Exhibit 10.32
COMMON STOCK PURCHASE
AGREEMENT
Dated as of October 6,
2009
by and between
ARYX THERAPEUTICS,
INC.
and
COMMERCE COURT SMALL CAP VALUE
FUND, LTD.
TABLE OF
CONTENTS
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Page
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ARTICLE I
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DEFINITIONS
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1
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ARTICLE II
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PURCHASE AND SALE OF COMMON
STOCK
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1
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Section 2.1.
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Purchase and Sale of
Stock
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1
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Section 2.2.
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Closing Date; Settlement
Dates
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2
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Section 2.3.
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Initial Public Announcements and
Required Filings
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2
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ARTICLE III
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FIXED REQUEST TERMS
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3
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Section 3.1.
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Fixed Request Notice
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3
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Section 3.2.
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Fixed Requests
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3
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Section 3.3.
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Share Calculation
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5
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Section 3.4.
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Limitation of Fixed
Requests
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6
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Section 3.5.
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Reduction of Commitment
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6
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Section 3.6.
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Below Threshold Price
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6
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Section 3.7.
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Settlement
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6
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Section 3.8.
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Reduction of Pricing
Period
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7
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Section 3.9.
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Failure to Deliver Shares
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8
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Section 3.10.
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Certain Limitations
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8
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ARTICLE IV
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REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE INVESTOR
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9
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Section 4.1.
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Organization and Standing of the
Investor
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9
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Section 4.2.
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Authorization and Power
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9
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Section 4.3.
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No Conflicts
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10
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Section 4.4.
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Investment Purpose
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10
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Section 4.5.
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Accredited Investor
Status
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10
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Section 4.6.
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Reliance on Exemptions
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10
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Section 4.7.
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Information
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11
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Section 4.8.
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No Governmental Review
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11
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Section 4.9.
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No General Solicitation
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11
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Section 4.10.
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Not an Affiliate
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11
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Section 4.11.
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Statutory Underwriter
Status
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11
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Section 4.12.
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Resales of Securities
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11
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ARTICLE V
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REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY
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12
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Section 5.1.
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Organization, Good Standing and
Power
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12
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Section 5.2.
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Authorization,
Enforcement
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12
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Section 5.3.
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Capitalization
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12
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Section 5.4.
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Issuance of Securities
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13
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Section 5.5.
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No Conflicts
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13
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Section 5.6.
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Commission Documents, Financial
Statements
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14
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i
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Section 5.7.
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Subsidiaries
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16
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Section 5.8.
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No Material Adverse
Effect
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16
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Section 5.9.
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No Undisclosed
Liabilities
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16
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Section 5.10.
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No Undisclosed Events or
Circumstances
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16
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Section 5.11.
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Indebtedness; Solvency
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17
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Section 5.12.
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Title To Assets
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17
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Section 5.13.
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Actions Pending
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17
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Section 5.14.
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Compliance With Law
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18
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Section 5.15.
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Certain Fees
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18
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Section 5.16.
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Disclosure
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18
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Section 5.17.
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Operation of Business
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19
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Section 5.18.
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Environmental Compliance
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20
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Section 5.19.
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Material Agreements
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21
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Section 5.20.
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Transactions With
Affiliates
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21
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Section 5.21.
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Employees
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22
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Section 5.22.
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Use of Proceeds
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22
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Section 5.23.
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Investment Company Act
Status
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22
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Section 5.24.
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ERISA
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22
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Section 5.25.
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Taxes
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23
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Section 5.26.
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Insurance
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23
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Section 5.27.
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U.S. Real Property Holding
Corporation
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23
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Section 5.28.
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Exemption from Registration; Valid
Issuances
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23
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Section 5.29.
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No General Solicitation or
Advertising
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23
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Section 5.30.
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No Integrated Offering
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24
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Section 5.31.
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Dilutive Effect
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24
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Section 5.32.
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Manipulation of Price
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24
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Section 5.33.
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Securities Act
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24
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Section 5.34.
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Listing and Maintenance
Requirements
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25
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Section 5.35.
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Application of Takeover
Protections
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25
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Section 5.36.
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Acknowledgement Regarding
Investor’s Acquisition of Securities
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25
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ARTICLE VI
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ADDITIONAL COVENANTS
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25
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Section 6.1.
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Securities Compliance
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25
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Section 6.2.
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Reservation of Common
Stock
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26
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Section 6.3.
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Registration and Listing
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26
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Section 6.4.
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Compliance with Laws
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26
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Section 6.5.
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Keeping of Records and Books of
Account; Foreign Corrupt Practices Act
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27
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Section 6.6.
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Limitations on Holdings and
Issuances
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27
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Section 6.7.
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Other Agreements and Alternate
Transactions
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27
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Section 6.8.
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Corporate Existence
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29
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Section 6.9.
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Fundamental Transaction
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30
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Section 6.10.
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Delivery of Registration Statement
and Prospectus; Subsequent Changes
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30
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Section 6.11.
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Amendments to the Registration
Statement; Prospectus Supplements
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31
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Section 6.12.
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Stop Orders
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31
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Section 6.13.
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Selling Restrictions
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32
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Section 6.14.
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Effective Registration
Statement
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32
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Section 6.15.
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Blue Sky
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33
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ii
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Section 6.16.
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Non-Public Information
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33
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Section 6.17.
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Broker/Dealer
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33
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Section 6.18.
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Additional Registration
Statements
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33
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Section 6.19.
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Disclosure Schedule
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33
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ARTICLE VII
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CONDITIONS TO CLOSING AND CONDITIONS
TO THE SALE AND PURCHASE OF THE SHARES
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34
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Section 7.1.
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Conditions Precedent to
Closing
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34
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Section 7.2.
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Conditions Precedent to a Fixed
Request
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35
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ARTICLE VIII
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TERMINATION
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38
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Section 8.1.
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Termination
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38
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Section 8.2.
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Other Termination
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38
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Section 8.3.
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Effect of Termination
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39
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ARTICLE IX
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INDEMNIFICATION
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40
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Section 9.1.
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Indemnification of
Investor
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40
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Section 9.2.
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Indemnification
Procedures
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41
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ARTICLE X
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MISCELLANEOUS
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42
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Section 10.1.
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Fees and Expenses
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42
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Section 10.2.
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Specific Enforcement, Consent to
Jurisdiction, Waiver of Jury Trial
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44
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Section 10.3.
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Entire Agreement;
Amendment
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45
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Section 10.4.
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Notices
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45
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Section 10.5.
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No Waivers
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46
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Section 10.6.
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Headings
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46
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Section 10.7.
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Construction
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47
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Section 10.8.
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Successors and Assigns
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47
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Section 10.9.
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No Third Party
Beneficiaries
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47
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Section 10.10.
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Governing Law
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47
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Section 10.11.
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Survival
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47
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Section 10.12.
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Counterparts
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47
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Section 10.13.
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Publicity
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48
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Section 10.14.
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Severability
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48
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Section 10.15.
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Further Assurances
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48
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Annex I.
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Definitions
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iii
COMMON STOCK PURCHASE
AGREEMENT
This COMMON STOCK PURCHASE
AGREEMENT is made and entered into as of October 6, 2009
(this “ Agreement ”), by and between
Commerce Court Small Cap Value Fund, Ltd., a business company
incorporated under the laws of the British Virgin Islands (the
“ Investor ”), and ARYx
Therapeutics, Inc., a corporation organized and existing under
the laws of the State of Delaware (the “
Company ”).
RECITALS
WHEREAS , the parties desire that, upon the terms and
subject to the conditions and limitations set forth herein, the
Company may issue and sell to the Investor, from time to time as
provided herein, and the Investor shall purchase from the Company,
up to the lesser of (i) $35,000,000 of newly issued shares of
the Company’s common stock, $0.001 par value (“
Common Stock ”), and (ii) the Trading
Market Limit; and
WHEREAS , such investments will be made in reliance upon
the provisions of Section 4(2) of the Securities Act
(“ Section 4(2) ”) and Regulation D
promulgated by the Commission under the Securities Act (“
Regulation D ”), and upon such other exemption
from the registration requirements of the Securities Act as may be
available with respect to any or all of the investments in Common
Stock to be made hereunder; and
WHEREAS , the parties hereto are concurrently entering
into a Registration Rights Agreement in the form of
Exhibit A hereto (the “ Registration Rights
Agreement ”), pursuant to which the Company shall
register the Registrable Securities (as defined in the Registration
Rights Agreement), upon the terms and subject to the conditions set
forth therein; and
WHEREAS , in consideration for the Investor’s
execution and delivery of this Agreement, the Company is
concurrently causing its transfer agent to issue to the Investor
the Commitment Shares, upon the terms and subject to the conditions
set forth in this Agreement;
NOW, THEREFORE
, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this
agreement shall have the meanings ascribed to such terms in
Annex I hereto, and hereby made a part hereof, or as
otherwise set forth in this agreement.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1.
Purchase and Sale of
Stock . Upon
the terms and subject to the conditions of this Agreement, during
the Investment Period, the Company in its discretion may issue and
sell to the Investor, and the Investor shall purchase from the
Company, up to the lesser of (i) $35,000,000 (the “
Total Commitment ”) of duly authorized, validly
issued, fully paid and
nonassessable shares of Common Stock
and (ii) the Trading Market Limit (the “ Aggregate
Limit ”), by the delivery to the Investor of not more
than 24 separate Fixed Request Notices as provided in
Article III hereof.
Section 2.2.
Closing Date; Settlement
Dates . This
Agreement shall become effective and binding (the “
Closing ”) upon payment of the Document
Preparation Fee prior to the Closing Date pursuant to Sections 7.1
and 10.1, the delivery of irrevocable instructions to issue the
Commitment Shares to the Investor or its designees as provided in
Sections 7.1 and 10.1, the delivery of counterpart signature
pages of this Agreement and the Registration Rights Agreement
executed by each of the parties hereto and thereto, and the
delivery of all other documents, instruments and writings required
to be delivered at the Closing, in each case as provided in
Section 7.1, to the offices of Greenberg Traurig, LLP, 200
Park Avenue, New York, New York 10166, at 5:00 p.m., New York
City time, on the Closing Date. In consideration of and in express
reliance upon the representations, warranties and covenants
contained in, and upon the terms and subject to the conditions of,
this Agreement, during the Investment Period the Company shall
issue and sell to the Investor, and the Investor shall purchase
from the Company, the Shares in respect of each Fixed Request. The
issuance and sale of Shares to the Investor pursuant to any Fixed
Request shall occur on the applicable Settlement Date(s) in
accordance with Section 3.7 and Section 3.8 (as
applicable), provided that all of the conditions precedent thereto
set forth in Article VII theretofore shall have been fulfilled
on or prior to each such Settlement Date.
Section 2.3.
