SECURITIES PURCHASE
AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT
(this “
Agreement ”) is dated October 14, 2009,
between Syntroleum Corporation, a Delaware corporation (the “
Company ”) and, Fletcher International, Ltd., a
company domiciled in Bermuda (the “ Purchaser
”).
WHEREAS , the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company,
authorized but unissued shares of Common Stock upon the terms and
subject to the conditions set forth in this Agreement;
and
WHEREAS , the Company and the Purchaser have executed
and delivered that certain Settlement Agreement of even date
herewith (the “ Settlement Agreement ”),
which Settlement Agreement releases all obligations and claims
evidenced by, under, relating to or arising out of that certain
Agreement dated as of November 18, 2007 by and between the
Company and the Purchaser, including all amendments and supplements
thereto, and all related documents, certificates and instruments
(collectively, the “ Prior Agreement ”),
and releases the Company, the Purchaser and their employees,
Affiliates, representatives, stockholders, directors and agents of
all obligations, action, claims, causes of action, losses,
controversies, agreements and demands arising thereunder, including
without limitation all claims arising out of Civil Action
No. 08-cv-5851, Fletcher International, Ltd. vs. Syntroleum
Corporation , in the United States District Court for the
Southern District of New York.
NOW, THEREFORE, IN CONSIDERATION
of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company
and the Purchaser agree as follows:
1.1 Definitions . In addition to the
terms defined elsewhere in this Agreement, for all purposes of this
Agreement, the following terms have the meanings set forth in this
Section 1.1:
“ Acquiring Person ”
means, in connection with any Change of Control, (i) the
continuing or surviving Person of a consolidation or merger with
the Company (if other than the Company), (ii) the transferee
of all or substantially all of the properties or assets of the
Company, (iii) the corporation consolidating with or merging
into the Company in a consolidation or merger in connection with
which the Common Stock is changed into or exchanged for stock or
other securities of any other Person or cash or any other property,
(iv) the entity or group acting in concert acquiring or
possessing the power to cast the majority of the eligible votes at
a meeting of the Company’s stockholders at which directors
are elected, (v) in the case of a capital reorganization or
reclassification of the Common Stock pursuant to which the
shareholders of the Company immediately prior to such
reorganization or reclassification do not beneficially own at least
fifty percent (50%) of each class of voting securities of the
Company outstanding immediately following such reorganization or
reclassification, the Company, or (vi) if the holders of
Common Stock are to receive securities of a Person that controls
the Person that would be otherwise treated as the Acquiring Person
directly or indirectly through one or more intermediaries, then
such controlling Person shall be treated as the Acquiring Person
for the other provisions of this Agreement.
“ Affiliate ” means
any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under
Rule 405 under the Securities Act. With respect to the
Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as the
Purchaser will be deemed to be an Affiliate of the
Purchaser.
“ Board of Directors ”
means the board of directors of the Company.
“ Business Day ” means
any day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York or Nasdaq is
closed.
“ Change of Control ”
means:
(i) an acquisition of the Company by means
of merger or other form of corporate reorganization in which
outstanding shares of the Company are exchanged for securities or
other consideration issued, or caused to be issued, by the
Acquiring Person or its parent, subsidiary or affiliate (each as
defined in Rule 12b-2 of the Exchange Act),
(ii) a sale of all or substantially all of
the assets of the Company (on a consolidated basis) in a single
transaction or series of related transactions,
(iii) any tender offer, exchange offer,
stock purchase or other transaction or series of related
transactions by the Company in which the power to cast the majority
of the eligible votes at a meeting of the Company’s
stockholders at which directors are elected is transferred to a
single entity or group acting in concert, or
(iv) a capital reorganization or
reclassification of the Common Stock pursuant to which the
shareholders of the Company immediately prior to such
reorganization or reclassification do not beneficially own at least
fifty percent (50%) of each class of voting securities of the
Company outstanding immediately following such reorganization or
reclassification. Notwithstanding anything contained herein to the
contrary, the change in the state of incorporation of the Company
shall not in and of itself constitute a Change of
Control.
