Exhibit 10.1
EXECUTION COPY
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT
(the “Agreement”), dated
as of October 27, 2008 by and between AASTROM BIOSCIENCES,
INC. , a Michigan 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, no par value 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
this Agreement, the Company has the right to sell to the Buyer, and
the Buyer has the obligation 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 occur from time to time upon written notices by the Company
to the Buyer on the terms and conditions as set forth herein
following the satisfaction of the conditions (the
“Commencement”) as set forth in Sections 6 and 7
below (the date of satisfaction of such conditions, the
“Commencement Date”).
(b) The Company’s Right to
Require Purchases . Any time on or after the Commencement Date,
the Company shall have the right but not the obligation to direct
the Buyer by its delivery to the Buyer of Base Purchase Notices
from time to time to buy Purchase Shares (each such purchase a
“Base Purchase”) in any amount up to Sixty Thousand
Dollars ($60,000) per Base Purchase Notice (the “Base
Purchase Amount”) at the Purchase Price on the Purchase Date.
The Company may deliver multiple Base Purchase Notices to the Buyer
so long as at least one (1) Business Day has passed since the
most recent Base Purchase was completed. Notwithstanding the
forgoing, any time on or after the Commencement Date, the Company
shall also have the right but not the obligation by its delivery to
the Buyer of Block Purchase Notices from time to time to direct the
Buyer to buy Purchase Shares (each such purchase a “Block
Purchase”) in any amount up to Two Million Dollars
($2,000,000) per Block Purchase Notice at the Block Purchase Price
on the Purchase Date as provided herein. For a Block Purchase
Notice to be valid the following conditions must be met:
(1) the Block Purchase Amount shall not exceed One Hundred
Thousand Dollars ($100,000) per Block Purchase Notice, (2) the
Company must deliver the Purchase Shares before 11:00 a.m.
eastern time on the Purchase Date and (3) the Sale Price of
the Common Stock must not be below $0.25 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) during the
Purchase Date, the date of the delivery of the Block Purchase
Notice and during the Business Day prior to the delivery of the
Block Purchase Notice. The Block Purchase Amount may be increased
to up to Two Hundred Fifty Thousand Dollars ($250,000) per Block
Purchase Notice if the Sale Price of the Common Stock is not below
$0.40 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction) during the Purchase Date, the date of the delivery of
the Block Purchase Notice and during the Business Day prior to the
delivery of the Block Purchase Notice. The Block Purchase Amount
may be increased to up to Five Hundred Thousand Dollars ($500,000)
per Block Purchase Notice if the Sale Price of the Common Stock is
not below $0.80 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction) during the Purchase Date, the date of
the delivery of the Block Purchase Notice and during the Business
Day prior to the delivery of the Block Purchase Notice. The Block
Purchase Amount may be increased to up to One Million Dollars
($1,000,000) per Block Purchase Notice if the Sale Price of the
Common Stock is not below $1.60 (subject to equitable adjustment
for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) during the Purchase Date, the
date of the delivery of the Block Purchase Notice and during the
Business Day prior to the delivery of the Block Purchase Notice.
The Block Purchase Amount may be increased to up to Two Million
Dollars ($2,000,000) per Block Purchase Notice if the Sale Price of
the Common Stock is not below $2.50 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) during the
Purchase Date, the date of the delivery of the Block Purchase
Notice and during the Business Day prior to the delivery of the
Block Purchase Notice. As used herein, the term “Block
Purchase Price” shall mean the lesser of (i) the lowest
Sale Price of the Common Stock on the Purchase Date or
(ii) the lowest Purchase Price during the previous ten
(10) Business Days prior to the date that the valid Block
Purchase Notice was received by the Buyer. However, if at any time
during the Purchase Date, the date of the delivery of the Block
Purchase Notice or during the Business Day prior to the delivery of
the Block Purchase Notice, the Sale Price of the Common Stock is
below the applicable Block Purchase threshold price, such Block
Purchase shall be void and the Buyer’s obligations to buy
Purchase Shares in respect of that Block Purchase Notice shall be
terminated. Thereafter, the Company shall again have the right to
submit a Block Purchase Notice as set forth herein by delivery of a
new Block Purchase Notice only if the Sale Price of the Common
Stock is above the applicable Block Purchase threshold price during
the date of the delivery of the Block Purchase Notice and during
the Business Day prior to the delivery of the Block Purchase
Notice. The Company may deliver multiple Block Purchase Notices to
the Buyer so long as at least two (2) Business Days have
passed since the most recent Block Purchase was
completed.
(c) Payment for Purchase Shares .
The Buyer shall pay to the Company an amount equal to the Purchase
Amount with respect to such Purchase Shares as full payment for
such Purchase Shares via wire transfer of immediately available
funds on the same Business Day that the Buyer receives such
Purchase Shares if they are received by the Buyer before
11:00 a.m. eastern time or if received by the Buyer after
11:00 a.m. eastern time, the next Business Day. 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 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
Business Day, the same shall instead be due on the next succeeding
day that is a Business Day.