Initial Public Announcements
and Required Filings . The Company shall, at or before
8:30 a.m., New York City time, on the first Trading Day after
the Closing Date, issue a press release (the “ Press
Release ”) reasonably acceptable to the Investor
disclosing the execution of this Agreement and the Registration
Rights Agreement by the Company and the Investor and the issuance
of the Commitment Shares to the Investor, and briefly describing
the transactions contemplated thereby. At or before 8:30 a.m.,
New York City time, on the second Trading Day following the Closing
Date, the Company shall file a Current Report on Form 8 K
describing all the material terms of the transactions contemplated
by the Transaction Documents in the form required by the Exchange
Act and attaching copies of each of this Agreement, the
Registration Rights Agreement and the Press Release as exhibits
thereto (including all exhibits thereto, the “ Current
Report ”). The Company heretofore has provided the
Investor a reasonable opportunity to comment on a draft of such
Current Report and has given due consideration to such comments.
From and after the issuance of the Press Release and the filing of
the Current Report, the Company shall have disclosed all material,
nonpublic information delivered to the Investor (or the
Investor’s representatives or agents) by the Company or any
of its Subsidiaries, or any of their respective officers,
directors, employees, agents or representatives (if any) in
connection with the transactions contemplated by the Transaction
Documents. The Investor covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company as described in this Section 2.3, the Investor
will maintain the confidentiality of all disclosures made to it in
connection with the transactions contemplated by the Transaction
Documents (including the existence and terms of the transactions),
except that the Investor may disclose the terms of such
transactions to its financial, accounting, legal and other
advisors. Not later than 15 calendar days following the Closing
Date, the Company shall file a Form D with respect to the
Securities in accordance with Regulation D and shall provide a copy
thereof to the Investor promptly after such filing. The Company
shall prepare and file with the Commission the Registration
Statement (including the Prospectus) covering only the
resale
2
by the Investor of the Registrable
Securities in accordance with the Securities Act and the
Registration Rights Agreement. Pursuant to Section 6.10, at or
before 8:30 a.m., New York City time, on each Settlement Date,
the Company shall file with the Commission a Prospectus Supplement
pursuant to Rule 424(b) under the Securities Act (whether
or not such a prospectus supplement is technically required by such
rule) with respect to the applicable Fixed Request disclosing the
total Fixed Amount Requested, the number of Shares to be issued and
sold to the Investor on such Settlement Date, the total purchase
price therefor, the applicable Discount Price and the net proceeds
to be received by the Company therefrom.
ARTICLE III
FIXED REQUEST TERMS
Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as
follows:
Section 3.1.
Fixed Request
Notice . From
time to time during the Investment Period, the Company may, in its
sole discretion, no later than 9:30 a.m. (New York City time)
on the first Trading Day of the Pricing Period, provide to the
Investor a Fixed Request Notice, substantially in the form attached
hereto as Exhibit B (the “ Fixed Request
Notice ”), which Fixed Request Notice shall become
effective at 9:30 a.m. (New York City time) on the first
Trading Day of the Pricing Period specified in the Fixed Request
Notice; provided , however , that if the Company
delivers the Fixed Request Notice to the Investor later than
9:30 a.m. (New York City time) on a Trading Day, then the
first Trading Day of such Pricing Period shall not be the Trading
Day on which the Investor received such Fixed Request Notice, but
rather shall be the next Trading Day (unless a subsequent Trading
Day is therein specified). The Fixed Request Notice shall specify
the Fixed Amount Requested (up to the Maximum Fixed Amount
Requested), establish the Threshold Price for such Fixed Request
and designate the first and last Trading Day of the Pricing Period.
Upon the terms and subject to the conditions of this Agreement, the
Investor is obligated to accept each Fixed Request Notice prepared
and delivered in accordance with the provisions of this
Agreement.
Section 3.2.
Fixed Requests
. From time to time during the
Investment Period, the Company may, in its sole discretion, deliver
to the Investor a Fixed Request Notice for a specified Fixed Amount
Requested (up to the Maximum Fixed Amount Requested), and the
applicable discount price (the “ Discount Price
”) shall be determined, in accordance with the price and
share amount parameters as set forth in the below pricing grid, and
upon the terms and subject to the conditions of this Agreement, the
Investor shall purchase from the Company the Shares subject to such
Fixed Request Notice at the Discount Price; provided ,
however , that (i) if an ex-dividend date is
established by the Trading Market in respect of the Common Stock on
or between the first Trading Day of the applicable Pricing Period
and the applicable Settlement Date, the Discount Price shall be
reduced by the per share dividend amount and (ii) the Company
may not deliver any single Fixed Request Notice for a Fixed Amount
Requested in excess of the amount in the applicable Fixed Amount
Requested column below (the “ Maximum Fixed Amount
Requested ”).
3
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Threshold Price
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Fixed Amount
Requested
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Discount Price
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Equal to or greater than
$8.00
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Not to exceed, at the
Company’s option, the greater of (i) $4,000,000 and
(ii) the Alternative Fixed Amount Requested
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95.80% of the VWAP
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Equal to or greater than $7.00 and
less than $8.00
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Not to exceed, at the
Company’s option, the greater of (i) $3,500,000 and
(ii) the Alternative Fixed Amount Requested
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95.60% of the VWAP
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Equal to or greater than $6.00 and
less than $7.00
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Not to exceed, at the
Company’s option, the greater of (i) $3,000,000 and
(ii) the Alternative Fixed Amount Requested
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95.40% of the VWAP
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Equal to or greater than $5.00 and
less than $6.00
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Not to exceed, at the
Company’s option, the greater of (i) $2,500,000 and
(ii) the Alternative Fixed Amount Requested
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95.20% of the VWAP
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Equal to or greater than $4.00 and
less than $5.00
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Not to exceed, at the
Company’s option, the greater of (i) $2,000,000 and
(ii) the Alternative Fixed Amount Requested
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95.00% of the VWAP
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Equal to or greater than $3.00 and
less than $4.00
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Not to exceed, at the
Company’s option, the greater of (i) $1,500,000 and
(ii) the Alternative Fixed Amount Requested
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94.000% of the VWAP
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Equal to or greater than $2.00 and
less than $3.00
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Not to exceed, at the
Company’s option, the greater of (i) $1,000,000 and
(ii) the Alternative Fixed Amount Requested
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93.000% of the VWAP
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Equal to or greater than $1.50 and
less than $2.00
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Not to exceed, at the
Company’s option, the greater of (i) $750,000 and
(ii) the Alternative Fixed Amount Requested
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93.000% of the VWAP
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Anything to the contrary in this
Agreement notwithstanding, at no time shall the Investor be
required to purchase more than the Maximum Fixed Amount Requested
in respect of any Pricing Period (subject in all cases to the
provisions of Section 3.10 and 6.6 of this
Agreement).
For purposes of this Agreement,
“ Alternative Fixed Amount Requested ”
shall mean a dollar amount equal to the aggregate sum of each
quotient (calculated for each Trading Day during the applicable
Pricing Period for which the VWAP equals or exceeds the Threshold
Price) determined pursuant to the following equation (rounded to
the nearest cent):
AFAR = A x B x C, where:
AFAR = Alternative Fixed Amount
Requested,
A =
0.25
B =
the trading volume of the Common
Stock for the applicable Trading Day during the applicable Pricing
Period, as reported by Bloomberg L.P. using the AQR function
(excluding block trades of 25,000 shares or more), and
C =
the applicable Discount
Price;
4
provided , however , that the Alternative Fixed
Amount Requested shall not exceed the dollar amount cap therefor to
be specified by the Company in the applicable Fixed Request Notice
(and shall in all cases be subject to the provisions of
Section 3.10 and 6.6 of this Agreement).
The date on which the Company
delivers any Fixed Request Notice in accordance with this
Section 3.2 hereinafter shall be referred to as a “
Fixed Request Exercise Date ”. The parties
hereto hereby acknowledge and agree that the provisions of this
Section 3.2 shall not be amended or waived under any
circumstances.
Section 3.3.
Share
Calculation .
(a)
If, with respect to any Fixed
Request Notice, the Company does not elect the Alternative Fixed
Amount Requested in accordance with the provisions of
Section 3.2 hereof, then, with respect to the Trading Days
during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price, the number of Shares to be issued by
the Company to the Investor pursuant to a Fixed Request shall equal
the aggregate sum of each quotient (calculated for each Trading Day
during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price) determined pursuant to the following
equation (rounded to the nearest whole Share):
N =
(A x B)/C, where:
N =
the number of Shares to be issued by
the Company to the Investor in respect of a Trading Day during the
applicable Pricing Period for which the VWAP equals or exceeds the
Threshold Price,
A =
0.10 (the “
Multiplier ”),
B =
the total Fixed Amount Requested,
and
C =
the applicable Discount
Price.
(b)
If, with respect to any Fixed
Request Notice, the Company elects the Alternative Fixed Amount
Requested in accordance with the provisions of Section 3.2
hereof, then, with respect to the Trading Days during the
applicable Pricing Period for which the VWAP equals or exceeds the
Threshold Price, the number of Shares to be issued by the Company
to the Investor pursuant to a Fixed Request shall equal the
aggregate sum of each quotient (calculated for each Trading Day
during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price) determined pursuant to the following
equation (rounded to the nearest whole Share):
N =
A x B, where:
N =
the number of Shares to be issued by
the Company to the Investor in respect of a Trading Day during the
applicable Pricing Period for which the VWAP equals or exceeds the
Threshold Price,
A =
0.25, and
5
B =
the trading volume of the Common
Stock for the applicable Trading Day during the applicable Pricing
Period, as reported by Bloomberg L.P. using the AQR function
(excluding block trades of 25,000 shares or more).
Section 3.4.
Limitation of Fixed
Requests . The
Company shall not make more than one Fixed Request in each Pricing
Period. Not less than five Trading Days shall elapse between
the end of one Pricing Period and the commencement of any other
Pricing Period during the Investment Period. There shall be
permitted a maximum of 24 Fixed Requests during the Investment
Period. Each Fixed Request automatically shall expire immediately
following the last Trading Day of each Pricing Period.
Section 3.5.
Reduction of
Commitment . On
each Settlement Date, the Investor’s Total Commitment under
this Agreement automatically (and without the need for any
amendment to this Agreement) shall be reduced, on a
dollar-for-dollar basis, by the total amount of the Fixed Request
Amount for the portion of such Pricing Period paid to the Company
on such Settlement Date.
Section 3.6.
Below Threshold
Price .