“ Code ” means the
Internal Revenue Code of 1986, as amended, and the treasury
regulations thereunder.
“ Common Stock ” means
common stock of the Company, $0.01 par value per share.
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“ Exchange Act ” means
the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“ Existing Registration
Statement ” means that registration statement on Form
S-3 filed March 12, 2009 by the Company with the SEC, as
amended (Registration No. 333-157879), along with any
amendments and supplements thereto and any replacement registration
statement with respect thereto.
“ Initial Closing Shares
” means the shares of Common Stock issued to the Purchaser in
the Initial Closing pursuant to this Agreement and upon the
exercise of the Initial Closing Warrant.
“ Material Adverse Effect
” means any material adverse effect with respect to
(A) the business, properties, assets, operations, results of
operations, revenues, or condition, financial or otherwise, of the
Company and its subsidiaries taken as a whole, (B) the
legality, validity or enforceability of the Agreement and the
Warrants, or the Existing Registration Statement or Prospectus, or
(C) the Company’s ability to perform fully on a timely
basis its obligations under the Agreement or the
Warrants.
“ Nasdaq ” shall mean
the Nasdaq Capital Market, but if the Nasdaq Capital Market is not
then the principal U.S. trading market for the Common Stock, then
“Nasdaq” shall be deemed to mean the principal U.S.
trading market on which the Common Stock, or such other applicable
common stock, is then traded.
“ Person ” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“ Securities Act ”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“ Shares ” means the
shares of Common Stock issued or issuable to the Purchaser pursuant
to this Agreement and the Warrants.
“ Subsequent Closing Shares
” means the shares of Common Stock issued to the Purchaser in
a Subsequent Closing pursuant to this Agreement and upon the
exercise of a Subsequent Closing Warrant.
“ Tax Affiliate ”
means any Person in which the Purchaser, directly or indirectly
through one or more intermediaries, owns any equity
interest.
“
Tax Covenants ” means Sections 4.2(a),
(b), (c) and (d) of this Agreement.
“ Transaction Documents
” means this Agreement, the Warrants, and any other documents
or agreements executed and delivered in connection with the
transactions contemplated hereunder.
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ARTICLE II.
PURCHASE AND SALE
(a) Initial Closing . Subject to
the terms and conditions set forth in this Agreement, the initial
purchase and sale of shares of Common Stock (the “
Initial Closing ”) shall take place at 9:30
a.m., New York City time, on October 14, 2009 unless the
Purchaser and the Company shall mutually agree on a different date
and time (the “ Initial Closing Date ”).
At the Initial Closing, the Company shall issue and the Purchaser
shall acquire from the Company:
(i) 1,513,833 shares of Common Stock at a
price per share equal to $2.6423 (“ Per Share Purchase
Price ”). The purchase price shall be paid at the
Initial Closing by wire transfer as directed by the Company;
and
(ii) a warrant in the form attached hereto
as Annex A (the “ Initial Closing
Warrant ”). The Warrant delivered at the Initial
Closing shall cover 1,892,291 shares of Common Stock and shall be
exercisable at a per share price of $3.3029.
(b) Subsequent Closing . Until 6:00
p.m., New York City time on June 30, 2010 (the “
Expiration Date ”), the Purchaser shall have
the right to purchase at the Per Share Purchase Price (subject to
adjustment pursuant to Sections 2.1(d) and 4.5(b)(iii)(C)
hereof) up to a maximum of $8,000,000.00 of Common Stock from the
Company at up to two closings of a minimum of $4,000,000.00 for the
first such closing and up to the remainder of the $8,000,000.00, if
any, at the second such closing (each a “ Subsequent
Closing ” and together with the Initial Closing, each
a “ Closing ”).
