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EXHIBIT
4.4
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (the
“Agreement”), dated as of December 16, 2005, by and
between HEPALIFE TECHNOLOGIES, INC. , a Florida corporation
(the “Company”), and FUSION CAPITAL FUND II, LLC
, an Illinois limited liability company (the “Buyer”).
Capitalized terms used herein and not otherwise defined
herein are defined in Section 10 hereof.
WHEREAS:
Subject to the terms and conditions set forth in
this Agreement, the Company wishes to sell to the Buyer, and the
Buyer wishes to buy from the Company, up to Fifteen Million Dollars
($15,000,000) of the Company's common stock, par value $0.001 per
share (the “Common Stock”). The shares of Common
Stock to be purchased hereunder are referred to herein as the
"Purchase Shares."
NOW THEREFORE , the Company and the Buyer
hereby agree as follows:
1.
PURCHASE OF COMMON STOCK.
Subject to the terms and conditions set forth in
Sections 6, 7 and 9 below, the Company hereby agrees to sell to the
Buyer, and the Buyer hereby agrees to purchase from the Company,
Purchase Shares as follows:
(a)
Commencement of Purchases of Common Stock .
The purchase and sale of Purchase Shares hereunder shall
commence (the "Commencement") within five (5) Trading Days
following the date of satisfaction of the conditions to the
Commencement set forth in Sections 6 and 7 below (the date of
such Commencement, the "Commencement Date").
(b)
Buyer's Purchase Rights and Obligations .
Subject to the Company’s right to suspend purchases
under Section 1(d)(ii) hereof, the Buyer shall buy Purchase Shares
(“Daily Purchases”) on each Trading Day during each
Monthly Period equal to the Daily Purchase Amount (as defined in
Section 1(c)(i)) at the Purchase Price. From time to time,
the Company shall also have the right but not the obligation, by
its delivery to the Buyer of a Block Purchase Notice (as defined in
Section 1(c)(iv)), to require the Buyer to buy Purchase Shares (a
“Block Purchase”) equal to the Block Purchase Amount
(as defined in Section 1(c)(iv)) at the Block Purchase Price (as
defined in Section 1(c)(iv)). The Buyer shall pay to
the Company an amount equal to the Purchase Amount with respect to
such Purchase Shares as full payment for the purchase of the
Purchase Shares so received. The Company shall not issue any
fraction of a share of Common Stock upon any purchase. If the
issuance would result in the issuance of a fraction of a share of
Common Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share. All
payments made under this Agreement shall be made in lawful money of
the United States of America by check or wire transfer of
immediately available funds to such account as the Company may from
time to time designate by written notice in accordance with the
provisions of this Agreement. Whenever any amount expressed
to be due by the terms of this Agreement is due on any day that is
not a Trading Day, the same shall instead be due on the next
succeeding day which is a Trading Day.
(c)
The Daily Purchase Amount; Company's Right to
Decrease or Increase the Daily Purchase Amount; the Block Purchase
Amount .
(i)
The Daily Purchase Amount . As used
herein the term “Original Daily Purchase Amount”
shall mean Twenty Thousand Five Dollars ($25,000) per Trading
Day. As used herein, the term “Daily Purchase
Amount” shall mean initially Twenty Thousand Five Dollars
($25,000) per Trading Day, which amount may be increased or
decreased from time to time pursuant to this Section 1(c).
(ii)
Company’s Right to Decrease the Daily
Purchase Amount . The Company shall always have the
right at any time to decrease the amount of the Daily Purchase
Amount by delivering written notice (a “Daily Purchase
Amount Decrease Notice”) to the Buyer which notice shall
specify the new Daily Purchase Amount. The decrease in the
Daily Purchase Amount shall become effective one Trading Day
after receipt by the Buyer of the Daily Purchase Amount Decrease
Notice. Any purchases by the Buyer which have a Purchase
Date on or prior to the first (1st) Trading Day after receipt by
the Buyer of a Daily Purchase Amount Decrease Notice must be
honored by the Company as otherwise provided herein. The
decrease in the Daily Purchase Amount shall remain in effect
until the Company delivers to the Buyer a Daily Purchase Amount
Increase Notice (as defined below).