(a)
If, with respect to any Fixed
Request Notice, the Company does not elect the Alternative Fixed
Amount Requested in accordance with the provisions of
Section 3.2 hereof, then, if the VWAP on any Trading Day in a
Pricing Period is lower than the Threshold Price, then for each
such Trading Day the Fixed Amount Requested shall be reduced, on a
dollar-for-dollar basis, by an amount equal to the product of
(x) the Multiplier and (y) the total Fixed Amount
Requested, and no Shares shall be purchased or sold with respect to
such Trading Day. If trading in the Common Stock on the
Trading Market is suspended for any reason for more than three
hours on any Trading Day, then for each such Trading Day the Fixed
Amount Requested shall be reduced, on a dollar-for-dollar basis, as
provided in the immediately preceding sentence, and no Shares shall
be purchased or sold with respect to such Trading Day.
(b)
If, with respect to any Fixed
Request Notice, the Company elects the Alternative Fixed Amount
Requested in accordance with the provisions of Section 3.2
hereof, then, if the VWAP on any Trading Day in a Pricing Period is
lower than the Threshold Price, then for each such Trading Day no
Shares shall be purchased or sold with respect to such Trading Day.
If trading in the Common Stock on the Trading Market is suspended
for any reason for more than three hours on any Trading Day, then
for each such Trading Day no Shares shall be purchased or sold with
respect to such Trading Day.
Section 3.7.
Settlement
. The payment for, against
simultaneous delivery of, Shares in respect of any Fixed Request
shall be settled as provided in this Section 3.7 and
Section 3.8 (as applicable). With respect to any Fixed Request
for which the Pricing Period is not reduced pursuant to
Section 3.8, Shares purchased by the Investor during the first
five Trading Days of such Pricing Period shall be determined and
settled on the sixth Trading Day of such Pricing Period, and Shares
purchased by the Investor during the second five Trading Days of
such Pricing Period shall be determined and settled on the first
Trading Day next following the last Trading Day of such Pricing
Period. If a Pricing Period in respect of any Fixed Request is
reduced to five or fewer Trading Days pursuant to Section 3.8,
the payment for, against
6
simultaneous delivery of, Shares in
respect of such Fixed Request shall be determined and settled on
the Trading Day as provided in Section 3.8. If a Pricing
Period in respect of any Fixed Request is reduced to six or more
Trading Days pursuant to Section 3.8, the payment for, against
simultaneous delivery of, Shares in respect of such Fixed Request
shall be settled as follows: (i) Shares purchased by the
Investor during the first five Trading Days of such Pricing Period
shall be determined and settled on the sixth Trading Day of such
Pricing Period and (ii) Shares purchased by the Investor
during the remaining Trading Days of such Pricing Period shall be
determined and settled on the Trading Day as provided in
Section 3.8. Each date on which settlement of the purchase and
sale of Shares occurs under this Section 3.7 and
Section 3.8 (as applicable) shall be referred to herein as a
“ Settlement Date ”. On each Settlement
Date, the Company shall, or shall cause its transfer agent to,
electronically transfer the Shares purchased by the Investor by
crediting the Investor’s or its designees’ account
(provided the Investor shall have given the Company written notice
of such designee prior to the Settlement Date) at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system, which Shares shall
be freely tradable and transferable and without restriction on
resale, against simultaneous payment therefor to the
Company’s designated account by wire transfer of immediately
available funds; provided that if the Shares are received by the
Investor later than 1:00 p.m., New York City time, payment
therefor shall be made with next day funds. As set forth in
Section 3.9, a failure by the Company or its transfer agent
(if applicable) to deliver such Shares on the applicable Settlement
Date shall result in the payment of liquidated damages by the
Company to the Investor.
Section 3.8.
Reduction of Pricing
Period .
(a)
If during a Pricing Period the
Company elects to reduce the number of Trading Days in such Pricing
Period, the Company shall so notify the Investor before
9:00 a.m. (New York City time) on any Trading Day during a
Pricing Period (a “ Reduction Notice ”)
and the last Trading Day of such Pricing Period shall be the
Trading Day immediately preceding the Trading Day on which the
Investor received such Reduction Notice; provided ,
however , that (i) the Company may not elect to reduce
the number of Trading Days in any such Pricing Period to less than
two Trading Days and (ii) if the Company delivers the
Reduction Notice later than 9:00 a.m. (New York City time) on
a Trading Day during a Pricing Period, then the last Trading Day of
such Pricing Period instead shall be the Trading Day on which the
Investor received such Reduction Notice. Upon receipt of a
Reduction Notice, the Investor shall purchase the Shares in respect
of each Trading Day in such reduced Pricing Period for which the
VWAP equals or exceeds the Threshold Price in accordance with
Section 3.3 hereof. The payment for, against simultaneous
delivery of, Shares to be purchased and sold in accordance with
this Section 3.8(a) shall be determined and settled on
the Trading Day next following the Trading Day on which the
Investor receives a Reduction Notice.
(b)
If, with respect to any Fixed
Request Notice, the Company elects the Alternative Fixed Amount
Requested in accordance with the provisions of Section 3.2
hereof, the last Trading Day of the applicable Pricing Period shall
be the earliest of: (i) the Trading Day on which the
Alternative Fixed Amount Requested (calculated in accordance with
Section 3.2 hereof) shall have reached the dollar amount cap
therefor specified by the Company in the applicable Fixed Request
Notice, (ii) the last Trading Day of the Pricing Period, if
such Pricing Period is reduced by the Company pursuant to clause
(a) of this Section 3.8, and (iii) the 10
th Trading Day of the Pricing Period. If the
last Trading Day of the applicable Pricing Period is the
7
Trading Day specified in clause
(i) of this Section 3.8(b), the payment for, against
simultaneous delivery of, Shares to be purchased and sold in
accordance with this Section 3.8(b) shall be determined
and settled on the Trading Day next following the last Trading Day
of the Pricing Period.
Section 3.9.
Failure to Deliver Shares . If the Company issues a Fixed Request
Notice and fails to deliver the Shares to the Investor on the
applicable Settlement Date and such failure continues for 10
Trading Days, the Company shall pay the Investor, in cash, in
addition to all other remedies available to the Investor, as
partial damages for such failure and not as a penalty, an amount
equal to 2.0% of the payment required to be paid by the Investor on
such Settlement Date for the initial 30 days following such
Settlement Date until the Shares have been delivered, and an
additional 2.0% for each additional 30-day period thereafter until
the Shares have been delivered, which amount shall be prorated for
such periods less than 30 days (the “ Make Whole
Amount ”). In the event that the Make Whole Amount is
not paid within two Trading Days following a demand therefor from
the Investor, the Make Whole Amount shall accrue annual interest
(on the basis of the 365 day year) compounded daily at a rate equal
to the greater of (i) the prime rate of interest then in
effect as published by the Wall Street Journal plus 3.0% and
(ii) 10.0%, up to and including the date on which the Make
Whole Amount is actually paid.
Section 3.10.
Certain Limitations . Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a
Fixed Request Notice to the extent that (i) the Fixed Amount
Requested in such Fixed Request Notice exceeds the Maximum Fixed
Amount Requested determined in accordance with Section 3.2,
(ii) the sale of Shares pursuant to such Fixed Request Notice
would cause the Company to sell or the Investor to purchase
(A) a dollar value of shares Common Stock which, when
aggregated with all Fixed Request Amounts paid by the Investor
pursuant to all prior Fixed Request Notices issued under this
Agreement, would exceed the Aggregate Limit or (B) a number of
shares of Common Stock which, when aggregated with all Shares
purchased by the Investor pursuant to all prior Fixed Request
Notices issued under this Agreement, would exceed the Aggregate
Limit, as the case may be, or (iii) the sale of Shares
pursuant to such Fixed Request Notice would cause the Company to
sell or the Investor to purchase a number of shares of Common Stock
which, when aggregated with all other shares of Common Stock then
beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder) by the Investor and its Affiliates, would
result in the beneficial ownership by the Investor or any of its
Affiliates of more than 9.9% of the then issued and outstanding
shares of Common Stock (the “ Ownership
Limitation ”). If the Company issues a Fixed Request
Notice in which the Fixed Amount Requested exceeds the Maximum
Fixed Amount Requested determined in accordance with
Section 3.2, such Fixed Request Notice shall be void ab
initio to the extent the Fixed Amount Requested exceeds the
Maximum Fixed Amount Requested. If the Company issues a Fixed
Request Notice that otherwise would require the Investor to
purchase shares of Common Stock which would cause the aggregate
purchases of Common Stock by the Investor under this Agreement to
exceed the Aggregate Limit, such Fixed Request Notice shall be void
ab initio to the extent of (x) the amount by
which the dollar value of shares of Common Stock otherwise issuable
pursuant to such Fixed Request Notice, together with all Fixed
Request Amounts paid by the Investor pursuant to all prior Fixed
Request Notices issued under this Agreement, would exceed the
Aggregate Limit, or (y) the amount by which the number of
shares of Common Stock otherwise issuable pursuant to such Fixed
Request Notice, together with all Shares purchased by
the
8
Investor pursuant to all prior Fixed
Request Notices issued under this Agreement, would exceed the
Aggregate Limit, as the case may be. If the Company issues a Fixed
Request Notice that otherwise would require the Investor to
purchase shares of Common Stock which would cause the aggregate
number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act and
Rule 13d-3 promulgated thereunder) by the Investor and its
Affiliates to exceed the Ownership Limitation, such Fixed Request
Notice shall be void ab initio to the extent of the
amount by which the number of shares of Common Stock otherwise
issuable pursuant to such Fixed Request Notice, together with all
shares of Common Stock then beneficially owned by the Investor and
its Affiliates, would exceed the Ownership Limitation. The Company
hereby represents, warrants and covenants that neither it nor any
of its Subsidiaries (1) has effected any transaction or series
of transactions, (2) is a party to any pending transaction or
series of transactions or (3) shall enter into any contract,
agreement, agreement-in-principle, arrangement or understanding
with respect to, or shall effect, any Alternate Transaction which,
in any of such cases, may be aggregated with the transactions
contemplated by this Agreement for purposes of determining whether
approval of the Company’s stockholders is required under any
bylaw, listed securities maintenance standards or other
rules of the Trading Market; provided , however
, that the Company shall be permitted to take any action referred
to in clause (3) above if (x) the Company has timely
provided the Investor with an Aggregation Notice as provided in
Section 6.7(ii) hereof and (y) unless the Investor
has previously terminated this Agreement pursuant to
Section 8.2, the Company obtains the requisite stockholder
approval prior to the closing of such Alternate Transaction. The
parties hereto hereby acknowledge and agree that the provisions of
this Section 3.10 shall not be amended or waived under any
circumstances.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
INVESTOR
The Investor hereby makes the
following representations, warranties and covenants to the
Company:
Section 4.1.
Organization and Standing of the Investor
. The Investor is a business
company duly organized, validly existing and in good standing under
the laws of the British Virgin Islands.
Section 4.2.