(i) To exercise the right to purchase
shares of Common Stock in a Subsequent Closing, the Purchaser shall
deliver a notice in the form attached hereto as Annex B (the
“ Purchaser Notice ”) to the Company at
least three (3) Business Days prior to the Expiration Date;
provided , however , that the Purchaser shall not be
entitled to deliver a Purchaser Notice (A) if the Purchaser
shall have breached any of the Tax Covenants; (B) if
(1) the Purchaser shall have materially breached any of its
obligations (other than the Tax Covenants) under this Agreement or
the Warrants (as defined below), (2) such breach caused
material damage or loss to the Company, and (3) an investment
by the Purchaser at a Subsequent Closing would cause the Company
additional material damage or loss; or (C) if the sale of the
Subsequent Closing Shares to the Purchaser would result in the
breach of Section 4.2(a) of this Agreement (each of the
conditions specified in (A), (B) and (C) being referred
to herein as the “ Non-Exercise Conditions
”).
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(ii) Subject to (i) above, the date of
a Subsequent Closing shall be set forth in the Purchaser Notice
delivered in connection therewith; provided , however
, that such date shall be no less than three (3) Business Days
after the Company’s receipt of the Purchaser Notice and no
later than the Expiration Date.
(iii) At each Subsequent Closing, Purchaser
shall deliver to the Company, via wire transfer, immediately
available funds equal to the aggregate purchase price for the
Subsequent Closing Shares to be purchased at such Subsequent
Closing, and the Company shall deliver to each Purchaser the
Subsequent Closing Shares purchased at such Subsequent Closing and
a Warrant in the form attached hereto as Annex A (a “
Subsequent Closing Warrant, ” and together with
the Initial Closing Warrant, the “ Warrants
”) evidencing rights to purchase from the Company, subject to
the terms and conditions set forth in such Subsequent Closing
Warrant and this Agreement, that number of shares of Common Stock
as is equal to 125% of the number of shares of Common Stock issued
to the Purchaser at such Subsequent Closing at an exercise price of
125% of the Per Share Purchase Price.
(c) Notwithstanding anything to the
contrary in Section 2.1(b) or elsewhere in this Agreement, in
no event (including the occurrence of a Non-Exercise Condition)
shall the Expiration Date be extended.
(d) For the purpose of Section 2.1(b),
in case the Company may effect any subdivision or combination of
the issued Common Stock, whether by reason of any dividend or
distribution of units, split, recapitalization, reorganization,
spin-off, combination or other similar change, then (i) in the
case of any such distribution, immediately after the close of
business on the record date for the determination of holders of any
class of securities entitled to receive such distribution, or
(ii) in the case of any such subdivision or combination, at
the close of business on the Business Day immediately prior to the
Business Day upon which such Company action becomes effective, the
Per Share Purchase Price shall be proportionately
changed.
(a) The obligations of the Company with
respect to the Initial Closing and each Subsequent Closing are
subject to the performance by the Purchaser of its obligations
hereunder and the payment of the applicable price with respect to
the shares of Common Stock purchased at such Closing and to the
satisfaction of the following additional conditions precedent (in
each case, unless waived in writing by the Company):
(i) As of each applicable Closing Date, the
representations and warranties made by the Purchaser in this
Agreement shall be true and correct, except those representations
and warranties which address matters only as of a particular date,
which shall be true and correct as of such date;
(ii) The Purchaser shall be in compliance
in all material respects with all of the covenants and agreements
in this Agreement;
(iii) On the applicable Closing Date, the
Company shall have received from the Purchaser a certificate of an
appropriate officer of the Purchaser dated as of such Closing Date
certifying as to the matters set forth in the foregoing clauses
(i) and (ii);
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(iv) At the Initial Closing the Purchaser
shall have executed and delivered the Settlement Agreement and such
agreement shall be in full force and effect; and
(v) With respect to each Subsequent Closing
none of the Non-Exercise Conditions shall exist at the time of such
Subsequent Closing.