(d) Purchase Price Floor . The
Company and the Buyer shall not effect any sales under this
Agreement on any Purchase Date where the Purchase Price for any
purchases of Purchase Shares would be less than the Floor Price.
“Floor Price” means $0.10, 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.
(g) Compliance with Principal Market
Rules . Notwithstanding any other provisions in this Agreement,
the Company shall not effect any sale under this Agreement and 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 “Exchange Cap” shall
be deemed to be reached. The “Exchange Cap” shall be
deemed to have been reached if, at any time prior to the
shareholders of the Company approving the transaction contemplated
by this Agreement, upon a purchase under this Agreement, the
Purchase Shares issuable pursuant to such purchase would, together
with all shares previously issued under this Agreement, exceed
26,565,299 shares of Common Stock (19.99% of the 132,826,495
outstanding shares of Common Stock as of the date of this
Agreement). The Company may, but shall be under no obligation to,
request its shareholders to approve the transaction contemplated by
this Agreement. The Company shall not be required to issue any
Purchase Shares under this Agreement if such issuance would breach
the Company’s obligations under the rules or regulations of
the Principal Market .
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(e) hereof) (this Agreement, the
Purchase Shares 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 other than as set forth in Section 4(e) with respect
to the Commitment Shares.
(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 Sale . 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 Section 242.200 of
Regulation SHO 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 the date
hereof, the authorized capital stock of the Company consists of
(i) 250,000,000 shares of Common Stock, of which as of the
date hereof, 132,826,495 shares are issued and outstanding, none
are held as treasury shares, 15,923,027 shares are reserved for
issuance pursuant to the Company’s stock option plans of
which only approximately 6,974,781 shares remain available for
future grants and 19,420,014 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) 5,000,000 shares of Preferred Stock, no par value with no
per share liquidation preference, of which as of the date hereof
none 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. 22,692,665 shares of Common Stock have been duly
authorized and reserved for issuance upon purchase under this
Agreement. 1,936,317 shares of Common Stock (subject to equitable
adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) have been duly
authorized and reserved for issuance as Additional Commitment
Shares in accordance with Section 4(e) 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, terminations, amendments, accelerations, cancellations
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
September 30, 2007 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
June 30, 2007, 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 September 30, 2007 .
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 June 30,
2008, 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 . 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 and
customary 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 . The Company agrees that it shall, within the time
required under the 1934 Act file a Current Report on Form 8-K
disclosing this Agreement and the transaction contemplated hereby.
The Company shall also file within ten (10) Business Days from the
date hereof a new registration statement covering only the sale of
the Commitment Shares and 22,692,665 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”).
(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) Listing . The Company shall
promptly secure the listing of all of the Purchase Shares and
Commitment Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and
shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all such securities from time to time
issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stock’s authorization for quotation
on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would be reasonably
expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in
no event later than the following Business Day, provide to the
Buyer copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing
on such automated quotation system or securities exchange. The
Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
(d) Limitation on Short Sales and
Hedging Transactions . The Buyer 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), the Buyer and its
agents, representatives and affiliates shall not in any manner
whatsoever enter into or effect, directly or indirectly, any (i)
“short sale” (as such term is defined in
Section 242.200 of Regulation SHO of the 1934 Act) of the
Common Stock or (ii) hedging transaction, which establishes a net
short position with respect to the Common Stock.
(e) Issuance of Commitment Shares;
Limitation on Sales of Commitment Shares . Immediately upon the
execution of this Agreement, the Company shall issue to the Buyer
as consideration for the Buyer entering into this Agreement
1,936,317 shares of Common Stock (the “Initial Commitment
Shares”). In connection with each purchase of Purchase Shares
hereunder, the Company agrees to issue to the Buyer a number of
shares of Common Stock (the “Additional Commitment
Shares” and together with the Initial Commitment Shares, the
“Commitment Shares”) equal to the product of
(x) 1,936,317 and (y) the Purchase Amount Fraction. The
“Purchase Amount Fraction” shall mean a fraction, the
numerator of which is the Purchase Amount purchased by the Buyer
with respect to such purchase of Purchase Shares and the
denominator of which is Fifteen Million Dollars ($15,000,000). The
Additional Commitment Shares shall be equitably adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction. The Initial Commitment Shares shall be
issued in certificated form and (subject to Section 5 hereof)
shall bear the following restrictive legend:
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF
HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS.
The
Buyer agrees that the Buyer shall not transfer or sell the
Commitment Shares until the earlier of 500 Business Days (25
Monthly Periods) from the date hereof or the date on which this
Agreement has been terminated, provided, however, that such
restrictions shall not apply: (i) in connection with any
transfers to or among affiliates (as defined in the 1934 Act),
(ii) in the event that the Commencement does not occur on or
before January 15, 2009, due to the failure of the Company to
satisfy the conditions set forth in Section 7 or (iii) if
an Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default, including
any failure by the Company to timely issue Purchase Shares under
this Agreement. Notwithstanding the forgoing, the Buyer may
transfer Commitment Shares to a third party in order to settle a
sale made by the Buyer where the Buyer reasonably expects the
Company to deliver Purchase Shares to the Buyer under
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