Authorization and Power . The Investor has the requisite corporate
power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement and to
purchase the Shares in accordance with the terms hereof. The
execution, delivery and performance by the Investor of this
Agreement and the Registration Rights Agreement and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Investor,
its Board of Directors or its stockholders is required. Each of
this Agreement and the Registration Rights Agreement has been duly
executed and delivered by the Investor and constitutes a valid and
binding obligation of the Investor enforceable against it in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership, or similar
laws relating to, or affecting generally the enforcement of,
creditor’s rights and
9
remedies or by other equitable
principles of general application (including any limitation of
equitable remedies).
Section 4.3.
No Conflicts . The execution, delivery and performance
by the Investor of this Agreement and the Registration Rights
Agreement and the consummation by the Investor of the transactions
contemplated hereby and thereby do not and shall not
(i) result in a violation of such Investor’s charter
documents, bylaws or other applicable organizational instruments,
(ii) conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or
give rise to any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or
obligation to which the Investor is a party or is bound,
(iii) create or impose any lien, charge or encumbrance on any
property of the Investor under any agreement or any commitment to
which the Investor is party or under which the Investor is bound or
under which any of its properties or assets are bound, or
(iv) result in a violation of any federal, state, local or
foreign statute, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to the
Investor or by which any of its properties or assets are bound or
affected, except, in the case of clauses (ii), (iii) and (iv),
for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere
with, in any material respect, the ability of the Investor to enter
into and perform its obligations under this Agreement and the
Registration Rights Agreement. The Investor is not required under
any applicable federal, state, local or foreign law, rule or
regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the Registration Rights
Agreement or to purchase the Shares in accordance with the terms
hereof; provided , however , that for purposes of the
representation made in this sentence, the Investor is assuming and
relying upon the accuracy of the relevant representations and
warranties and the compliance with the relevant covenants and
agreements of the Company in the Transaction Documents to which it
is a party.
Section 4.4.
Investment Purpose . The Investor is acquiring the Securities for
its own account, for investment purposes and not with a view
towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered under or
exempt from the registration requirements of the Securities Act;
provided , however , that by making the
representations herein, the Investor does not agree, or make any
representation or warranty, to hold any of the Securities for any
minimum or other specific term and reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
The Investor does not presently have any agreement or
understanding, directly or indirectly, with any Person to
distribute any of the Securities.
Section 4.5.
Accredited Investor Status . The Investor is an “accredited
investor” as that term is defined in
Rule 501(a)(3) of Regulation D.
Section 4.6.
Reliance on Exemptions . The Investor understands that the Securities
are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and
state securities laws and that the Company is relying in part upon
the truth and accuracy of, and the Investor’s compliance
with, the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth herein in order
to
10
determine the availability of such
exemptions and the eligibility of the Investor to acquire the
Securities.
Section 4.7.
Information . All materials relating to the business,
financial condition, management and operations of the Company and
materials relating to the offer and sale of the Securities which
have been requested by the Investor have been furnished or
otherwise made available to the Investor or its advisors,
including, without limitation, the Commission Documents. The
Investor understands that its investment in the Securities involves
a high degree of risk. The Investor is able to bear the economic
risk of an investment in the Securities and has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of a proposed investment in the
Securities. The Investor and its advisors have been afforded the
opportunity to ask questions of and receive answers from
representatives of the Company concerning the financial condition
and business of the Company and other matters relating to an
investment in the Securities. Neither such inquiries nor any
other due diligence investigations conducted by the Investor or its
advisors, if any, or its representatives shall modify, amend or
affect the Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement or in
any other Transaction Document to which the Company is a party or
the Investor’s right to rely on any other document or
instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated
hereby (including, without limitation, the opinions of the
Company’s counsel delivered pursuant to Sections
7.1(iv) and 7.2(xiv)). The Investor 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.
Section 4.8.
No Governmental Review . The Investor understands that no United States
federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of
the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities. The Investor
understands that it (and not the Company) shall be responsible for
its own tax liabilities that may arise as a result of this
investment or the transactions contemplated by this
Agreement.
Section 4.9.
No General Solicitation . The Investor is not purchasing the Securities
as a result of any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
the offer or sale of the Securities.
Section 4.10.
Not an Affiliate .
The Investor is not an officer, director or an Affiliate of the
Company.
Section 4.11.
Statutory Underwriter Status . The Investor acknowledges that it will be
disclosed as an “underwriter” and a “selling
stockholder” in the Registration Statement and in any
Prospectus contained therein to the extent required by applicable
law and to the extent the Prospectus is related to the resale of
Registrable Securities.
Section 4.12.
Resales of Securities . The Investor represents and covenants that
unless the Securities are eligible for resale pursuant to
Rule 144, it will resell such Securities only pursuant to the
Registration Statement, in a manner described under the caption
“Plan of
11
Distribution” in the
Registration Statement, and in a manner in compliance with all
applicable United States federal and state securities laws,
rules and regulations, including, without limitation, any
applicable prospectus delivery requirements of the Securities
Act.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY
Except as set forth in the
disclosure schedule delivered by the Company to the Investor (which
is hereby incorporated by reference in, and constitutes an integral
part of, this Agreement) (the “ Disclosure
Schedule ”), the Company hereby makes the following
representations, warranties and covenants to the
investor:
Section 5.1.
Organization, Good Standing and Power
. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and
operate its properties and assets and to conduct its business as it
is now being conducted. The Company and each Subsidiary is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification
necessary, except for any jurisdiction in which the failure to be
so qualified would not have a Material Adverse Effect.
Section 5.2.
Authorization, Enforcement . The Company has the requisite corporate
power and authority to enter into and perform its obligations under
each of the Transaction Documents to which it is a party and to
issue the Securities in accordance with the terms hereof and
thereof. Except for approvals of the Company’s Board of
Directors or a committee thereof as may be required in connection
with any issuance and sale of Shares to the Investor hereunder
(which approvals shall be obtained prior to the delivery of any
Fixed Request Notice), the execution, delivery and performance by
the Company of each of the Transaction Documents to which it is a
party and the consummation by it of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization
of the Company, its Board of Directors or its stockholders is
required. Each of the Transaction Documents to which the Company is
a party has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and
remedies or by other equitable principles of general application
(including any limitation of equitable remedies).
Section 5.3.
Capitalization . The authorized capital stock of the
Company and the shares thereof issued and outstanding are as set
forth in the Commission Documents as of the dates reflected
therein. All of the outstanding shares of Common Stock have been
duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth in the Commission Documents,
this Agreement and the Registration Rights Agreement, there are no
agreements or arrangements under which the Company is obligated to
register the sale of any securities under the Securities Act.
Except as set forth in the Commission Documents, no shares of
Common Stock are entitled to preemptive rights and there are no
outstanding options,
12
warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, any
shares of capital stock of the Company. Except as set forth
in the Commission Documents, there are no outstanding debt
securities and no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue
additional shares of the capital stock of the Company or options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock
of the Company other than those issued or granted in the ordinary
course of business pursuant to the Company’s equity incentive
and/or compensatory plans or arrangements. Except for customary
transfer restrictions contained in agreements entered into by the
Company to sell restricted securities or as set forth in the
Commission Documents, the Company is not a party to, and it has no
Knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of the Company. Except as set forth
in the Commission Documents, the offer and sale of all capital
stock, convertible or exchangeable securities, rights, warrants or
options of the Company issued prior to the Closing Date complied
with all applicable federal and state securities laws, and no
stockholder has any right of rescission or damages or any
“put” or similar right with respect thereto that would
have a Material Adverse Effect. There are no securities or
instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any of the other Transaction
Documents or the consummation of the transactions described herein
or therein. The Company has furnished or made available to the
Investor via EDGAR true and correct copies of the Company’s
Certificate of Incorporation as in effect on the Closing Date (the
“ Charter ”), and the Company’s
Bylaws as in effect on the Closing Date (the “
Bylaws ”), and true and correct copies
(redacted as appropriate) of all executed resolutions of the
Company’s Board of Directors (and committees thereof)
relating to the capital stock of the Company (and transactions in
respect thereof) since December 31, 2006 (except with respect
to issuances of shares of capital stock of the Company to directors
or employees of the Company as fees or compensation that were duly
approved by the Company’s Board of Directors or a committee
thereof).
Section 5.4.
Issuance of Securities . The Commitment Shares have been, and the
Shares to be issued under this Agreement have been or will be
(prior to the delivery of any Fixed Request Notice to the Investor
hereunder), duly authorized by all necessary corporate action on
the part of the Company. The Commitment Shares, when issued in
accordance with the terms of this Agreement, and the Shares, when
paid for in accordance with the terms of this Agreement, shall be
validly issued and outstanding, fully paid and nonassessable and
free from all liens, charges, taxes, security interests,
encumbrances, rights of first refusal, preemptive or similar rights
and other encumbrances with respect to the issue
thereof.
Section 5.5.
No Conflicts . The execution, delivery and performance
by the Company of each of the Transaction Documents to which it is
a party and the consummation by the Company of the transactions
contemplated hereby and thereby do not and shall not
(i) result in a violation of any provision of the
Company’s Charter or Bylaws, (ii) conflict with,
constitute a default (or an event which, with notice or lapse of
time or both, would become a default) under, or give rise to any
rights of termination, amendment, acceleration or cancellation of,
any material agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which
the Company or any of its Significant Subsidiaries is a party or is
bound (including, without limitation, any listing agreement with
the Trading Market), (iii) create or
13
impose a lien, charge or encumbrance
on any property of the Company or any of its Significant
Subsidiaries under any agreement or any commitment to which the
Company or any of its Significant Subsidiaries is a party or under
which the Company or any of its Significant Subsidiaries is bound
or under which any of their respective properties or assets are
bound, or (iv) result in a violation of any federal, state,
local or foreign statute, rule, regulation, order, judgment or
decree applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its
Subsidiaries are bound or affected (including federal and state
securities laws and regulations and the rules and regulations
of the Trading Market), except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations,
amendments, acceleration, cancellations, liens, charges,
encumbrances and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. Except as
specifically contemplated by this Agreement or the Registration
Rights Agreement and as required under the Securities Act and any
applicable state securities laws, the Company is not required under
any federal, state, local or foreign law, rule or regulation
to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency
(including, without limitation, the Trading Market) in order for it
to execute, deliver or perform any of its obligations under the
Transaction Documents to which it is a party, or to issue the
Securities to the Investor in accordance with the terms hereof and
thereof (other than such consents, authorizations, orders, filings
or registrations as have been obtained or made prior to the Closing
Date); provided , however , that, for purposes of the
representation made in this sentence, the Company is assuming and
relying upon the accuracy of the representations and warranties of
the Investor in this Agreement and the compliance by it with its
covenants and agreements contained in this Agreement and the
Registration Rights Agreement.
Section 5.6.