(b) The obligations of the Purchaser with
respect to the Initial Closing and each Subsequent Closing
hereunder are subject to the performance by the Company of its
obligations hereunder and to the satisfaction of the following
additional conditions precedent (in each case, unless waived in
writing by the Purchaser):
(i) As of each applicable Closing Date, the
representations and warranties made by the Company in this
Agreement shall be true and correct, except those representations
and warranties which address matters only as of a particular date,
which shall be true and correct as of such date;
(ii) The Company shall be in compliance in
all material respects with all of the covenants and agreements in
this Agreement;
(iii) On the applicable Closing Date, the
Purchaser shall have received a certificate of the Chief Executive
Officer and the Principal Financial Officer of the Company dated as
of such Closing Date stating as to the matters set forth in the
foregoing clauses (i) through (ii);
(iv) At the Initial Closing the Company
shall have executed and delivered the Settlement Agreement and such
agreement shall be in full force and effect; and
(v) On the applicable Closing Date, the
Existing Registration Statement shall be effective to cover all of
the Shares and the Warrants issuable hereunder and the Shares
issuable upon exercise of the Warrants.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the
Company . The Company hereby makes the following
representations and warranties to the Purchaser on each Closing
Date:
(a) Offering . The Company has
authorized the sale and issuance of all shares of Common Stock, the
Warrants issuable under this Agreement and the shares of Common
Stock issuable upon exercise of the Warrants (the “
Offering ”). The Offering, and any subsequent
issuance of shares of Common Stock upon exercise of the Warrants
will, subject to compliance by the Purchaser with the applicable
representations and warranties contained in Section 3.2 hereof
and with the applicable covenants and agreements contained in
Article IV hereof, be registered under the Securities
Act.
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(b) Incorporation . The Company has
been duly incorporated and is validly existing in good standing
under the laws of Delaware or, after the relevant Closing Date, if
another entity has succeeded the Company in accordance with the
terms hereof, under the laws of its jurisdiction of
incorporation.
(c) Authorization . The execution,
delivery and performance of this Agreement and the Warrants
(including the authorization, sale, issuance and delivery of the
shares of Common Stock issuable hereunder and thereunder) have been
duly authorized by all requisite corporate action and no further
consent or authorization of the Company, its Board of Directors or
its stockholders is required.
(d) Execution and Delivery . This
Agreement and the Warrants have been duly executed and delivered by
the Company and are valid and binding agreements enforceable
against the Company in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors’ rights generally and to general principles of
equity. The issuance of the shares of Common Stock issuable
hereunder and under the Warrants is not and will not be subject to
any preemptive right or rights of first refusal that have not been
properly waived or complied with and will not trigger any
antidilution or similar rights that have not been properly
waived.
(e) Power and Authority; Qualification
to Conduct Business . The Company has full corporate power and
authority necessary to (i) own and operate its properties and
assets, (ii) execute and deliver this Agreement and the Warrants,
(iii) perform its obligations hereunder and under the Warrants
(including, but not limited to, the issuance of the shares of
Common Stock issuable hereunder and under the Warrants) and
(iv) carry on its business as presently conducted and as
presently proposed to be conducted. The Company and its
subsidiaries are duly qualified and are authorized to do business
and are in good standing as foreign corporations in all
jurisdictions in which the nature of their activities and of their
properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so
would not, individually or in the aggregate, be reasonably expected
to have a Material Adverse Effect.
(f) Consents . No consent,
approval, authorization or order of any court, governmental agency
or other body is required for execution and delivery by the Company
of this Agreement or the Warrants or the performance by the Company
of any of its obligations hereunder or under the
Warrants.
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(g) Conflicts . Neither the
execution and delivery by the Company of this Agreement nor the
performance by the Company of any of its obligations hereunder and
under the Warrants:
(i) violates, conflicts with, results in a
breach of, or constitutes a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) or creates any rights in respect of
any Person under (A) the certificates of incorporation or
by-laws of the Company or any of its subsidiaries, (B) any
decree, judgment, order, law, treaty, rule, regulation or
determination of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets,
(C) the terms of any bond, debenture, indenture, credit
agreement, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, lease, mortgage,
deed of trust or other instrument to which the Company or any of
its subsidiaries is a party, by which the Company or any of its
subsidiaries is bound, or to which any of the properties or assets
of the Company or any of its subsidiaries is subject, (D) the
terms of any “lock-up” or similar provision of any
underwriting or similar agreement to which the Company or any of
its subsidiaries is a party or (E) a any rule or regulation of
the Financial Industry Regulatory Authority, Inc. (successor entity
to National Association of Securities Dealers, Inc.) (“
FINRA ”) or Nasdaq; or
(ii) results in the creation or imposition
of any lien, charge or encumbrance upon any shares of Common Stock
issuable hereunder or under the Warrants or upon any of the
properties or assets of the Company or any of its
subsidiaries.
