EXHIBIT 10.83
EXECUTED ZLP SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement dated as of August 9, 2002 (this
"AGREEMENT"), by and among Peregrine Pharmaceuticals, Inc., a Delaware
corporation (the "COMPANY"), and the purchasers identified on the signature
pages hereto (each, including its respective successors and assigns, a
"PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and Rule 506 promulgated thereunder, the Company desires
to issue and sell to the Purchasers, and the Purchasers, severally and not
jointly, desire to purchase from the Company, certain securities of the Company,
as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I.
DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth in this Section
1.1:
"ADJUSTMENT WARRANT" means a common stock purchase warrant in the form
attached hereto as EXHIBIT G.
"AFFILIATE" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"CLOSING" means the closing of the purchase and sale of the Shares and
the Warrants, as contemplated by Section 2.1.
"CLOSING DATE" means the date of the Closing.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $.001 par value
per share, and any securities into which such common stock may hereafter be
reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMMON STOCK INVESTMENT AMOUNT" means, with respect to the purchase of
the Common Stock by a Purchaser, the amount indicated below such Purchaser's
name on such Purchaser's signature page of this Agreement.
"COMMON SHARES" means the shares of Common Stock issuable to the
Purchasers at the Closing.
"COMPANY OUTSIDE COUNSEL" means Xxxxxxx, Xxxxx & Xxxx, LLP.
"CONCURRENT PURCHASE AGREEMENT" means the Securities Purchase
Agreement, dated as of August 9, 2002, between the Company and the purchasers
signatory thereto, as amended, modified or supplemented from time to time in
accordance with its terms, pursuant to which such purchasers will purchase from
the Company common stock purchase convertible debentures, shares of Common Stock
and common stock purchase warrants similar to the Warrants and the Adjustment
Warrants, and have the right to require the Company to register the Common Stock
so purchased and shares of common stock issuable upon conversion of all the
common stock purchase convertible debentures and exercise of all common stock
purchase warrants pursuant to a registration rights agreement similar to the
Registration Rights Agreement.
"EFFECTIVE DATE" means the date that a Registration Statement is first
declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"INDEBTEDNESs" shall mean the principal amount of, premium, if any,
profit participation, if any, and accrued and unpaid interest on and all other
amounts and costs payable in respect of (a) indebtedness for money borrowed from
others; (b) indebtedness guaranteed, directly or indirectly, in any manner, or
in effect guaranteed, directly or indirectly, in any manner through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in the debtor, or to purchase indebtedness, or to purchase and pay for
property if not delivered or pay for services if not performed, primarily for
the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss; (c) all indebtedness secured
by any mortgage, lien, pledge, charge or other encumbrance upon property owned
by the Company; (d) all indebtedness of such Person created or arising under any
conditional sale, lease (intended primarily as a financing device) or other
title retention or security agreement with respect to property acquired by the
Company even though the rights and remedies of the seller, lessor or lender
under such agreement or lease in the event of a default may be limited to
repossession or sale of such property; and (e) renewals, extensions and
refundings of any such indebtedness.
"LOCK-UP LETTER" means the lock-up letter, in the form attached hereto
as EXHIBIT E, to be executed by each of Xxxxxx Xxxxxx, Xxxx Xxxxxx and Xxxxx
Xxxxxx.
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"PER SHARE PURCHASE PRICE" equals $0.65.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PURCHASER PERCENTAGE" means, with respect to a Purchaser, the
percentage equal to the product of (x) a fraction, the numerator of which shall
be the sum of the Common Stock Investment Amount paid or payable by such
Purchaser on the Closing Date, and the denominator of which shall be the sum of
the aggregate amount of Common Stock Investment Amount paid or payable by all
Purchasers on the Closing Date times (y) 100.
"REGISTRATION STATEMENT" means one or more registration statements
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Common Shares and the Warrant Shares by the
Purchasers.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, by and among the Company and
the Purchasers, in the form of EXHIBIT B attached hereto.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES" means the Common Shares, the Warrants, the Adjustment
Warrant and the Warrant Shares.
"SHARES" means the Common Shares issuable to the Purchasers on the
Closing Date.
"SUBSIDIARY" means any subsidiary of the Company that is required to be
listed in SCHEDULE 3.1(A).