Commission Documents, Financial Statements
. (a) The Company has
timely filed (giving effect to permissible extensions in accordance
with Rule 12b-25 under the Exchange Act) all Commission
Documents. The Company has delivered or made available to the
Investor via EDGAR or otherwise true and complete copies of the
Commission Documents filed with or furnished to the Commission
prior to the Closing Date (including, without limitation, the 2008
Form 10-K). No Subsidiary of the Company is required to file
or furnish any report, schedule, registration, form, statement,
information or other document with the Commission. As of its filing
date, each Commission Document filed with or furnished to the
Commission prior to the Closing Date (including, without
limitation, the 2008 Form 10-K) complied in all material
respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and other federal, state and local
laws, rules and regulations applicable to it, and, as of its
filing date (or, if amended or superseded by a filing prior to the
Closing Date, on the date of such amended or superseded filing),
such Commission Document did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The Registration Statement, on the date it is filed
with the Commission, on the date it is declared effective by the
Commission, on each Fixed Request Exercise Date and on each
Settlement Date, shall comply in all material respects with the
requirements of the Securities Act (including, without limitation,
Rule 415 under the Securities Act) and shall not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein not misleading, except that this
representation and warranty shall not apply to statements in or
omissions from the Registration Statement made in reliance upon and
in conformity with information relating to the Investor furnished
to the
14
Company in writing by or on behalf
of the Investor expressly for use therein (which to the
Company’s Knowledge are not false or misleading). The
Prospectus and each Prospectus Supplement required to be filed
pursuant to this Agreement or the Registration Rights Agreement
after the Closing Date, when taken together, on its date, on each
Fixed Request Exercise Date and on each Settlement Date, shall
comply in all material respects with the requirements of the
Securities Act (including, without limitation,
Rule 424(b) under the Securities Act) and shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that this
representation and warranty shall not apply to statements in or
omissions from the Prospectus or any Prospectus Supplement made in
reliance upon and in conformity with information relating to the
Investor furnished to the Company in writing by or on behalf of the
Investor expressly for use therein (which to the Company’s
Knowledge are not false or misleading). Each Commission Document
(other than the Registration Statement, the Prospectus or any
Prospectus Supplement) to be filed with or furnished to the
Commission after the Closing Date and incorporated by reference in
the Registration Statement, the Prospectus or any Prospectus
Supplement required to be filed pursuant to this Agreement or the
Registration Rights Agreement (including, without limitation, the
Current Report), when such document is filed with or furnished to
the Commission and, if applicable, when such document becomes
effective, as the case may be, shall comply in all material
respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and other federal, state and local
laws, rules and regulations applicable to it, and shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company has delivered or
made available to the Investor via EDGAR or otherwise true and
complete copies of all comment letters and substantive
correspondence received by the Company from the Commission relating
to the Commission Documents filed with or furnished to the
Commission as of the Closing Date, together with all written
responses of the Company thereto. There are no outstanding or
unresolved comments or undertakings in such comment letters
received by the Company from the Commission. The Commission has not
issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company under the
Securities Act or the Exchange Act.
(b)
The financial statements, together with the related notes and
schedules, of the Company included in the Commission Documents
comply as to form in all material respects with all applicable
accounting requirements and the published rules and
regulations of the Commission and all other applicable
rules and regulations with respect thereto as may be subject
to any applicable out of period adjustments disclosed in the
Commission Documents. Such financial statements, together with the
related notes and schedules, have been prepared in accordance with
GAAP applied on a consistent basis 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 not include
footnotes or may be condensed or summary statements and are subject
to customary year-end audit adjustments), and fairly present in all
material respects the financial condition of the Company and its
consolidated Subsidiaries as of the dates thereof and the results
of operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments).
15
(c)
The Company has timely filed with the Commission and made available
to the Investor via EDGAR or otherwise all certifications and
statements required by (x) Rule 13a-14 or
Rule 15d-14 under the Exchange Act or (y) 18 U.S.C.
Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002 (“ SOXA ”)) with respect to all
relevant Commission Documents. The Company is in compliance
in all material respects with the provisions of SOXA applicable to
it as of the date hereof. The Company maintains disclosure
controls and procedures required by Rule 13a-15 or
Rule 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information
concerning the Company and its Subsidiaries is made known on a
timely basis to the individuals responsible for the timely and
accurate preparation of the Company’s Commission filings and
other public disclosure documents. As used in this
Section 5.6(c), the term “file” shall be broadly
construed to include any manner in which a document or information
is furnished, supplied or otherwise made available to the
Commission.
(d)
Ernst & Young LLP, who shall express their opinion on the
audited financial statements and related schedules to be included
or incorporated by reference in the Registration Statement and the
Prospectus are, with respect to the Company, independent public
accountants as required by the Securities Act and is an independent
registered public accounting firm within the meaning of SOXA as
required by the rules of the Public Company Accounting
Oversight Board.
Section 5.7.
Subsidiaries . The 2008 Form 10-K sets forth each
Subsidiary of the Company as of the Closing Date, showing its
jurisdiction of incorporation or organization and the percentage of
the Company’s ownership of the outstanding capital stock or
other ownership interests of such Subsidiary, and the Company does
not have any other Subsidiaries as of the Closing Date.
Section 5.8.
No Material Adverse Effect . Except as disclosed in any Commission
Documents filed since December 31, 2008 or which may be deemed
to have resulted from the Company’s continued losses from
operations, since December 31, 2008, the Company has not
experienced or suffered any Material Adverse Effect, and there
exists no current state of facts, condition or event which would
have a Material Adverse Effect.
Section 5.9.
No Undisclosed Liabilities . Neither the Company nor any of its
Subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) that would be required
to be disclosed on a balance sheet of the Company or any Subsidiary
(including the notes thereto) in conformity with GAAP and are not
disclosed in the Commission Documents, other than those incurred in
the ordinary course of the Company’s or its Subsidiaries
respective businesses since June 30, 2009 and which,
individually or in the aggregate, do not or would not have a
Material Adverse Effect.
Section 5.10.
No Undisclosed Events or Circumstances
. No event or circumstance has
occurred or information exists with respect to the Company or any
of its Subsidiaries or its or their business, properties,
liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law,
rule or regulation, requires public disclosure or announcement
by the Company at or before the Closing but which has
not
16
been so publicly announced or disclosed, except
for events or circumstances which, individually or in the
aggregate, do not or would not have a Material Adverse
Effect.
Section 5.11.
Indebtedness; Solvency . The Company’s Quarterly Report on
Form 10-Q for its fiscal quarter ended June 30, 2009 sets
forth, as of June 30, 2009, all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments through such
date. For the purposes of this Agreement, “
Indebtedness ” shall mean (a) any
liabilities for borrowed money or amounts owed in excess of
$1,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties,
endorsements, indemnities and other contingent obligations in
respect of Indebtedness of others in excess of $1,000,000, whether
or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of
$1,000,000 due under leases required to be capitalized in
accordance with GAAP. There is no existing or continuing
default or event of default in respect of any Indebtedness of the
Company or any of its Subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek
protection pursuant to Title 11 of the United States Code or any
similar federal or state bankruptcy law or law for the relief of
debtors, nor does the Company have any Knowledge that its creditors
intend to initiate involuntary bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for
relief under Title 11 of the United States Code or any other
federal or state bankruptcy law or any law for the relief of
debtors. The Company is financially solvent and is generally able
to pay its debts as they become due.
Section 5.12.
Title To Assets . Each of the Company and its Subsidiaries
has good and marketable title to all of their respective real and
personal property reflected in the Commission Documents, free of
mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the Commission
Documents and those that do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company and its
Subsidiaries or otherwise do not result in a Material Adverse
Effect. To the Company’s Knowledge, all real property and
facilities held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company or any of its
Subsidiaries.
Section 5.13.
Actions Pending . There is no action, suit, claim,
investigation or proceeding pending, or to the Knowledge of the
Company threatened, against the Company or any Subsidiary which
questions the validity of the Transaction Documents or the
transactions contemplated thereby or any action taken or to be
taken pursuant thereto. Except as set forth in the Commission
Documents, there is no action, suit, claim, investigation or
proceeding pending, or to the Knowledge of the Company threatened,
against or involving the Company, any Subsidiary or any of their
respective properties or assets, or involving any officers or
directors of the Company or any of its Subsidiaries, including,
without limitation, any securities class action lawsuit or
stockholder derivative lawsuit, in each case which, if determined
adversely to the Company, its Subsidiary or any officer or director
of the Company or its Subsidiaries, would have a Material Adverse
Effect. Except as set forth in the Commission Documents, no
judgment,
17
order, writ, injunction or decree or
award has been issued by or, to the Knowledge of the Company,
requested of any court, arbitrator or governmental agency
(including, without limitation, the Trading Market) which would be
reasonably expected to result in a Material Adverse
Effect.
Section 5.14.
Compliance With Law . The business of the Company and the
Subsidiaries has been and is presently being conducted in
compliance with all applicable federal, state, local and foreign
governmental laws, rules, regulations and ordinances, except as set
forth in the Commission Documents and except for such
non-compliance which, individually or in the aggregate, would not
have a Material Adverse Effect. To the Company’s Knowledge,
neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order applicable to the Company or any of
its Subsidiaries, and neither the Company nor any of its
Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could
not, individually or in the aggregate, have a Material Adverse
Effect. Without limiting the generality of the foregoing, except as
set forth in the Commission Documents, the Company has maintained
all requirements for the continued listing or quotation of its
Common Stock on the Trading Market, and the Company is not in
violation of any of the rules, regulations or requirements of the
Trading Market and has no Knowledge of any facts or circumstances
that could reasonably lead to delisting or suspension of the Common
Stock by the Trading Market in the foreseeable future.
Section 5.15.
Certain Fees . Except for the placement fee payable by
the Company to Reedland Capital Partners, an Institutional Division
of Financial West Group, Member FINRA/SIPC (“
Reedland ”), which shall be set forth in a
separate engagement letter between the Company and Reedland (a true
and complete fully executed copy of which has heretofore been
provided to the Investor) (the “ Placement Agent
Engagement Letter ”), no brokers, finders or
financial advisory fees or commissions shall be payable by the
Company or any Subsidiary (or any of their respective Affiliates)
with respect to the transactions contemplated by the Transaction
Documents.
Section 5.16.
Disclosure .
The Company confirms that neither it nor any other Person acting on
its behalf has provided the Investor or any of its agents, advisors
or counsel with any information that constitutes or could
reasonably be expected to constitute material, nonpublic
information concerning the Company or any of its Subsidiaries,
other than the existence of the transactions contemplated by the
Transaction Documents. The Company understands and confirms that
the Investor will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure
provided to Investor regarding the Company and its Subsidiaries,
their businesses and the transactions contemplated by the
Transaction Documents (including, without limitation, the
representations and warranties of the Company contained in the
Transaction Documents to which it is a party and the disclosures
contained in the Disclosure Schedule) furnished by or on behalf of
the Company or any of its Subsidiaries is true and correct and does
not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company
or any of its Subsidiaries during the 12 months preceding the date
of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact
required to
18
be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
Section 5.17.