(h) Valid Issuance . When issued to
Purchaser against payment therefor, each share of Common Stock
issuable hereunder and each share of Common Stock issuable upon
exercise of the Warrants:
(i) will have been duly and validly
authorized, duly and validly issued, fully paid and
non-assessable;
(ii) will be free and clear of any security
interests, liens, claims or other encumbrances; and
(iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders
of any securities of the Company.
(i) Filings Complete and Accurate in
All Material Respects . Since January 1, 2006, none of the
Company’s filings with the United States Securities and
Exchange Commission (the “ SEC ”) under
the Securities Act or under Section 13 or 15(d) of the
Exchange Act, including the financial statements, schedules,
exhibits and results of the Company’s operations and cash
flow contained therein (each an “ SEC Filing
”), contained, when filed, any untrue statement of a material
fact or omitted to state any material fact necessary in order to
make the statements, in the light of the circumstances under which
they were made, not misleading. As of their respective filing
dates, the SEC Filings complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the SEC promulgated thereunder as in
effect at the time of filing (including as to the reporting and
accounting for stock options, as to internal controls, disclosures
as to off balance sheet arrangements, and disclosures as to
transactions with officers, directors or employees).
(j) No Integrated Offering .
Neither the Company, nor any Person authorized to act on its
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 cause the Offering to be integrated with
prior offerings by the Company for purposes of the Securities Act
or the rules and regulations of FINRA or Nasdaq.
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(k) Capitalization . Immediately
prior to the Initial Closing Date, the authorized capital stock of
the Company consists of 150,000,000 shares of Common Stock, par
value $0.01 per share and 5,000,000 shares of preferred stock, par
value $0.01 per share. As of the Initial Closing Date,
(i) 72,607,956 shares of Common Stock are issued and
outstanding, and 17,768,705 shares of Common Stock are reserved and
subject to issuance upon the exercise of outstanding stock options,
warrants or other convertible rights, (ii) no shares of
preferred stock have been designated, and (iii) no shares of
capital stock are held in the treasury of the Company. All of the
outstanding shares of Common Stock are, and all shares of capital
stock which may be issued pursuant to outstanding stock options,
warrants or other convertible rights will be, when issued and paid
for in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and non-assessable, free of
any preemptive rights in respect thereof and issued in compliance
with all applicable state and federal laws concerning issuance of
securities. As of the Initial Closing Date, except as set forth
above, and except for shares of Common Stock or other securities
issued upon conversion, exchange, exercise or purchase associated
with the securities, options, warrants, rights and other
instruments referenced above, no shares of capital stock or other
voting securities of the Company were outstanding, no equity
equivalents, interests in the ownership or earnings of the Company
or other similar rights were outstanding, and there were no
existing options, warrants, calls, subscriptions or other rights or
agreements or commitments relating to the capital stock of the
Company or any of its subsidiaries or obligating the Company or any
of its subsidiaries to issue, transfer, sell or redeem any shares
of capital stock, or other equity interest in, the Company or any
of its subsidiaries or obligating the Company or any of its
subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement or
commitment.
3.2 Representations and Warranties of the
Purchaser . The Purchaser hereby represents and warrants to the
Company on each Closing Date:
(a) The Purchaser has been duly
incorporated and is validly existing under the laws of Bermuda as
of the date of this Agreement.
(b) The execution, delivery and performance
of this Agreement by the Purchaser have been duly authorized by all
requisite corporate action and no further consent or authorization
of the Purchaser, its Board of Directors or its stockholders is
required. This Agreement has been duly executed and delivered by
the Purchaser and, when duly authorized, executed and delivered by
the Company, will be a valid and binding agreement enforceable
against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’
rights generally and to general principles of equity.