"STRATEGIC TRANSACTION" means a transaction or relationship in which
the Company issues shares of Common Stock to a Person which is, itself or
through its subsidiaries, an operating company in a business synergistic with
the business of the Company, whose business consists primarily of manufacturing,
research, developing, or selling pharmaceutical products and in which the
Company receives material benefits in addition to the investment of funds (such
Person, a "STRATEGIC COMPANY"), but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
a Person whose primary business is investing in securities. The parties agree
that the issuance by the Company of Common Stock in connection with the
Company's licensing of technology to or from a Strategic Company if (i) such
arrangement is approved by the board of directors of the Company, (ii) such
transaction is a bona fide, arms-length transaction to a third party
unaffiliated with the Company or any of its Affiliates, (iii) the Common Stock
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at issue may not be registered for resale until 60 Trading Days following the
Effective Date (plus such number of Trading Days during such period when the
Registration Statement may not be used by the Purchasers for the resale of the
Common Shares), (iv) such Strategic Company is not in the primary business of
investing in securities, (v) and such Strategic Company purchases the Common
Stock, for cash, at a price equal to or greater than the average of the Closing
Prices of the Common Stock for the five Trading Days immediately preceding the
closing date of the issuance of the Common Stock shall be deemed a Strategic
Transaction.
"TRADING DAY" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which the Common Stock is traded in the over the counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over
the counter market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding its functions of reporting
prices); provided, that in the event that the Common Stock is not listed or
quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.
"TRADING MARKET" means whichever of the Nasdaq SmallCap Market, Nasdaq
National Market, American Stock Exchange or New York Stock Exchange on which the
Common Stock is then listed or quoted.
"TRANSFER AGENT INSTRUCTIONS" means the company's transfer agent
instructions in the form of EXHIBIT D.
"TRANSACTION DOCUMENTS" means this Agreement, the Registration Rights
Agreement, the Warrants, the Adjustment Warrants, the Transfer Agent
Instructions, the Voting Rights Letter, the Lock-Up Letter and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
"VOTING RIGHTS LETTER" means the voting rights letter, from Xxxxxx
Xxxxxx, addressed to the Purchasers, in the form attached hereto as EXHIBIT F.
"WARRANTS" means, collectively, the Common Stock purchase warrants
issuable to each Purchaser at the Closing, in the form attached hereto as
EXHIBIT C.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants and the Adjustment Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1. CLOSING. Subject to the terms and conditions set forth in this
Agreement the Company shall issue and sell to the Purchasers and the Purchasers
shall, severally and not jointly, purchase from the Company the Common Shares
and the Warrants. The closing of the purchase and the sale of the Common Shares
and the Warrants shall take place at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the first Trading Day immediately
following the date that the conditions set forth in Section 2.4 have been
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satisfied or waived by the appropriate party or at such other location or such
later date as the parties shall agree.
2.2. DELIVERIES. On the date that this Agreement is executed, (a) the
Company shall deliver or cause to be delivered to each Purchaser (i) this
Agreement and the Registration Rights Agreement, (ii) the Transfer Agent
Instructions, signed by the Company's transfer agent and counter-signed by the
Company; (iii) each of the Lock-Up Letters; and (iv) the Voting Rights Letter;
and (b) each Purchaser shall deliver to the Company this Agreement and a
Registration Rights Agreement, each duly executed by such Purchaser.
2.3. CLOSING DELIVERIES.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) a stock certificate, containing the legend set forth in
Section 4.1(b), registered in the name of such Purchaser, evidencing the number
of Common Shares equal to such Purchaser's Common Stock Investment Amount
divided by the Per Share Purchase Price;
(ii) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire the 4,648,846
Warrant Shares;
(iii) An Adjustment Warrant, registered in the name of such
Purchaser who acquired Common Shares pursuant to Section 2.3(a)(i), pursuant to
which such Purchaser shall have the right to acquire the number of Adjustment
Shares as set forth in Section 4.6 hereof; and
(iv) legal opinion of Company Outside Counsel, in agreed form,
addressed to the Purchasers;
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company, in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose, an amount equal to the sum of such Purchaser's Common Stock
Investment Amount.