Operation of Business . (a) The Company or one or more of
its Subsidiaries possesses such permits, licenses, approvals,
consents and other authorizations (including licenses,
accreditation and other similar documentation or approvals of any
local health departments) (collectively, “ Governmental
Licenses ”) issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies, including, without
limitation, the United States Food and Drug Administration (“
FDA ”), necessary to conduct the business now
operated by it, except where the failure to possess such
Governmental Licenses, individually or in the aggregate, would not
have a Material Adverse Effect or except as otherwise disclosed in
the Commission Documents. To the Company’s Knowledge, the
Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and all applicable FDA
rules and regulations, guidelines and policies, and all
applicable rules and regulations, guidelines and policies of
any governmental authority exercising authority comparable to that
of the FDA (including any non-governmental authority whose approval
or authorization is required under foreign law comparable to that
administered by the FDA), except where the failure to so comply,
individually or in the aggregate, would not have a Material Adverse
Effect or except as otherwise disclosed in the Commission
Documents. All of the Governmental Licenses are valid and in
full force and effect, except where the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses
to be in full force and effect, individually or in the aggregate,
would not have a Material Adverse Effect or except as otherwise
disclosed in the Commission Documents. As to each product
that is subject to FDA regulation or similar legal provisions in
any foreign jurisdiction that is developed, manufactured, tested,
packaged, labeled, marketed, sold, distributed and/or
commercialized by the Company or any of its Subsidiaries, each such
product is being developed, manufactured, tested, packaged,
labeled, marketed, sold, distributed and/or commercialized in
compliance with all applicable requirements of the FDA (and any
non-governmental authority whose approval or authorization is
required under foreign law comparable to that administered by the
FDA), including, but not limited to, those relating to
investigational use, investigational device exemption, premarket
notification, premarket approval, good clinical practices, good
manufacturing practices, record keeping, filing of reports, and
patient privacy and medical record security, except where such
non-compliance, individually or in the aggregate, would not have a
Material Adverse Effect or except as otherwise disclosed in the
Commission Documents. As to each product or product candidate
of the Company or any of its Subsidiaries subject to FDA regulation
or similar legal provision in any foreign jurisdiction, all
manufacturing facilities of the Company and its Subsidiaries are
operated in compliance with the FDA’s Quality System
Regulation requirements at 21 C.F.R. Part 820, as applicable,
except where such non-compliance, individually or in the aggregate,
would not have a Material Adverse Effect. Except as set forth
in the Commission Documents, neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses or
relating to a potential violation of, failure to comply with, or
request to produce additional information under, any FDA
rules and regulations, guidelines or policies which, if the
subject of any unfavorable decision, ruling or finding,
individually or in the aggregate, would have a Material Adverse
Effect. Except as set forth in the Commission Documents,
neither the Company nor any of its Subsidiaries has received any
correspondence, notice or request from the FDA, including, without
limitation, notice that any one or more products or product
candidates
19
of the Company or any of its
Subsidiaries failed to receive approval from the FDA for use for
any one or more indications. This Section 5.17 does not
relate to environmental matters, such items being the subject of
Section 5.18.
(b)
The Company or one or more of its Subsidiaries owns or possesses
adequate rights to use patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks,
trade names, trade dress, logos, copyrights and other intellectual
property, including, without limitation, all of the intellectual
property described in the Commission Documents as being owned or
licensed by the Company (collectively, “ Intellectual
Property ”), necessary to carry on the business now
operated by it, except where failure to own, license or have such
rights would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth in the Commission
Documents, there are no actions, suits or judicial proceedings
pending, or to the Company’s Knowledge threatened, relating
to patents or proprietary information to which the Company or any
of its Subsidiaries is a party or of which any property of the
Company or any of its Subsidiaries is subject, and neither the
Company nor any of its Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of
any facts or circumstances which could render any Intellectual
Property invalid or inadequate to protect the interest of the
Company and its Subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or
finding) or invalidity or inadequacy, individually or in the
aggregate, would have a Material Adverse Effect.
(c)
All clinical trials conducted by, or on behalf of, the Company or
any of its Subsidiaries, or in which the Company or any of its
Subsidiaries has participated that are described in the Commission
Documents, or the results of which are referred to in the
Commission Documents, if any, are the only clinical trials
currently being conducted by or on behalf of the Company and its
Subsidiaries. To the Company’s Knowledge, all such
clinical trials conducted, supervised or monitored by, or on behalf
of, the Company or any of its Subsidiaries have been conducted in
compliance with all applicable federal, state, local and foreign
laws, and the regulations and requirements of any applicable
governmental entity, including, but not limited to, FDA good
clinical practice and good laboratory practice requirements (or the
foreign equivalent requirements), except as otherwise disclosed in
the Commission Documents or where such noncompliance does not
result in a Material Adverse Effect. Except as set forth in
the Commission Documents, neither the Company nor any of its
Subsidiaries has received any notices or correspondence from the
FDA or any other governmental agency requiring the termination,
suspension, delay or modification of any clinical trials conducted
by, or on behalf of, the Company or any of its Subsidiaries or in
which the Company or any of its Subsidiaries has participated that
are described in the Commission Documents, if any, or the results
of which are referred to in the Commission Documents.
Section 5.18.
Environmental Compliance . Except as disclosed in the Commission
Documents, the Company and each of its Subsidiaries have obtained
all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are
required under any Environmental Laws, except for any approvals,
authorization, certificates, consents, licenses,
20
orders and permits or other similar
authorizations the failure of which to obtain does not or would not
have a Material Adverse Effect. “ Environmental
Laws ” shall mean all applicable laws relating to the
protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges,
releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials
or wastes, whether solid, liquid or gaseous in nature, into the
air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material
or wastes, whether solid, liquid or gaseous in nature. Except
for such instances as would not, individually or in the aggregate,
have a Material Adverse Effect, to the Company’s Knowledge,
there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting
the Company or its Subsidiaries that violate or could reasonably be
expected to violate any Environmental Law after the Closing Date or
that could reasonably be expected to give rise to any environmental
liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation
(i) under any Environmental Law, or (ii) based on or
related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous
substance.
Section 5.19.
Material Agreements . Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company is
a party to any written or oral contract, instrument, agreement
commitment, obligation, plan or arrangement, a copy of which would
be required to be filed with the Commission as an exhibit to an
annual report on Form 10-K (collectively, “
Material Agreements ”). Except as set
forth in the Commission Documents, the Company and each of its
Subsidiaries have performed in all material respects all the
obligations required to be performed by them under the Material
Agreements, have received no notice of default or an event of
default by the Company or any of its Subsidiaries thereunder and
are not aware of any basis for the assertion thereof, and neither
the Company or any of its Subsidiaries nor, to the Knowledge of the
Company, any other contracting party thereto are in default under
any Material Agreement now in effect, the result of which would
have a Material Adverse Effect. Except as set forth in the
Commission Documents, each of the Material Agreements is in full
force and effect, and constitutes a legal, valid and binding
obligation enforceable in accordance with its terms against the
Company and/or any of its Subsidiaries and, to the Knowledge of the
Company, each other contracting party thereto, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally
the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
Section 5.20.
Transactions With Affiliates . Except as set forth in the Commission
Documents, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts, service arrangements or
other continuing transactions exceeding $120,000 between
(a) the Company or any Subsidiary, on the one hand, and
(b) any person or entity who would be covered by Item
404(a) of Regulation S-K, on the other hand. Except as
disclosed in the Commission Documents, there are no outstanding
amounts payable to or receivable from, or advances by the Company
or any of its Subsidiaries to, and neither the Company nor any of
its
21
Subsidiaries is otherwise a creditor
of or debtor to, any beneficial owner of more than 5% of the
outstanding shares of Common Stock, or any director, employee or
affiliate of the Company or any of its Subsidiaries, other than
(i) reimbursement for reasonable expenses incurred on behalf
of the Company or any of its Subsidiaries or (ii) as part of
the normal and customary terms of such persons’ employment or
service as a director with the Company or any of its
Subsidiaries.
Section 5.21.
Employees .
Neither the Company nor any Subsidiary of the Company has any
collective bargaining arrangements or agreements covering any of
its employees, except as set forth in the Commission
Documents. Except as disclosed in the Commission Documents,
no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect, has terminated or, to the Knowledge of the Company, has any
present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
Section 5.22.
Use of Proceeds . The proceeds from the sale of the Shares
shall be used by the Company and its Subsidiaries as set forth in
the Prospectus and any Prospectus Supplement filed pursuant to
Sections 2.3 and 6.10 of this Agreement and pursuant to the
Registration Rights Agreement.
Section 5.23.
Investment Company Act Status . The Company is not, and as a result of
the consummation of the transactions contemplated by the
Transaction Documents and the application of the proceeds from the
sale of the Shares as set forth in the Prospectus and any
Prospectus Supplement shall not be, an “investment
company” or a company “controlled” by an
“investment company , ” within the
meaning of the Investment Company Act of 1940, as
amended.
Section 5.24.
ERISA . No
liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its
Subsidiaries which has had or would have a Material Adverse
Effect. No “prohibited transaction” (as defined
in Section 406 of ERISA or Section 4975 of the Code) or
“accumulated funding deficiency” (as defined in
Section 203 of ERISA) or any of the events set forth in
Section 4043(b) of ERISA has occurred with respect to any
Plan which has had or would have a Material Adverse Effect, and the
execution and delivery of this Agreement and the issuance and sale
of the Shares hereunder shall not result in any of the foregoing
events. Each Plan is in compliance in all material respects
with applicable law, including ERISA and the Code; the Company has
not incurred and does not expect to incur liability under Title IV
of ERISA with respect to the termination of, or withdrawal from,
any Plan; and each Plan for which the Company would have any
liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or
failure to act, which would cause the loss of such
qualifications. As used in this Section 5.24, the term
“ Plan ” shall mean an “employee
pension benefit plan” (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any
Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary,
is under common control, as described in
Section 414(b) or (c) of the Code.
22
Section 5.25.
Taxes . The
Company and each of its Subsidiaries (i) has filed all
necessary federal, state and foreign income and franchise tax
returns or has duly requested extensions thereof, except for those
the failure of which to file would not have a Material Adverse
Effect, (ii) has paid all federal, state, local and foreign
taxes due and payable for which it is liable, except to the extent
that any such taxes are being contested in good faith and by
appropriate proceedings, except for such taxes the failure of which
to pay would not have a Material Adverse Effect, and
(iii) does not have any tax deficiency or claims outstanding
or assessed or, to the Company’s Knowledge, proposed against
it which would have a Material Adverse Effect. 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 and
its Subsidiaries know of no basis for any such claim. The Company
is not operated in such a manner as to qualify as a passive foreign
investment company, as defined in Section 1297 of the U.S.