(iii)
Company’s Right to Increase the Daily
Purchase Amount . The Company shall have the right
(but not the obligation) to increase the amount of the Daily
Purchase Amount in accordance with the terms and conditions set
forth in this Section 1(c)(iii) by delivering written notice to
the Buyer stating the new amount of the Daily Purchase Amount (a
“Daily Purchase Amount Increase Notice”). A
Daily Purchase Amount Increase Notice shall be effective five
(5) Trading Days after receipt by the Buyer. The Company
shall always have the right at any time to increase the amount
of the Daily Purchase Amount up to the Original Daily Purchase
Amount. With respect to increases in the Daily Purchase
Amount above the Original Daily Purchase Amount, as the market
price for the Common Stock increases the Company shall have the
right from time to time to increase the Daily Purchase Amount as
follows. For every $0.10 increase in Threshold Price above
$1.50 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other
similar transaction), the Company shall have the right to
increase the Daily Purchase Amount by up to an additional $2,500
in excess of the Original Daily Purchase Amount.
“Threshold Price” for purposes hereof means
the lowest Sale Price of the Common Stock during the five (5)
consecutive Trading Days immediately prior to the submission to
the Buyer of a Daily Purchase Amount Increase Notice (subject to
equitable adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction).
For example, if the Threshold Price is $2.00, the Company
shall have the right to increase the Daily Purchase Amount to up
to $37,500 in the aggregate. If the Threshold Price is
$3.00, the Company shall have the right to increase the Daily
Purchase Amount to up to $62,500 in the aggregate. Any
increase in the amount of the Daily Purchase Amount shall
continue in effect until the delivery to the Buyer of a Daily
Purchase Amount Decrease Notice. However, if at any time
during any Trading Day the Sale Price of the Common Stock is
below the applicable Threshold Price, such increase in the Daily
Purchase Amount shall be void and the Buyer’s obligations
to buy Purchase Shares hereunder in excess of the applicable
maximum Daily Purchase Amount shall be terminated.
Thereafter, the Company shall again have the right to
increase the amount of the Daily Purchase Amount as set forth
herein by delivery of a new Daily Purchase Amount Increase
Notice only if the Sale Price of the Common Stock is above the
applicable Threshold Price on each of five (5) consecutive
Trading Days immediately prior to such new Daily Purchase Amount
Increase Notice.
(iv)
The Block Purchase Amount . As used
herein the term “Block Purchase Amount” shall mean
such Purchase Amount as specified by the Company in a Block
Purchase Notice. As used herein the term “Block
Purchase Notice” shall mean an irrevocable written notice
from the Company to the Buyer directing the Buyer to buy the
Purchase Amount in Purchase Shares as specified by the Company
therein at the Block Purchase Price. For a Block Purchase
Notice to be valid the following conditions must be met: (1) the
Block Purchase Amount shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000) per Block Purchase Notice, (2) the
Company must deliver the Purchase Shares on the same day as the
Block Purchase Notice is delivered and (3) the Sale Price of the
Common Stock must have been above $2.50 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) during the
ten (10) Trading Days prior to the delivery of the Block
Purchase Notice. The Block Purchase Amount may be
increased to up to $500,000 if the Sale Price of the Common
Stock is above $4.00 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split
or other similar transaction) during the ten (10) Trading Days
prior to the delivery of the Block Purchase Notice. The
Company may deliver multiple Block Purchase Notices as it shall
determine; provided however, at least ten (10) Trading Days must
have passed since the most recent Block Purchase was completed.
As used herein, the term “Block Purchase
Price” shall mean the lowest Purchase Price during the
previous fifteen (15) Trading Days prior to the date that the
Block Purchase Notice was received by the Buyer. The daily
purchases shall be automatically suspended for ten (10) trading
days each time any such block purchase notice is delivered.
(d)
Limitations on Purchases .
(i)
Limitation on Beneficial Ownership .