2.4. CONDITIONS TO CLOSING. The obligation of a Purchaser to perform at
the Closing is subject to satisfaction or waiver by such Purchaser of each of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company in this Agreement shall be true and correct as of the
date when made and as of the Closing Date as though first made at that time
(except for representations and warranties that speak of a specific date, which
need only be true and correct as of such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants and
agreements required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date.
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(c) DELIVERY OF CLOSING ITEMS. The Company shall have delivered to
the Purchasers the items required to be delivered pursuant to Section 2.3(a).
(d) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The
Common Stock shall be authorized for trading or quotation on the Trading Market
and trading in the Common Stock shall not have been suspended by the Commission
or the Trading Market at any time from the date of execution of this Agreement
through the Closing Date. The Company shall not have received any notice from
the Trading Market threatening to delist the Common Stock from the Trading
Market.
(e) ANNUAL REPORT ON FORM 10-K. The Company shall have filed its
Annual Report on Form 10-K for the fiscal year ended April 30, 2002 (the "FORM
10-K") on a timely basis (as determined under the General Instructions I.A. 3(b)
of Form S-3 promulgated under the Securities Act and Rule 12(b)-25(b) under the
Exchange Act).
(f) AUDITOR'S REPORT. The report of the Company's auditors prepared
in accordance with Rule 2-02 of Regulation S-X, contained in the financial
statements included in the Form 10-K shall not contain a "going concern" or
similar opinion.
(g) COMPLIANCE CERTIFICATE. The Company shall have delivered to or
as directed by the Purchasers, an Officer's Certificate signed by the Company's
Chief Executive Officer, dated as of Closing Date, certifying that the Company
has satisfied the conditions set forth in Sections 2.4(a)-(f).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to each Purchaser:
(a) SUBSIDIARIES. The Company has no direct or indirect
subsidiaries other than those listed in SCHEDULE 3.1(A). Except as disclosed in
SCHEDULE 3.1(A), the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
"LIENS"), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and each
Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and each Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
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standing, as the case may be, could not, individually or in the aggregate have
or reasonably be expected to result in: (i) an adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) an adverse impairment to the Company's ability to perform on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a "MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filing of the Form D with the
Commission and any applicable blue sky filings; (ii) the filing with the
Commission of one or more Registration Statements and (iii) the application with
the Trading Market for the listing of the Common Shares and Warrant Shares for
trading thereon in the time and manner required thereby (collectively, the
"REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Securities are duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will
be duly and validly issued, fully paid and non-assessable, free and clear of all
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Liens. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to this Agreement,
the Warrants and the Adjustment Warrants in order to issue the full number of
Warrant Shares as are or may become issuable in accordance with the terms of the
Warrants and the Adjustment Warrants, ignoring any limits on the number of
shares of Common Stock that may be owned by the Purchasers at any one time and
assuming that the exercise price of the Warrants at all times on and after the
date of determination equals 100% of the actual exercise price on the Trading
Day immediately prior to the date of determination).
(g) CAPITALIZATION. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set forth in
SCHEDULE 3.1(G). No securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and the securities being purchased pursuant to the
Concurrent Purchase Agreement and the transaction contemplated thereby and
except as disclosed in SCHEDULE 3.1(G), there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with the Schedules to this
Agreement, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
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(i) MATERIAL CHANGES. Since the date of the latest audited
financials included within the SEC Reports (except as disclosed in the SEC
Reports) and except as contemplated by the Concurrent Purchase Agreement: (i)
there has been no event, occurrence or development relating to the Company or
its Subsidiaries that has had or could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than: (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information.
(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "ACTION") which: (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any officer
thereof, is or has been, nor any director thereof is or has been for the last
three years, the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and, to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director that was a director of the Company
at any time during the last three years or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) COMPLIANCE. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, has had or could reasonably
be expected to result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
9
individually or in the aggregate, has had or could reasonably be expected to
result in a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(n) TITLE TO ASSETS. Except as contemplated by the Concurrent
Purchase Agreement, the Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to their
respective businesses and good and marketable title in all personal property
owned by them that is material to their respective businesses, in each case free
and clear of all Liens, except as set forth in SCHEDULE 3.1(N) and except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary and material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so could have, or reasonably be expected to result in, a Material Adverse Effect
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Except as set forth on
Schedule 3.1(o), neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person which if
determined adversely to the Company would, individually or in the aggregate have
or could reasonably be expected to result in a Material Adverse Effect. To the
knowledge of the Company, (i) all such Intellectual Property Rights are
enforceable and (ii) there is no existing infringement by another Person of any
of the Intellectual Property Rights.