(c) The
Purchaser represents and warrants to the Company that:
(i) As of
any Subsequent Closing, no Non-Exercise Condition has occurred or
exists;
(ii) As of any Subsequent Closing, the
Purchaser shall be in compliance in all material respects with all
of the covenants and agreements in this Agreement;
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(iii) With respect to each Closing, neither
the Purchaser, its Affiliates, nor any Persons acting on the behalf
of or in concert with the Purchaser or its Affiliates has taken,
directly or indirectly, any action designed to cause or to result
in the reduction, stabilization or manipulation of the price of any
shares of Common Stock or other security of the Company or paid any
broker’s fees or similar compensation (for the avoidance of
doubt, excluding any compensation paid to employees or consultants
of the Purchaser or its Affiliates) with respect to the issuance or
sale of the Common Stock or Warrants.
(d) The Purchaser represents and warrants
to the Company that on the date hereof, the date of each Subsequent
Closing and the date of each exercise of Warrants:
(i) The Purchaser and its Tax Affiliates do
not and will not own immediately before and immediately after,
respectively, each such Closing or exercise more than 4.95% of the
shares of Common Stock of the Company outstanding at the time of
such Closing or exercise. For purposes of the foregoing sentence:
(A) ownership of Common Stock shall include any long
derivative or synthetic position or any other stock (as defined in
Temporary Treasury Regulation Section 1.382-2T(f)(18) or any
successor provision) of the Company held by the Purchaser or its
Tax Affiliates; (B) notwithstanding any other provision in
this Agreement (including the foregoing clause (A)), ownership of
Common Stock shall not include any Common Stock which may be
acquired pursuant to this Agreement or by exercise of any Warrant
until such Common Stock is purchased and issued to the Purchaser or
its Tax Affiliates; (C) any short actual, synthetic or
derivative positions held by the Purchaser or its Tax Affiliates
shall not decrease the amount of Common Stock they are treated as
owning, and (D) for purposes of calculating the percentage
ownership interest of the Purchaser and its Tax Affiliates as of a
particular date, the aggregate number of shares of Common Stock
outstanding shall be the number of outstanding shares of Common
Stock of the Company most recently reported prior to such date by
the Company in a filing with the SEC, provided, however,
that if at least twenty (20) Business Days prior to the
effectiveness of the Purchaser’s representation in this
clause (d)(i), the Company informs the Purchaser in writing that it
has redeemed shares of its Common Stock and provides the Purchaser
with the number of outstanding shares of Common Stock following
such redemption which the Purchaser can rely upon for this purpose,
the Purchaser will use such revised number of outstanding shares
instead, unless and until further updated by a subsequent SEC
filing and/or Company notice pursuant to this clause
(d)(i).
(ii) The Purchaser and its Tax Affiliates
have not and will not be required to file either Schedule 13D
or 13G with respect to the capital stock of the Company pursuant to
Regulation 13D or 13G promulgated under the Exchange Act;
and
(iii) The Affidavits (as defined below)
provided previously are true, correct and complete and none of such
Affidavits contains or omits any information that would be
necessary in order for such Affidavits to be not
misleading.
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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 [Intentionally Omitted ]
4.2 Limits
on Shares Issuable and Held .
(a) The Purchaser covenants and agrees with
the Company that neither the Purchaser, nor any of its Tax
Affiliates will at any time, directly, together with or through
Persons who have a formal or informal understanding to make a
coordinated acquisition of stock with the Purchaser or its Tax
Affiliates, acquire, offer to acquire, or agree to acquire, by
purchase or otherwise, any shares of stock (as defined in Temporary
Treasury Regulation Section 1.382-2T(f)(18) or any
successor provision) of the Company, including any Common Stock
acquired hereunder or pursuant to the Warrants, if, as a result of
such acquisition, it would not be able to make the representations
and warranties contained in Section 3.2(d) hereof or issue any
Affidavit described in Section 4.2(d) hereof.