The Buyer shall not have the right or the obligation to
purchase shares of Common Stock under this Agreement to the
extent that after giving effect to such purchase the Buyer
together with its affiliates would beneficially own in excess of
9.9% of the outstanding shares of the Common Stock following
such purchase. For purposes hereof, the number of shares
of Common Stock beneficially owned by the Buyer and its
affiliates or acquired by the Buyer and its affiliates, as the
case may be, shall include the number of shares of Common Stock
issuable in connection with a purchase under this Agreement with
respect to which the determination is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (1) a purchase of the remaining Available Amount
which has not been submitted for purchase, and (2) exercise or
conversion of the unexercised or unconverted portion of any
other securities of the Company (including, without limitation,
any notes or warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein
beneficially owned by the Buyer and its affiliates. For
purposes of this Section, in determining the number of
outstanding shares of Common Stock the Buyer may rely on the
number of outstanding shares of Common Stock as reflected in (1)
the Company's most recent Form 10-Q or Form 10-K (or Form 10-KSB
or Form 10-QSB), as the case may be, (2) a more recent public
announcement by the Company or (3) any other written
communication by the Company or its Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the
reasonable written or oral request of the Buyer, the Company
shall promptly confirm orally and in writing to the Buyer the
number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be
determined after giving effect to any purchases under this
Agreement by the Buyer since the date as of which such number of
outstanding shares of Common Stock was reported. Except as
otherwise set forth herein, for purposes of this Section
1(d)(i), beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended.
(ii)
Company's Right to Suspend Purchases .
The Company may, at any time, give written notice (a "
Daily Purchase Suspension Notice") to the Buyer suspending Daily
Purchases of Purchase Shares by the Buyer under this Agreement.
The Daily Purchase Suspension Notice shall be effective
only for Daily Purchases that have a Purchase Date later than
one (1) Trading Day after receipt of the Daily Purchase
Suspension Notice by the Buyer. Any Daily Purchase by the Buyer
that has a Purchase Date on or prior to the first (1st) Trading
Day after receipt by the Buyer of a Daily Purchase Suspension
Notice from the Company must be honored by the Company as
otherwise provided herein. Such Daily Purchase suspension
shall continue in effect until a revocation in writing by the
Company, at its sole discretion.
(iii)
Purchase Price Floor . The Company
shall not affect any sales under this Agreement and the Buyer
shall not have the right nor the obligation to purchase any
Purchase Shares under this Agreement on any Trading Day where
the Purchase Price for any purchases of Purchase Shares would be
less than the Floor Price. “Floor Price” means
$0.50, which shall be appropriately adjusted
for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction.
(e)
Records of Purchases . The Buyer and
the Company shall each maintain records showing the remaining
Available Amount at any give time and the dates and Purchase
Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.
(f)
Taxes . The Company shall pay any and
all transfer, stamp or similar taxes that may be payable with
respect to the issuance and delivery of any shares of Common Stock
to the Buyer made under this Agreement.
2.
BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company
that as of the date hereof and as of the Commencement Date:
(a)
Investment Purpose . The Buyer is
entering into this Agreement and acquiring the Commitment Shares,
(as defined in Section 4(f) hereof) (this Agreement and the
Commitment Shares are collectively referred to herein
as the "Securities"), for its own account for investment only and
not with a view towards, or for resale in connection with, the
public sale or distribution thereof; provided however, by making
the representations herein, the Buyer does not agree to hold any of
the Securities for any minimum or other specific term.
(b)
Accredited Investor Status . The Buyer
is an "accredited investor" as that term is defined in Rule
501(a)(3) of Regulation D.
(c)
Reliance on Exemptions . The Buyer
understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
(d)
Information . The Buyer has 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 that have been reasonably requested by the
Buyer, including, without limitation, the SEC Documents (as defined
in Section 3(f) hereof). The Buyer understands that its
investment in the Securities involves a high degree of risk.