(p) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth
in SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(q) INTERNAL ACCOUNTING CONTROLS. The Company and the Subsidiaries
maintain a system of internal accounting controls which the audit committee of
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the board of directors reasonably believes is 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 accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(r) SOLVENCY. Assuming the closing of the transaction contemplated
by the Transaction Documents and the Concurrent Purchase Agreement: (i) the
Company reasonably believes that the fair value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company's existing
debts and other liabilities (including known contingent liabilities) as they
mature and (ii) the current cash flow of the Company, together with the proceeds
the Company would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its debt when such amounts are required to be paid.
The Company does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its debt).
(s) CERTAIN FEES. Except for fees or commissions payable by the
Company as set forth on SCHEDULE 3.1(S), no brokerage or finder's fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer, issuance and sale of the
Securities by the Company to the Purchasers as contemplated hereby, and the
offer and sale of the Securities hereunder will not be integrated with any
offers or sales of other securities by the Company.
(u) FORM S-3 ELIGIBILITY. The Company is eligible to utilize Form
S-3 to register the resales of its Common Stock.
(v) LISTING AND MAINTENANCE REQUIREMENTS. Except as set forth in
the SEC Reports, the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. Except for the maintenance of the $1.00 minimum bid price (pursuant to
the rules and regulations of the Nasdaq Stock Market), the Company is currently
in compliance with all such listing and maintenance requirements. The issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of the Trading Market and no approval of the shareholders of the
Company is required for the Company to issue and deliver to the Purchasers the
maximum number of shares of Common Stock contemplated by this Agreement,
including by reason of the issuance of the Warrant Shares upon exercise in full
11
of the Warrants and Adjustment Warrants, if an, assuming that the exercise price
of the Warrants at all times on and after the date of determination equals 100%
of the actual exercise price on the Trading Day immediately prior to the date of
determination).
(w) REGISTRATION RIGHTS. Except for the registration rights granted
pursuant to the Concurrent Purchase Agreement and the transactions contemplated
thereby and as described in SCHEDULE 3.1(W), the Company has not granted or
agreed to grant to any Person any rights (including "piggy back" registration
rights) to have any securities of the Company registered with the Commission or
any other governmental authority that have not been satisfied.
(x) INVESTMENT COMPANY. The Company is not, and is not an Affiliate
of, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(y) APPLICATION OF TAKEOVER PROTECTIONS. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.
(z) DISCLOSURE. Except for the information provided to a Purchaser
pursuant to one or more confidentiality agreements, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. All representations and
warranties of the Company set forth in this Agreement, including the Schedules
to this Agreement, and the other Transaction Documents are true and correct and
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
3.2. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of its Securities
pursuant to the terms hereof has been duly authorized by all necessary corporate
action on the part of such Purchaser. Each of Transaction Document to which such
Purchaser is a party has been duly executed by such Purchaser, and, when
delivered by such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms.
12
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement, at all times to sell or otherwise dispose of all or any part
of such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises the Warrants, it will be, either (i) a "qualified institutional buyer"
as defined in Rule 144A under the Securities Act or (ii) an institutional
"accredited investor" as defined in Rule 501(a) under the Securities Act. Such
Purchaser has not been formed solely for the purpose of acquiring the
Securities. Such Purchaser is not a registered broker-dealer under Section 15 of
the Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) GENERAL SOLICITATION. To the knowledge of such Purchaser, such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded: (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
13
The Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1. TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of a Purchaser who is an "accredited investor" as defined in Rule
501(a) under the Securities Act or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement, the Registration
Rights Agreement, and, if such transfer is of all or a portion of the Warrants
or Adjustment Warrants held by such Purchaser, as a holder of such Warrants or
Adjustment Warrants, as the case may be. If requested by a Purchaser (or any
subsequent transferee), the Company shall use its best efforts to effect such
transfer of the Securities and shall file a prospectus supplement or other
disclosure document as may be required in order to permit such transferee to
utilize a Registration Statement to make registered resales of the Warrant
Shares.