(b) Any transfer of Common Stock or
exercise or transfer of the Warrants that results in a breach of
Section 4.2(a) hereof shall be void ab initio and without
force or effect (a “ Purported Transfer
”). The Purchaser and the Company covenant and agree to take
all steps reasonably practicable to unwind any such transfer so as
to return the transferee and transferor to the position they were
in prior to the Purported Transfer.
(i) If the Purported Transfer is a public
transaction and the Purchaser or a Tax Affiliate is the buyer, then
the Purported Transfer shall be void ab initio with respect to the
Purchaser or Tax Affiliate, and the Purchaser or Tax Affiliate
immediately shall turn over the shares transferred in the Purported
Transfer (the “ Void Shares ”) to the
Company, which shall sell the Void Shares in the open market. If
the proceeds of such sale are more than the amount paid by the
buyer for the Void Shares, the Company shall return to the buyer
only the amount paid by the buyer for the shares and any excess
shall be contributed to the United States Treasury as a charitable
contribution in respect of which no Person shall claim a deduction
for tax purposes. If the Company receives less for the Void Shares
than was paid by the buyer, the Company shall pay to the buyer only
the amount received by the Company for the Void Shares and the
Company shall have no further liability to the Purchaser, the
buyer, if not the Purchaser, or to any other Person.
(ii) If the Purported Transfer is not a
public transaction, the Purchaser shall take all steps reasonably
practicable within its power to cause the transaction to be
rescinded, including reimbursing any party to such transaction for
any loss incurred as a result of such rescission. If the Purchaser
is unable to cause the rescission of the Purported Transfer and the
Purchaser or a Tax Affiliate is the buyer in the Purported
Transfer, the Purported Transfer shall be treated the same as a
public transaction and shall have all of the consequences of a
Purported Transfer that is a public transaction described in the
preceding clause (i).
(c) In connection with any transfer by the
Purchaser or a Tax Affiliate in a non-public transaction, the
Purchaser or Tax Affiliate shall obtain (i) a representation
or warranty from the transferee substantially to the same effect as
the representation and warranty set forth in Section 3.2(d) hereof,
which shall expressly state that it may be relied upon by the
Company and (ii) covenants and affidavits from the transferee
substantially to the same effect as the Tax Covenants and
Affidavits provided for herein, which shall expressly state that
the Company shall be the beneficiary of such covenants.
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(d) Within 90 days after the end of
each fiscal year of the Company, if the Purchaser or a Tax
Affiliate owned any Common Stock during such fiscal year, and at
the time of each Subsequent Closing and exercise or transfer of a
Warrant, the Purchaser (or, in the case of a Warrant transfer, the
transferor and transferee of the Warrant) shall provide the Company
with an affidavit, attesting that at no time during the preceding
fiscal year (in the case of the affidavit after the end of the
fiscal year) or immediately before and immediately after the
Subsequent Closing, transfer of a Warrant or issuance of shares
pursuant to a Warrant (in the case of the Subsequent Closing or
transfer or exercise of a Warrant) was the Purchaser and its Tax
Affiliates (treated in the aggregate) a “5-percent
shareholder” (as the term is defined under Section 382
of the Code treating, for this purpose, the Purchaser and its Tax
Affiliates in the aggregate as one individual (and, separately, in
the case of a transfer of a Warrant, treating the transferee and
its Tax Affiliates in the aggregate as one individual and,
separately, treating the transferor and its Tax Affiliates in the
aggregate as one individual)), in each case, based on the number of
outstanding shares determined in the manner provided in
Section 3.2(d)(i)(D) (an “ Affidavit
”). For the first fiscal year in which the Purchaser and its
Tax Affiliates owned no Common Stock at any time during such fiscal
year, the Purchaser shall so attest in an Affidavit within
90 days after the end of such fiscal year; and for each fiscal
year thereafter, the Purchaser and its Tax Affiliates shall have no
duty to provide an Affidavit, unless and until an Affidavit is
again required by the first sentence of this clause (d). The
attestations of all Affidavits made pursuant to this
Section 4.2(d) shall be made under penalty of
perjury.
