaction
Documents.
10.3. FEES AND EXPENSES. The Company shall reimburse the Investor(s) for
reasonable attorney's fees and related costs and expenses incurred in
connection with the transactions contemplated by this Agreement and the
other Transaction Documents and due diligence in connection therewith,
including fees and related costs and expenses incurred in connection
with any Additional Investment by the Investor(s) as contemplated by
Section 1.3, which amount(s) shall be paid to the Investors or its
counsel whether or not the transactions contemplated by this Agreement
and the other Transaction Documents are consummated, including, without
limitation, in the event this Agreement is terminated as contemplated
in Section 9. Except as expressly set forth above, each party hereto
shall be solely responsible for the payment of the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement and
the other Transaction Documents. Without limiting the generality of the
foregoing, the Company shall pay all stamp and other taxes, if any,
which may be payable in respect of the issuance, sale and delivery to
the Investor(s) or any designees of the Preferred Shares, the Warrants,
the New Notes, the Conversion Shares or the Warrant Shares, and shall
save the Investor harmless against any loss or liability resulting from
nonpayment or delay in the payment of any such taxes.
10.4. GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF JURY TRIAL.
10.4.1. This Agreement is to be construed in accordance with and
governed by the internal laws of the State of New York (as
permitted by Section 5-1401 of the New York General Obligations
Law (or any similar successor provision)) without giving effect
to any choice of law rule that would cause the application of
the laws of any jurisdiction other than the internal laws of
the State of New York to the rights and duties of the parties.
39
10.4.2. For purposes of any suit, action or other legal proceeding
relating to this Agreement or the enforcement of any provision
of this Agreement, each party hereto hereby expressly and
irrevocably submits and consents to the exclusive jurisdiction
of the courts of the State of New York sitting in the borough
of Manhattan and the United States District Court for the
Southern District of New York for the purposes of any such
suit, action or legal proceeding, including to enforce any
settlement, order or award; and agrees that such state and
federal courts shall be deemed to be a convenient forum; and
waives and agrees not to assert (by way of motion, as a defense
or otherwise), in any such legal proceeding commenced in such
court any claim that such party is not subject personally to
the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such
proceeding is improper or that this Agreement or the subject
matter of this Agreement may not be enforced in or by such
court.
10.4.3. Each party hereto agrees to the entry of an order to enforce
any resolution, settlement, order or award made pursuant to
this Section by the courts of the State of New York sitting in
the borough of Manhattan and the United States District Court
for the Southern District of New York and in connection
therewith hereby waives, and agrees not to assert by way of
motion, as a defense, or otherwise, any claim that such
resolution, settlement, order or award is inconsistent with or
violative of the laws or public policy of the laws of the State
of New York or any other jurisdiction.
10.4.4. Each party hereto hereby knowingly, voluntarily, and
intentionally waives the right to a trial by jury in respect of
any litigation arising out of, under or in connection with this
Agreement, this waiver being a material inducement for each
such party to enter into this Agreement.
10.5. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific intent or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement and to enforce specifically the terms
and provisions hereof without the necessity of demonstration actual
damages and without having to post a bond or other form of security as
a condition to such relief, this being in addition to any other remedy
to which they may be entitled by law or equity.
10.6. SURVIVAL. Unless this Agreement is terminated under Section 9, the
representations and warranties of the parties hereunder shall survive
each Closing.
10.7. THIRD PARTY BENEFICIARIES. Except as set forth in Section 7 of this
Agreement, this Agreement is intended for the benefit of the parties
hereto and their respective permitted successors (including subsequent
Securities holders) and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other Person or entity.
10.8. ENTIRE AGREEMENT. This Agreement, the other Transaction Documents and
the other documents contemplated hereby and thereby (including all
schedules and exhibits
40
thereto) constitute the full and entire understanding and agreement
among the parties with regard to the subjects hereof and thereof, and
no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as
specifically set forth herein and therein. This Agreement supersedes
all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
10.9. SEVERABILITY. The provisions of this Agreement shall be severable, and
any invalidity, unenforceability or illegality of any provision or
provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this
Agreement shall be construed to be valid and enforceable to the full
extent permitted by law.
10.10. AMENDMENT AND WAIVER. This Agreement may be amended or modified only
upon the mutual written consent of the Company and the Investors. No
failure to exercise and no delay in exercising any right, power or
privilege granted under this Agreement shall operate as a waiver of
such right, power or privilege. No single or partial exercise of any
right, power or privilege granted under this Agreement shall preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this
Agreement are cumulative and are not exclusive of any rights or
remedies provided by law.
10.11. RELATIONSHIP OF THE PARTIES. For all purposes of this Agreement and
the other Transaction Documents, each of the parties hereto and their
respective Affiliates shall be deemed to be independent entities and,
anything in this Agreement or the other Transaction Documents to the
contrary notwithstanding, nothing herein shall be deemed to constitute
the parties hereto or any of their respective Affiliates as partners,
joint venturers, co-owners, an association or any entity separate and
apart from each party itself, nor shall this Agreement or any other
Transaction Documents make any party hereto an employee or agent, legal
or otherwise, of the other parties for any purposes whatsoever. None of
the parties hereto is authorized to make any statements or
representations on behalf of any other party or in any way to obligate
any other party, except as expressly authorized in writing by the other
parties. Except as expressly provided in this Agreement or any other
Transaction Documents, no party hereto or thereto shall assume nor
shall be liable for any liabilities or obligations of the other
parties, whether past, present or future.
10.12. NOTICES.
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the
next business day; (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid; or (iv) two (2) days after deposit with a nationally
recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to
the parties hereto at the
41
respective addresses set forth below, or as notified by such party from
time to time at least ten (10) days prior to the effectiveness of such
notice:
if to the Investors: Durus Life Sciences Master Fund Ltd.
c/o International Fund Services (Ireland)
Ltd.
0xx Xxxxx, Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx
Xxxxxx 0, Xxxxxxx
Attention: Xxxxx Xxxxx
Tel: (000) 00-00-000-0000
Fax: (000) 00-00-000-0000
WITH A COPY TO: Xxxxx Xxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
AND A COPY TO: Xxxx X. Xxxx, Esq.
Xxxxxxx, Xxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
if to the Company: Aksys, Ltd.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
WITH A COPY TO: Xxxxx X. Xxxx P.C.
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
10.13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
10.14. ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may
be entitled.
42
In Witness Whereof, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
AKSYS, LTD.
By: /s/ Xxxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: CEO
INVESTOR:
DURUS LIFE SCIENCES MASTER FUND LTD.
By: /s/ Xxxxxx X. Lake
-------------------------------------
Name: Xxxxxx X. Lake
Title: Director
[Signature page to Securities Purchase Agreement]