(b) The Purchasers agree to the imprinting, so long as is required
by this SECTION 4.1(B), of the following legend on the certificates evidencing
the Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE [CONVERTIBLE][EXERCISABLE]] HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
14
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval or consent of the Company and no legal opinion of legal counsel to
the pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing Common Shares and Warrant Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)): (i)
while a registration statement (including a Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Common Shares and Warrant Shares pursuant to Rule 144, or (iii)
if such Common Shares and Warrant Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the Effective Date if requested
by a holder thereof, and on any other date on which legends on stock
certificates are not required under this Section 4.1(c). If all or any portion
of a Warrant is exercised at a time when there is a effective registration
statement to cover the resale of the Warrant Shares, such Warrant Shares shall
be issued free of all legends. The Company agrees that following the Effective
Date or at such time as such legend is no longer required under this Section
4.1(c), it will, no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a certificate
representing Common Shares and Warrant Shares issued with a restrictive legend,
deliver or cause to be delivered to such Purchaser a certificate representing
such Common Shares and Warrant Shares that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
4.2. FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any such Person, the Company shall deliver to
such Person a written certification of a duly authorized officer as to whether
it has complied with the preceding sentence. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Warrant Shares under Rule 144.
4.3. INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
15
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the offer and sale of the Securities to the
Purchasers, or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market, if such
integration would result in a violation of any such rule or regulation.
4.4. INCREASE IN AUTHORIZED SHARES. If on any date the Company would
be, if notice of exercise or conversion were to be delivered on such date,
precluded from issuing the number of Warrant Shares issuable upon exercise in
full of all of the Warrants and Adjustment Warrants due to the unavailability of
a sufficient number of authorized but unissued or reserved shares of Common
Stock (ignoring any limits on the number of shares of Common Stock that may be
owned by the Purchasers at any one time and assuming that the exercise price of
the Warrants at all times on and after the date of determination equals 100% of
the actual exercise price on the Trading Day immediately prior to the date of
determination), then the Board of Directors of the Company shall promptly
prepare and mail to the stockholders of the Company proxy materials requesting
authorization to amend the Company's certificate of incorporation to increase
the number of shares of Common Stock which the Company is authorized to issue so
as to provide enough shares for issuance of the Warrant Shares. In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase in authorized shares, (b) recommend to and otherwise use its best
efforts to promptly and duly obtain stockholder approval to carry out such
resolutions (and hold a special meeting of the stockholders as soon as
practicable, but in any event not later than the 60th day after delivery of the
proxy materials relating to such meeting) and (c) within five Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's certificate or articles of incorporation to evidence such increase.
4.5. SUBSEQUENT PLACEMENTS AND REGISTRATIONS.
(a) Prior to the Effective Date, the Company will not, directly or
indirectly, offer, issue, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, issuance, sale, grant or any option to
purchase or other disposition of) any Common Stock, Common Stock Equivalents or
any of its Subsidiaries' equity or Common Stock Equivalents, including the
issuance of Common Stock pursuant to a primary registration statement or
pursuant to an equity line of credit or similar transaction (such offer,
issuance, sale, grant, disposition or announcement being referred to as
"SUBSEQUENT PLACEMENT").
(b) Following the Effective Date through and including the
expiration of the first anniversary of the Effective Date, the Company shall not
effect a Subsequent Placement, unless (i) the Company delivers to each Purchaser
a written notice (the "SUBSEQUENT PLACEMENT NOTICE") of its intention to effect
such Subsequent Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Placement is proposed to be effected, and attached to which shall be a term
sheet or similar document relating thereto and (ii) such Purchaser shall not
have notified the Company by 6:30 p.m. (New York City time) on the fifth Trading
Day after its receipt of the Subsequent Placement Notice of its willingness to
provide (or to cause its designee to provide), subject to completion of mutually
acceptable documentation, all or part of such financing to the Company on the
same terms set forth in the Subsequent Placement Notice. If the Purchasers shall
16
fail to so notify the Company of their willingness to participate in full in the
Subsequent Placement, the Company may effect the remaining portion of such
Subsequent Placement on the terms and to the Persons set forth in the Subsequent
Placement Notice. The Company shall provide the Purchasers with a second
Subsequent Placement Notice and the Purchasers will again have the right of
first refusal set forth in this Section 4.5(a), if the Subsequent Placement
subject to the initial Subsequent Placement Notice is not consummated for any
reason on the terms set forth in such Subsequent Notice within 30 Trading Days
after the date of the initial Subsequent Placement Notice with the Person
identified in the Subsequent Placement Notice. If the Purchasers indicate a
willingness to provide financing in excess of the amount set forth in the
Subsequent Placement Notice, then each Purchaser will be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Purchaser Percentage of the financing, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice.