The Buyer (i) is able to bear the economic risk of an
investment in the Securities including a total loss, (ii) has such
knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the proposed
investment in the Securities and (iii) has had an opportunity to
ask questions of and receive answers from the officers of the
Company concerning the financial condition and business of the
Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due
diligence investigations conducted by the Buyer or its
representatives shall modify, amend or affect the Buyer's right to
rely on the Company's representations and warranties contained in
Section 3 below. The Buyer has sought such accounting, legal
and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the
Securities.
(e)
No Governmental Review . The Buyer
understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of
the Securities.
(f)
Transfer or Resale . The Buyer
understands that except as provided in the Registration Rights
Agreement (as defined in Section 4(a) hereof): (i) the Securities
have not been and are not being registered under the 1933 Act or
any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered
thereunder or (B) an exemption exists permitting such Securities to
be sold, assigned or transferred without such registration; (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 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person
is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
(g)
Validity; Enforcement . This Agreement
has been duly and validly authorized, executed and delivered on
behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable against the Buyer in accordance with its terms,
subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.
(h)
Residency . The Buyer is a resident of
the State of Illinois.
(i)
No Prior Short Selling . The Buyer
represents and warrants to the Company that at no time prior to the
date of this Agreement has any of the Buyer, its agents,
representatives or affiliates engaged in or effected, in any manner
whatsoever, directly or indirectly, any (i) "short sale" (as such
term is defined in Rule 3b-3 of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of the Common Stock or (ii)
hedging transaction, which establishes a net short position with
respect to the Common Stock.
3.
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.
The Company represents and warrants to the Buyer
that as of the date hereof and as of the Commencement Date:
(a)
Organization and Qualification . The
Company and its "Subsidiaries" (which for purposes of this
Agreement means any entity in which the Company, directly or
indirectly, owns 50% or more of the voting stock or capital stock
or other similar equity interests) are corporations duly organized
and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite
corporate power and authority to own their properties and to carry
on their business as now being conducted. Each of the Company
and its Subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted
by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing could not
reasonably be expected to have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any
material adverse effect on any of: (i) the business, properties,
assets, operations, results of operations or financial condition of
the Company and its Subsidiaries, if any, taken as a whole, or (ii)
the authority or ability of the Company to perform its obligations
under the Transaction Documents (as defined in Section 3(b)
hereof). The Company has no Subsidiaries except as set forth
on Schedule 3(a).
(b)
Authorization; Enforcement; Validity .
(i) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement and each of the
other agreements entered into by the parties on the Commencement
Date and attached hereto as exhibits to this Agreement
(collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii)
the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby, including without limitation, the issuance of
the Commitment Shares and the reservation for issuance and the
issuance of the Purchase Shares issuable under this Agreement, 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, (iii) this Agreement has
been, and each other Transaction Document shall be on the
Commencement Date, duly executed and delivered by the Company and
(iv) this Agreement constitutes, and each other Transaction
Document upon its execution on behalf of the Company, shall
constitute, the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies.
The Board of Directors of the Company has approved the
resolutions (the “Signing Resolutions”) substantially
in the form as set forth as Exhibit C-1 attached hereto to
authorize this Agreement and the transactions contemplated hereby.
The Signing Resolutions are valid, in full force and effect
and have not been modified or supplemented in any respect other
than by the resolutions set forth in Exhibit C-2 attached
hereto regarding the registration statement referred to in Section
4 hereof. The Company has delivered to the Buyer a true and
correct copy of a unanimous written consent adopting the Signing
Resolutions executed by all of the members of the Board of
Directors of the Company. No other approvals or consents of
the Company’s Board of Directors and/or shareholders is
necessary under applicable laws and the Company’s Certificate
of Incorporation and/or Bylaws to authorize the execution and
delivery of this Agreement or any of the transactions contemplated
hereby, including, but not limited to, the issuance of the
Commitment Shares and the issuance of the Purchase Shares.