Internal Revenue Code of 1986, as amended.
Section 5.26.
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 be unable to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material
Adverse Effect.
Section 5.27.
U.S. Real Property Holding Corporation
. Neither the Company nor any of
its Subsidiaries is, or has ever been, and so long as any of the
Securities are held by the Investor, shall become a U.S. real
property holding corporation within the meaning of Section 897
of the Code.
Section 5.28.
Exemption from Registration; Valid Issuances
. Subject to, and in reliance on,
the representations, warranties and covenants made herein by the
Investor, the offer and sale of the Securities in accordance with
the terms and conditions of this Agreement is exempt from the
registration requirements of the Securities Act pursuant to
Section 4(2) and Regulation D; provided, however, that at
the request of and with the express agreement of the Investor, the
Shares will be delivered to the Investor via book entry through DTC
and will not bear legends noting restrictions as to resale of such
securities under federal or state securities laws, nor will any
such securities be subject to stop transfer instructions. Neither
the offer or sale of the Securities pursuant to, nor the
Company’s performance of its obligations under, the
Transaction Documents to which it is a party shall (i) result
in the creation or imposition of any liens, charges, claims or
other encumbrances upon the Securities, or (ii) entitle the
holders of any outstanding shares of capital stock of the Company
to preemptive or other rights to subscribe to or acquire the shares
of Common Stock or other securities of the Company.
Section 5.29.
No General Solicitation or Advertising
. Neither the Company, nor any of
its Subsidiaries or Affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities.
23
Section 5.30.
No Integrated Offering . None of the Company, its Subsidiaries or any
of their Affiliates, nor any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the issuance of any of the Securities
under the Securities Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to
require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading
Market. None of the Company, its Subsidiaries, their
Affiliates nor any Person acting on their behalf will take any
action or steps referred to in the preceding sentence that would
require registration of the issuance of any of the Securities under
the Securities Act or cause the offering of any of the Securities
to be integrated with other offerings.
Section 5.31.
Dilutive Effect .
The Company is aware and acknowledges that issuance of the
Securities could cause dilution to existing stockholders and could
significantly increase the outstanding number of shares of Common
Stock.
Section 5.32.
Manipulation of Price . Neither the Company nor any of its officers,
directors or Affiliates has, and, to the Knowledge of the Company,
no Person acting on their behalf has, (i) taken, directly or
indirectly, any action designed or intended to cause or to result
in the stabilization or manipulation of the price of any security
of the Company, or which caused or resulted in, or which would in
the future reasonably be expected to cause or result in, the
stabilization or manipulation of the price of any security of the
Company, in each case to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities, or
(iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company,
other than, in the case of clauses (ii) and (iii),
compensation paid to Reedland on the Closing Date in connection
with the placement of the Securities pursuant to the Placement
Agent Engagement Letter. Except as customary and required in
connection with an Acceptable Transaction, neither the Company nor
any of its officers, directors or Affiliates will during the term
of this Agreement, and, to the Knowledge of the Company, no Person
acting on their behalf will during the term of this Agreement, take
any of the actions referred to in clauses (i) through
(iii) of the immediately preceding sentence, other than, in
the case of clauses (ii) and (iii), compensation paid to
Reedland in connection with the settlement of each Fixed Request
pursuant to the Placement Agent Engagement Letter.
Section 5.33.
Securities Act .
The Company has complied and shall comply with all applicable
federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder, including, without
limitation, the applicable requirements of the Securities Act.
Without limiting the generality of the foregoing, the Company
satisfies, and the Registration Statement upon filing with the
Commission and at the time it is declared effective by the
Commission shall satisfy, all of the requirements of the Securities
Act to register the resale of the Registrable Securities by the
Investor in accordance with the Registration Rights Agreement on a
delayed or continuous basis under Rule 415 under the
Securities Act at then-prevailing market prices, and not fixed
prices. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i).
24
Section 5.34.
Listing and Maintenance Requirements . The Company’s Common Stock is
registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or
which to its Knowledge is likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act, nor
has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not,
in the 12 months preceding the Closing Date, received notice from
any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with
the listing or maintenance requirements of such Trading Market. The
Company currently is, and has no reason to believe that it will not
in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
Section 5.35.
Application of Takeover Protections . The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s Charter
or the laws of its state of incorporation that is or could become
applicable to the Investor as a result of the Investor and the
Company fulfilling their respective obligations or exercising their
respective rights under the Transaction Documents (as applicable),
including, without limitation, as a result of the Company’s
issuance of the Securities and the Investor’s ownership of
the Securities.
Section 5.36.
Acknowledgement Regarding Investor’s Acquisition of
Securities . The
Company acknowledges and agrees that the Investor is acting solely
in the capacity of an arm’s length purchaser with respect to
this Agreement and the transactions contemplated by the Transaction
Documents. The Company further acknowledges that the Investor is
not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the
transactions contemplated by the Transaction Documents, and any
advice given by the Investor or any of its representatives or
agents in connection therewith is merely incidental to the
Investor’s acquisition of the Securities. The Company further
represents to the Investor that the Company’s decision to
enter into the Transaction Documents to which it is a party has
been based solely on the independent evaluation of the transactions
contemplated thereby by the Company and its representatives. The
Company acknowledges and agrees that the Investor has not made and
does not make any representations or warranties with respect to the
transactions contemplated by the Transaction Documents other than
those specifically set forth in Article IV of this
Agreement.
ARTICLE VI
ADDITIONAL
COVENANTS
The Company covenants with the
Investor, and the Investor covenants with the Company, as follows,
which covenants of one party are for the benefit of the other
party, during the Investment Period:
Section 6.1.
Securities Compliance . The Company shall notify the Commission and
the Trading Market, if and as applicable, in accordance with their
respective rules and regulations, of the transactions
contemplated by the Transaction Documents, and shall take all
necessary action, undertake all proceedings and obtain all
registrations, permits, consents and
25
approvals for the legal and valid
issuance of the Securities to the Investor in accordance with the
terms of the Transaction Documents, as applicable.
Section 6.2.
Reservation of Common Stock . The Company has available and the Company
shall reserve and keep available at all times, free of preemptive
and other similar rights of stockholders, the requisite aggregate
number of authorized but unissued shares of Common Stock to enable
the Company to timely effect the issuance, sale and delivery in
full to the Investor of all Shares to be issued and delivered in
respect of all Fixed Requests under this Agreement, in any case
prior to the issuance to the Investor of such Shares. The number of
shares of Common Stock so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be
reduced by the number of shares of Common Stock actually delivered
pursuant to this Agreement.
Section 6.3.
Registration and Listing . The Company shall take all action
necessary to cause the Common Stock to continue to be registered as
a class of securities under Sections 12(b) or 12(g) of
the Exchange Act, shall comply with its reporting and filing
obligations under the Exchange Act, and shall not take any action
or file any document (whether or not permitted by the Securities
Act or the Exchange Act) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted
herein. The Company shall take all action necessary to continue the
listing and trading of its Common Stock and the listing of the
Commitment Shares and the Shares acquired or purchased by the
Investor hereunder on the Trading Market (including, without
limitation, maintaining sufficient tangible net assets), and shall
comply with the Company’s reporting, filing and other
obligations under the bylaws, listed securities maintenance
standards and other rules and regulations of the FINRA and the
Trading Market. The Company shall not take any action which could
be reasonably expected to result in the delisting or suspension of
the Common Stock on the Trading Market.
Section 6.4.
Compliance with Laws .
(i)
The Company shall comply, and cause each Subsidiary to comply,
(a) with all laws, rules, regulations and orders applicable to
the business and operations of the Company and its Subsidiaries,
except as would not have a Material Adverse Effect and
(b) with all applicable provisions of the Securities Act and
the Exchange Act and the rules and regulations of the FINRA
and the Trading Market.
(ii)
The Investor shall comply with all laws, rules, regulations and
orders applicable to the performance by it of its obligations under
this Agreement and its investment in the Securities, except as
would not, individually or in the aggregate, prohibit or otherwise
interfere with the ability of the Investor to enter into and
perform its obligations under this Agreement in any material
respect. Without limiting the foregoing, the Investor shall comply
with all applicable provisions of the Securities Act and the
Exchange Act.
26
Section 6.5.
Keeping of Records and Books of Account; Foreign Corrupt
Practices Act .
(i)
The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall be
made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Company and its Subsidiaries, and in
which, for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made. The
Company shall maintain a system of internal accounting controls
that (a) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (b) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(c) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the
Company’s financial statements.
(ii)
Neither the Company, nor any of its Subsidiaries, nor to the
Knowledge of the Company, any of their respective directors,
officers, agents, employees or any other persons acting on their
behalf shall, in connection with the operation of the
Company’s and its Subsidiaries’ respective businesses,
(a) use any corporate funds for unlawful contributions,
payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government
officials, candidates or members of political parties or
organizations, (b) pay, accept or receive any unlawful
contributions, payments, expenditures or gifts, or (c) violate
or operate in noncompliance with any export restrictions,
anti-boycott regulations, embargo regulations or other applicable
domestic or foreign laws and regulations.
(iii)
The Investor shall have the right, from time to time following the
Closing Date, to perform due diligence on the Company as it may
deem appropriate in its sole discretion. Subject to the
requirements of Section 6.16 of this Agreement, from time to
time from and after the Closing Date, the Company shall make
available for inspection and review by the Investor, customary
documentation allowing the Investor and/or its appointed counsel or
advisors to conduct due diligence; provided , however
, that after the Closing Date, the Investor’s continued due
diligence shall not be a condition to the issuance of any Fixed
Request Notice or the settlement of any Fixed Request.
Section 6.6.
Limitations on Holdings and Issuances
. The Company shall not be
obligated to issue and the Investor shall not be obligated to
purchase any shares of Common Stock which would cause the aggregate
number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder) by the Investor and its
Affiliates to exceed the Ownership Limitation. The parties hereto
hereby acknowledge and agree that the provisions of this
Section 6.6 shall not be amended or waived under any
circumstances.
Section 6.7.
Other Agreements and Alternate Transactions
.
(i)
The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction in or
of which the terms thereof would restrict, materially delay,
conflict with or impair the ability or right of the Company
to
27
perform its obligations under the
Transaction Documents to which it is a party, including, without
limitation, the obligation of the Company to deliver the Commitment
Shares to the Investor not later than 4:00 p.m. (New York
time) on the second Trading Day immediately following the Closing
Date and to deliver the Shares to the Investor in respect of a
Fixed Request on the applicable Settlement Date.