(c) The one year period set forth in Section 4.5(b) shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, or (ii) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for the
resale of the Common Shares and the Warrant Shares.
(d) The restrictions contained in Sections 4.5(a) and (b) shall not
apply to any grant or issuance by the Company of (i) any grant of an option or
warrant for Common Stock or issuance of any shares of Common Stock upon the
exercise of any options or warrants to employees, officers and directors of or
consultants to the Company pursuant to any stock option plan, employee stock
purchase plan or similar plan or consulting arrangement approved by the
Company's board of directors or (ii) any rights or agreements to purchase Common
Stock or Common Stock Equivalents outstanding on the date hereof and as
specified in SCHEDULE 3.1(G) (but not as to any amendments or other
modifications to the number of shares of Common Stock issuable thereunder, the
terms set forth therein, or the exercise price set forth therein) or (iii) the
issuance of shares of Common Stock in connection with a Strategic Transaction or
(iv) the issuance of Common Stock to any Person approved by the Purchasers (such
Person, an "APPROVED PURCHASER") of up to 2,900,000 shares of Common Stock (as
adjusted for stock splits, reverse stock splits, combinations and other similar
transactions) pursuant to Registration Statement No. 333- 71086 or (v) the
issuance of Common Stock pursuant to the Transaction Documents or (vi) the
issuance of Common Stock pursuant to the Concurrent Purchase Agreement and the
transactions contemplated thereby.
(e) Notwithstanding anything herein to the contrary, the Company
may not issue, agree to issue, or enter into any arrangement pursuant to which
it may issue at any time, shares of Common Stock or Common Stock Equivalents
that would entitle any holder thereof to receive at any time shares of Common
Stock at, in any such case, a price that is less than the Per Share Purchase
Price, unless prior to the earlier to occur of the entering into of such
agreement or such issuance, the Company obtains the approval of its shareholders
pursuant to the rules and regulations of the Nasdaq Stock Market, Inc.
("NASDAQ") (including, without limitation, NASD Rules 4350(i), XXXX XX-0000,
XXXX XX-0000-0, and Rule 4350(i)): for (i) the transactions contemplated by the
Transaction Documents and the Concurrent Purchase Agreement, including the sale,
17
issuance and potential issuance of the securities issued and issuable
thereunder, including the Securities issued pursuant to this Agreement, as well
as the shares of Common Stock issuable in accordance with the Warrants and
Adjustment Warrants, (ii) the issuance under the Transaction Documents and the
Concurrent Purchase Agreement (and the transactions contemplated thereby) of in
excess of 19.99% of the shares of Common Stock outstanding prior to the Closing
Date at a price that is less than the greater of book or market value of the
Common Stock, and/or (iii) the potential issuance of securities of the Company
having sufficient voting power to result in a change of control of the Company
as described under the rules of Nasdaq. The Company understands and agrees that
the shares of Common Stock that have been issued or that may be issued to and
then held by any Purchaser or any of such Purchaser's Affiliates may not cast
votes on such matters.