(c)
Capitalization . As of July 8, 2005,
the authorized capital stock of the Company consists of (i)
300,000,000 shares of Common Stock, of which as of the date hereof,
69,332,832 shares are issued and outstanding, no shares are held as
treasury shares, 16,933,000 shares are reserved for issuance
pursuant to the Company's stock option plans of which only
approximately 22,922,000 shares remain available for future grants
and no shares are issuable and reserved for issuance pursuant to
securities (other than stock options issued pursuant to the
Company's stock option plans) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 1,000,000 shares
of Preferred Stock, $0.10 par value of which as of the date hereof
no shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company,
(ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock
of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the
1933 Act (except the Registration Rights Agreement), (v) there are
no outstanding securities 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, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this
Agreement and (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the
Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as
amended and as in effect on the date hereof (the "By-laws"), and
summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents
containing the material rights of the holders thereof in respect
thereto.
(d)
Issuance of Securities . The
Commitment Shares have been duly authorized and, upon issuance in
accordance with the terms hereof, the Commitment Shares shall be
(i) validly issued, fully paid and non-assessable and (ii) free
from all taxes, liens and charges with respect to the issue
thereof. 10,000,000 shares of Common Stock have been duly
authorized and reserved for issuance upon purchase under this
Agreement. Upon issuance and payment therefor in
accordance with the terms and conditions of this Agreement, the
Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
(e)
No Conflicts . Except as disclosed in
Schedule 3(e), the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and
issuance of the Purchase Shares) will not (i) result in a violation
of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the By-laws or (ii) conflict
with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
the rules and regulations of the Principal Market applicable to the
Company or any of its Subsidiaries) or by which any property or
asset of the Company or any of its Subsidiaries is bound or
affected, except in the case of conflicts, defaults and violations
under clause (ii), which could not reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in Schedule
3(e), neither the Company nor its Subsidiaries is in violation of
any term of or in default under its Certificate of Incorporation,
any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or By-laws or
their organizational charter or by-laws, respectively. Except
as disclosed in Schedule 3(e), neither the Company nor any of its
Subsidiaries is in violation of any term of or is in default under
any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations or amendments
which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of
any law, ordinance, regulation of any governmental entity, except
for possible violations, the sanctions for which either
individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act
or applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by
the Transaction Documents in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence shall be
obtained or effected on or prior to the Commencement Date.
Except as listed in Schedule 3(e), since January 1, 2003, the
Company has not received nor delivered any notices or
correspondence from or to the Principal Market. The Principal
Market has not commenced any delisting proceedings against the
Company.
(f)
SEC Documents; Financial Statements . Except
as disclosed in Schedule 3(f), since January 1, 2004, the Company
has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the 1934 Act (all of the foregoing
filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as
the "SEC Documents"). As of their respective dates (except as
they have been correctly amended), the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC (except as they may have been properly
amended), 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. As
of their respective dates (except as they have been properly
amended), the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the
Company 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).
Except as listed in Schedule 3(f), the Company has received
no notices or correspondence from the SEC since January 1, 2003.
The SEC has not commenced any enforcement proceedings against
the Company or any of its subsidiaries.
(g)
Absence of Certain Changes . Except as
disclosed in Schedule 3(g), since March 31, 2005, there has been no
material adverse change in the business, properties, operations,
financial condition or results of operations of the Company or its
Subsidiaries. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant
to any Bankruptcy Law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy or insolvency
proceedings. The Company is financially solvent and is
generally able to pay its debts as they become due .
(h)
Absence of Litigation . There is no action,
suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, which could reasonably be expected to
have a Material Adverse Effect. A description of each
action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory
organization or body which, as of the date of this Agreement, is
pending or threatened in writing against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, is set forth in Schedule 3(h).
(i)
Acknowledgment Regarding Buyer's Status .
The Company acknowledges and agrees that the Buyer is acting
solely in the capacity of arm's length purchaser with respect to
the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that the Buyer
is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and
any advice given by the Buyer or any of its representatives or
agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental
to the Buyer's purchase of the Securities. The Company
further represents to the Buyer that the Company's decision to
enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives and
advisors.
(j)
No General Solicitation . Neither the
Company, nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the
1933 Act) in connection with the offer or sale of the
Securities.