(ii)
The Company shall notify the investor promptly (but in no event
later than 48 hours) if it enters into any agreement, plan,
arrangement or transaction with a third party, the principal
purpose of which is to implement, effect or consummate during a
Pricing Period an Alternate Transaction that does not constitute an
Acceptable Transaction (an “ Alternate Transaction
Notice ”); provided , however , that
the Company shall notify the Investor promptly (but in no event
later than 24 hours) (an “ Aggregation Notice
”) if it enters into any agreement, plan, arrangement or
transaction with a third party, the principal purpose of which is
to implement, effect or consummate at any time during the term of
this Agreement an Alternate Transaction that the Company reasonably
believes, upon advice of legal counsel, may be aggregated with the
transactions contemplated by the Transaction Documents for purposes
of determining whether approval of the Company’s stockholders
is required under any bylaw, listed securities maintenance
standards or other rules of the Trading Market and, if
required under applicable law, including, without limitation,
Regulation FD promulgated by the Commission, or under the
applicable rules and regulations of the Trading Market, the
Company shall simultaneously publicly disclose such information in
accordance with Regulation FD and the applicable rules and
regulations of the Trading Market. For purposes of this
Section 6.7(ii), any press release issued by, or Commission
Document filed by, the Company shall constitute sufficient notice,
provided that it is issued or filed, as the case may be, within the
time requirements set forth in the first sentence of this
Section 6.7(ii) for an Alternate Transaction Notice or an
Aggregation Notice, as applicable. For greater certainty, the
entry by the Company into any agreement, plan, arrangement or
transaction with a third party to implement, effect or consummate
an Alternate Transaction (whether or not constituting an Acceptable
Transaction) outside of a Pricing Period shall not trigger any
requirement for the Company to deliver an Alternate Transaction
Notice (it being acknowledged and agreed that nothing contained in
this sentence shall limit or modify in any respect the
Company’s obligation to deliver an Aggregation Notice to the
extent required by the proviso to the first sentence of this
Section 6.7(ii)). During any Pricing Period with respect to
which the Company is required to provide an Alternate Transaction
Notice pursuant to the first sentence of this Section 6.7(ii),
the Investor shall purchase the shares subject to the applicable
Fixed Request at the lower of (x) the price therefor in
accordance with the terms of this Agreement or (y) the third
party’s per share purchase price (or exercise or conversion
price, as the case may be) in connection with the Alternate
Transaction, net of such third party’s discounts, Warrant
Value and fees.
(iii)
For all purposes of this Agreement, an “ Alternate
Transaction ” shall mean (x) the issuance of
Common Stock for a purchase price less than, or the issuance of
securities convertible into or exchangeable for Common Stock at an
exercise or conversion price (as the case may be) less than, the
then Current Market Price of the Common Stock (including, without
limitation, pursuant to any “equity line” or other
financing that is substantially similar to the financing provided
for under this Agreement, or pursuant to any other transaction in
which the purchase, conversion or exchange price for such Common
Stock is determined using a floating discount or other
post-issuance adjustable discount to the then Current Market
Price), in
28
each case, after all fees,
discounts, Warrant Value and commissions associated with the
transaction (a “ Below Market Offering
”); (y) the implementation by the Company of any
mechanism in respect of any securities convertible into or
exchangeable for Common Stock for the reset of the purchase price
of the Common Stock to below the then Current Market Price of the
Common Stock (including, without limitation, any antidilution or
similar adjustment provisions in respect of any Company securities,
but specifically excluding customary antidilution adjustments for
stock splits, stock dividends, stock combinations,
recapitalizations, reclassifications and similar events); or
(z) the issuance of options, warrants or similar rights of
subscription or the issuance of convertible equity or debt
securities, in each case not constituting an Acceptable
Transaction. For all purposes of this Agreement, an “
Acceptable Transaction ” shall mean the
issuance by the Company of: (1) debt securities or any class
or series of preferred stock of the Company, in each case that are
not convertible into or exchangeable for Common Stock or securities
convertible into or exchangeable for Common Stock; (2) shares
of Common Stock or securities convertible into or exchangeable for
Common Stock other than in connection with a Below Market Offering,
and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; (3) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in
connection with an underwritten public offering of equity
securities of the Company or a registered direct public offering of
equity securities of the Company, in each case where the price per
share of such Common Stock (or the conversion or exercise price of
such securities, as applicable) is fixed concurrently with the
execution of definitive documentation relating to such offering,
and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; (4) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in
connection with awards under the Company’s benefit and equity
plans and arrangements or shareholder rights plan (as applicable),
and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; (5) shares of Common Stock
issuable upon the conversion or exchange of equity awards or
convertible or exchangeable securities outstanding as of the
Closing Date; (6) shares of Common Stock in connection with
stock splits, stock dividends, stock combinations,
recapitalizations, reclassifications and similar events;
(7) shares of Common Stock or securities convertible into or
exchangeable for Common Stock issued in connection with the
acquisition, license or sale of one or more other companies,
equipment, technologies, other assets or lines of business, and the
issuance of shares of Common Stock upon the conversion, exercise or
exchange thereof; (8) shares of Common Stock or securities
convertible into or exchangeable for Common Stock or similar rights
to subscribe for the purchase of shares of Common Stock in
connection with technology sharing, collaboration, partnering,
licensing, research and joint development agreements (or amendments
thereto) with third parties, and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof;
(9) shares of Common Stock or securities convertible into or
exchangeable for Common Stock to employees, consultants and/or
advisors as consideration for services rendered or to be rendered,
and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; and (10) shares of Common Stock
or securities convertible into or exchangeable for Common Stock
issued in connection with capital or equipment financings and/or
real property lease arrangements, and the issuance of shares of
Common Stock upon the conversion, exercise or exchange
thereof.
Section 6.8.
Corporate Existence . The Company shall take all steps
necessary to preserve and continue the corporate existence of the
Company; provided , however , that, except
29
as provided in Section 6.9,
nothing in this Agreement shall be deemed to prohibit the Company
from engaging in any Fundamental Transaction with another
Person.
Section 6.9.
Fundamental Transaction . If a Fixed Request Notice has been delivered
to the Investor and the transactions contemplated therein have not
yet been fully settled in accordance with the terms and conditions
of this Agreement, the Company shall not effect any Fundamental
Transaction until the expiration of five Trading Days following the
last Settlement Date with respect to such Fixed Request
Notice.
Section 6.10.
Delivery of Registration Statement and Prospectus; Subsequent
Changes . In
accordance with the Registration Rights Agreement, the Company
shall deliver or make available to the Investor and its counsel,
without charge, an electronic copy of the Registration Statement,
the Prospectus and all amendments and supplements to the
Registration Statement or Prospectus that are filed with the
Commission during any period in which a Prospectus (or in lieu
thereof, the notice referred to in Rule 173(a) under the
Securities Act) is required by the Securities Act to be delivered
in connection with resales of the Registrable Securities, in each
case as soon as reasonably practicable after the filing thereof
with the Commission. At or before 8:30 a.m., New York City
time, on each Settlement Date, the Company shall file with the
Commission a Prospectus Supplement pursuant to
Rule 424(b) under the Securities Act (whether or not such
a prospectus supplement is technically required by such rule) with
respect to the applicable Fixed Request disclosing the total Fixed
Amount Requested, the number of Shares to be issued and sold to the
Investor on such Settlement Date, the total purchase price
therefor, the applicable Discount Price and the net proceeds to be
received by the Company therefrom. The Company shall provide the
Investor a reasonable opportunity to comment on a draft of each
such Prospectus Supplement, shall give due consideration to all
such comments and shall deliver or make available to the Investor,
without charge, an electronic copy of the Prospectus on each
applicable Settlement Date. The Company consents to the use of the
Prospectus (and of any Prospectus Supplement thereto) in accordance
with the provisions of the Securities Act and with the securities
or “blue sky” laws of the jurisdictions in which the
Registrable Securities may be sold by the Investor, in connection
with the resale of the Registrable Securities and for such period
of time thereafter as the Prospectus (or in lieu thereof, the
notice referred to in Rule 173(a) under the Securities
Act) is required by the Securities Act to be delivered in
connection with resales of the Registrable Securities. If during
such period of time any event shall occur that in the reasonable
judgment of the Company and its counsel is required to be set forth
in the Registration Statement, the Prospectus or any Prospectus
Supplement or should be set forth therein in order to make the
statements made therein (in the case of the Prospectus or any
Prospectus Supplement, in light of the circumstances under which
they were made) not misleading, or if it is necessary to amend the
Registration Statement or supplement or amend the Prospectus or any
Prospectus Supplement to comply with the Securities Act or any
other applicable law or regulation, the Company shall forthwith
(i) notify the Investor to suspend the resale of Registrable
Securities during such period and (ii) prepare and file with
the Commission an appropriate amendment to the Registration
Statement or Prospectus Supplement to the Prospectus, and shall
expeditiously furnish or make available to the Investor an
electronic copy thereof, so as to correct such statement or
omission or effect such compliance.
30
Section 6.11.
Amendments to the Registration
Statement; Prospectus Supplements . Except as provided in this Agreement and other
than periodic reports required to be filed pursuant to the Exchange
Act, the Company shall not file with the Commission any amendment
to the Registration Statement that relates to the Investor, the
Transaction Documents or the transactions contemplated thereby or
file with the Commission any Prospectus Supplement that relates to
the Investor, the Transaction Documents or the transactions
contemplated thereby with respect to which (a) the Investor shall
not previously have been advised, (b) the Company shall not have
given due consideration to any comments thereon received from the
Investor or its counsel, or (c) the Investor shall reasonably
object after being so advised, unless it is necessary to amend the
Registration Statement or make any supplement to the Prospectus to
comply with the Securities Act or any other applicable law or
regulation, in which case the Company shall immediately so inform
the Investor, the Investor shall be provided with a reasonable
opportunity to review and comment upon any disclosure relating to
the Investor and the Company shall expeditiously furnish to the
Investor an electronic copy thereof. In addition, for so long as,
in the reasonable opinion of counsel for the Investor, the
Prospectus (or in lieu thereof, the notice referred to in Rule
173(a) under the Securities Act) is required to be delivered in
connection with any sales of Registrable Securities by the
Investor, the Company shall not file any Prospectus Supplement
without delivering or making available a copy of such Prospectus
Supplement to the Investor promptly.
Section 6.12.
Stop Orders
. The Company shall
immediately notify the Investor, and confirm in writing, upon its
becoming aware of the occurrence of any of the following events in
respect of the Registration Statement or related Prospectus or
Prospectus Supplement relating to an offering of Registrable
Securities: (i) receipt of any request by the Commission or any
other federal or state governmental authority for any additional
information relating to the Registration Statement, the Prospectus
or any Prospectus Supplement, or for any amendment of or supplement
to the Registration Statement, the Prospectus, or any Prospectus
Supplement; (ii) the issuance by the Commission or any other
federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any
Prospectus Supplement, or of the suspension of qualification or
exemption from qualification of the Securities for offering or sale
in any jurisdiction, or the initiation or contemplated initiation
of