4.6. ADJUSTMENT WARRANT.
(a) If at any time prior to the 18th month anniversary of the
Effective Date, (a) the Company shall issue or agree to issue shares of Common
Stock at a price below the Per Share Purchase Price or (b) the Company or any of
its subsidiaries shall issue any Common Stock Equivalents or shall enter an
agreement to issue Common Stock Equivalents, that entitle any Person to acquire
shares of Common Stock at a price per share less than the Per Share Purchase
Price (if the holder of the Common Stock or Common Stock Equivalent so issued
shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights issued in connection with such issuance, be
entitled to receive shares of Common Stock at a price less than the Per Share,
such issuance shall be deemed to have occurred for less than the Per Share
Purchase Price), then the Per Share Purchase Price shall be adjusted
automatically for the purposes of this Section to equal the price at which the
shares of Common Stock or Common Stock Equivalents were deemed issued under this
Section (such price, the "ADJUSTED PRICE") and the Company shall, within two
Trading Days of the date of such issuance or agreement to issue Common Stock or
Common Stock Equivalents, deliver a notice to each Purchaser who acquired Common
Shares at the Closing in accordance with Section 2.3(a)(i) of the number of
Adjustment Shares (as hereinafter defined) issuable under such Purchaser's
Adjustment Warrant, giving the Purchaser the right to purchase, for par value of
the Common Stock, a number of shares of Common Stock (such shares, the
"ADJUSTMENT SHARES") equal to: (1) the number of Common Shares that would have
been issued to such Purchaser on the Closing Date at the Adjusted Price less (2)
the number of Common Shares actually issued to such Purchaser on the Closing
Date. The Company shall notify the Purchasers in writing of its issuance of any
such Common Stock or Common Stock Equivalents by the end of the day on which the
Common Stock or Common Stock Equivalents are first issued. The number of
Adjustment Shares shall be calculated on each date of the issuance of the Common
Stock or Common Stock Equivalent at issue, without regard to a delay in the
conversion, exchange or other adjustment or resetting provision applicable to
such Common Stock Equivalent, which Adjusted Price shall continue for as long as
the Purchaser holds such Adjustment Warrant. Such notice will be delivered
whenever such Common Stock or Common Stock Equivalents are issued.
(b) If the Company or any subsidiary issues Common Stock
Equivalents at a price per share that floats or resets or otherwise varies or is
subject to adjustment based on market prices of the Common Stock (a "FLOATING
PRICE SECURITY"), then for purposes of applying the preceding paragraph in
connection with any subsequent exercise, the Adjusted Price will be deemed to
18
equal the lowest price per share at which any holder of such Floating Price
Security is entitled to acquire shares of Common Stock (regardless of whether
any such Purchaser actually acquires any shares on such date).
(c) The provisions contained in Section 4.6(a) shall not apply to
any grant or issuance by the Company of (i) any grant of an option or warrant
for Common Stock or issuance of any shares of Common Stock upon the exercise of
any options or warrants to employees, officers and directors of or consultants
to the Company pursuant to any stock option plan, employee stock purchase plan
or similar plan or consulting arrangement approved by the Company's board of
directors or (ii) any rights or agreements to purchase Common Stock or Common
Stock Equivalents outstanding on the date hereof and as specified in SCHEDULE
3.1(G) (but not as to any amendments or other modifications to the number of
shares of Common Stock issuable thereunder, the terms set forth therein, or the
exercise price set forth therein) or (iii) the issuance of shares of Common
Stock in connection with a Strategic Transaction or (iv) the issuance of Common
Stock to any Approved Purchaser of up to 2,900,000 shares of Common Stock (as
adjusted for stock splits, reverse stock splits, combinations and other similar
transactions) pursuant to Registration Statement No. 333-71086 or (v) the
issuance of Common Stock pursuant to the Transaction Documents or (vi) the
issuance of Common Stock pursuant to the Concurrent Purchase Agreement (or the
transactions contemplated thereby).
(d) The 18th month period set forth in this Section shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, or (ii) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for the
resale of the Common Shares and the Warrant Shares.
(e) The Company covenants and undertakes to file a registration
statement covering the resale by the Purchasers (or their transferees) of the
shares of common stock issuable upon exercise of each Adjustment Warrant by the
30th day following such issuance of an Adjustable Warrant and, such registration
statement shall be treated as a "Registration Statement" under the Registration
Rights Agreement and the Purchasers and the Company shall be accorded the
obligations and rights under the Registration Rights Agreement with respect to
such registration statement. In addition, the Adjustment Warrant shall be
entitled to full piggy-back registration rights on all future or then pending
Company registration statements.