(k)
Intellectual Property Rights . The
Company and its Subsidiaries own or possess adequate rights or
licenses to use all material trademarks, trade names, service
marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth
on Schedule 3(k), none of the Company's material trademarks, trade
names, service marks, service mark registrations, service names,
patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the
terms and conditions thereof, could expire or terminate within two
years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the
Company or its Subsidiaries of any material trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade
secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical
information by others and, except as set forth on Schedule 3(k),
there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against,
the Company or its Subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or
other infringement, which could reasonably be expected to have a
Material Adverse Effect.
(l)
Environmental Laws . To the best of
the Company’s knowledge, the Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants
(“Environmental Laws”), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit,
license or approval, except where, in each of the three foregoing
clauses, the failure to so comply could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect.
(m)
Title . The Company and its
Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 3(m) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company and any of its Subsidiaries.
Any real property and facilities held under lease by the
Company and 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.
(n)
Insurance . The Company and each of
its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent in the businesses
in which the Company and its Subsidiaries are engaged.
Neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of
the Company and its Subsidiaries, taken as a whole.
(o)
Regulatory Permits . The Company and
its Subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign
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.
(p)
Tax Status . The Company and each of
its Subsidiaries has made or filed all federal and state income and
all other material tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has
set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
(q)
Transactions With Affiliates . Except
as set forth on Schedule 3(q) and other than the grant or exercise
of stock options disclosed on Schedule 3(c), none of the officers,
directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has an interest
or is an officer, director, trustee or partner.
(r)
Application of Takeover Protections .
The Company and its board of directors have taken or will
take prior to the Commencement Date all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under
the Certificate of Incorporation or the laws of the state of its
incorporation which is or could become applicable to the Buyer as a
result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
(s)
Foreign 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
actions for, or on behalf of, the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct
or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended; or made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
4.
COVENANTS.
(a)
Filing of Form 8-K and Registration
Statement . If not then otherwise disclosed in a
registration statement the Company agrees that it shall, within the
time required under the 1934 Act file a Report on Form 8-K
disclosing this Agreement and the transaction contemplated hereby.
The Company shall also file within twenty (20) Trading Days
from the date hereof a new registration statement covering only the
sale of the Commitment Shares and at least 10,000,000 Purchase
Shares in accordance with the terms of the Registration Rights
Agreement between the Company and the Buyer, dated as of the date
hereof (“Registration Rights Agreement”).
After such registration statement is declared effective
by the SEC, the Company agrees and acknowledges that any sales by
the Company to the Buyer pursuant to this Agreement are sales of
the Company's equity securities in a transaction that is registered
under the 1933 Act.
(b)
Blue Sky . The Company shall take such
action, if any, as is reasonably necessary in order to obtain an
exemption for or to qualify (i) the initial sale of the Commitment
Shares and any Purchase Shares to the Buyer under this Agreement
and (ii) any subsequent resale of the Commitment Shares and any
Purchase Shares by the Buyer, in each case, under applicable
securities or "Blue Sky" laws of the states of the United States in
such states as is reasonably requested by the Buyer from time to
time, and shall provide evidence of any such action so taken to the
Buyer.
(c)
No Variable Priced Financing . Other
than pursuant to this Agreement, the Company agrees that beginning
on the date of this Agreement and ending on the date of termination
of this Agreement (as provided in Section 11(k) hereof), neither
the Company nor any of its Subsidiaries shall, without the prior
written consent of the Buyer, contract for any equity financing
(including any debt financing with an equity component) or issue
any equity securities of the Company or any Subsidiary or
securities convertible or exchangeable into or for equity
securities of the Company or any Subsidiary (including debt
securities with an equity component) which, in any case (i) are
convertible into or exchangeable for an indeterminate number of
shares of common stock, (ii) are convertible into or exchangeable
for Common Stock at a price which varies with the market price of
the Common Stock, (iii) directly or indirectly provide for any
"re-set" or adjustment of the purchase price, conversion rate or
exercise price after the issuance of the security, or (iv) contain
any "make-whole" provision based upon, directly or indirectly, the
market price of the Common Stock after the issuan
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