(f) If, at any time prior to the 18th month anniversary following
the Effective Date (as such period may be extended pursuant to this Section
4.6): (i) the Company effects any merger or consolidation of the Company with or
into another Person, (ii) the Company effects any sale of all or substantially
all of its assets in one or a series of related transactions, (iii) any tender
offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (iv) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (in any such case, a "FUNDAMENTAL
TRANSACTION"), then any successor to the Company or surviving entity in such
19
Fundamental Transaction shall continue to be bound by the obligation to increase
the number of Adjustment Shares issuable under the Adjustment Warrant under and
in accordance with this Section 4.6 and to honor all such Adjustment Warrants.
4.7. SECURITIES LAWS DISCLOSURE; PUBLICITY. No later than the Business
Day immediately following the Closing Date, the Company shall issue a press
release and file a Current Report on Form 8-K, in each case reasonably
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. The Company and the Purchasers shall consult with each
other in issuing any press releases with respect to the transactions
contemplated hereby. Notwithstanding the foregoing, other than in any
registration statement filed pursuant to the Registration Rights Agreement and
filings related thereto, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.
4.8. INDEMNIFICATION OF PURCHASERS. The Company hereby indemnifies and
holds the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "PURCHASER PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "LOSSES")
that any such Purchaser Party may suffer or incur as a result of or relating to
(a) any misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and solely arising
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents (other
than due to the gross negligence or willful misconduct of the Purchaser Party).
The Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The Purchaser Party may not, without the prior written consent of the
Company, agree to any settlement of any claim or action with respect to which
the Company is required to indemnify the Purchaser Party pursuant to this
Section 4.8.
4.9. SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
the Securities under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
4.10. NON-PUBLIC INFORMATION. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
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such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.11. USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for research and development or working capital
purposes that are consistent with the Company's business as at the Closing Date
(as reported in the SEC Reports) and not for the satisfaction of any portion of
the Company's debt (other than payment of trade payables in the ordinary course
of the Company's business and prior practices), nor to redeem any Company equity
or equity equivalent securities, nor to settle any outstanding litigation nor to
extend any loans to its directors or senior management.
4.12. LOCK-UP LETTER. On the Closing Date, the Company shall issue a
stop-transfer order to the Company's transfer agent, which order shall be
acknowledged by the transfer agent, in connection with each of the Lock-Up
Letter.
ARTICLE V.
MISCELLANEOUS
5.1. FEES AND EXPENSES. Except as expressly set forth in the
Transaction Documents, each party shall pay 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. The Company shall pay all stamp and
other taxes and duties levied in connection with the sale of the Securities.
5.2. ENTIRE AGREEMENT. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.3. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Agreement later than 6:30 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Peregrine Pharmaceuticals, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
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With a copy to: Xxxxxxx, Xxxxx & Xxxx, LLP
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4. AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and the Purchasers holding a majority-in-interest of the Common
Shares at Closing or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.5. CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
any or all of its rights under this Agreement and the Registration Rights
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities in accordance with the terms of this Agreement, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the "Purchasers."
5.7. NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8. LIQUIDATED DAMAGES. The Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled. Such liquidated
damages are not to be construed as the sole damages for remedies available to
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the Persons entitled to the same. The parties hereby agree that all remedies and
damages are cumulative.
5.9. GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York, Borough of Manhattan. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such Proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
5.10. SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing.
5.11. EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
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5.13. RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.14. REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested by the Company's transfer agent. The applicants for a
new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Securities.
5.15. REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. Notwithstanding any other remedy herein permitted or
provided under the Transaction Documents, the parties hereby agree to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16. PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17. INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
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SIGNATURE PAGES FOLLOW]
25
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PEREGRINE PHARMACEUTICALS, INC.
By: /S/ XXXXXX XXXXXX
---------------------------------
Name: Xxxxxx Xxxxxx
Title: President and CEO
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOWS]
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NAME OF PURCHASER: ZLP MASTER FUND, LTD
By: /S/ XXXXX XXXXX
----------------------------------
Name: Xxxxx Xxxxx
Title: Director
Common Stock Investment Amount: $ 2,144,000
Address for Notice:
c/o Xxxxxx Xxxxx Partners, LLC
00 Xxxxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxx Xxx
With a copy to:
Xxxxx Xxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
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