(e) The Purchaser shall not be bound by the
terms and provisions of any so-called “poison pill” or
other arrangement intended to protect the unrestricted use of the
Company’s tax net operating loss carryforwards, that are any
more restrictive on the Purchaser than the provisions of this
Agreement. For the avoidance of doubt, this Section 4.2(e)
shall not be construed to apply (i) to any transferee of Common
Stock or Warrants from the Purchaser and (ii) to any Person
other than the Purchaser, including any person to whom Common Stock
held by the Purchaser would be attributed pursuant to
Section 382 of the Code.
(f) In the event that the Purchaser
attempts to acquire Subsequent Closing Shares (including associated
Warrants) or exercise Warrants but is limited by
Section 4.2(a) from doing so, the Purchaser may nonetheless
exercise its right to acquire Subsequent Closing Shares (including
associated Warrants) and/or exercise Warrants at a later date,
subject to the terms and conditions of this Agreement and/or the
Warrants.
(g) Notwithstanding anything in this
Agreement or the Warrants to the contrary, the parties hereby agree
that (i) (A) any deliberate and intentional violation by the
Purchaser of Section 3.2(d) or the Tax Covenants would result in
actual, direct and foreseeable damages to the Company, for which
the Company may seek all available legal and equitable remedies,
provided that conduct shall be treated as “deliberate
and intentional” if such conduct was undertaken without the
exercise of reasonable diligence with respect to such conduct,
provided further, however , that the exercise of reasonable
diligence does not include having to inquire into facts that would
not have been taken into account under Treasury Regulations
Section 1.382-2T in the absence of actual knowledge of such
facts, but (B) that the Company shall be entitled to seek
only specific performance of Section 3.2(d) or
the Tax Covenants (and not a financial remedy) for any other actual
or alleged violation of such provisions, this clause (g)(i)(B)
being intended as an express limitation-of-remedies provision
enforceable by the Purchaser, its Affiliates and
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any Tax
Affiliate; (ii) no repurchase or redemption of shares of
capital stock by the Company shall result in any breach by the
Purchaser, its Affiliates or any Tax Affiliate of this Agreement or
the Warrants, provided , that for purposes of any subsequent
calculation of percentage ownership under this Agreement or the
Warrant, the Purchaser, its Affiliates and its Tax Affiliates take
into account the number of shares of Common Stock outstanding as
provided in Section 3.2(d)(i)(D); (iii) Section 3.2(d)
and the Tax Covenants and related provisions of this Agreement and
the Warrants shall not apply in connection with or following a
Change of Control , provided that such Change of Control
would result in an ownership change (as that term is defined under
Section 382 of the Code) without taking into account any
acquisitions of shares by the Purchaser that would otherwise breach
Section 3.2(d), the Tax Covenants or the related provisions of
this Agreement and the Warrants; and (iv) Section 3.2(d)
and Section 4.2(e) shall cease to apply and the Tax Covenants
shall terminate at such time that both (1) the
Purchaser’s right to purchase Shares pursuant to
Section 2.1(b) and its right to exercise any and all Warrants
have expired, and (2) the Purchaser and the Tax Affiliates no
longer own any Shares acquired pursuant to the terms of this
Agreement or pursuant to the exercise of Warrants.
(h) The total number of shares of Common
Stock that may be issued under this Agreement and the Warrants
shall not exceed a number equal to nineteen and ninety-nine
one-hundredths percent (19.99%) of the outstanding shares of Common
Stock as of the date of this Agreement, as indicated in
Section 3.1(k) hereof.
4.3
Registration Rights .
(a) No later than the Initial Closing Date,
the Company shall, at its own expense, cause all of the Shares
(including the Initial Closing Shares, Subsequent Closing Shares
and Shares issuable upon exercise of the Warrants) and the Warrants
(including the Initial Closing Warrant and all Subsequent Closing
Warrants) to be included on the Existing Registration Statement and
file a Prospectus Supplement thereunder.
(b) The Company will: (i) use its
commercial best efforts to keep the Existing Registration Statement
effective until such time as no additional Shares or Warrants may
be issued pursuant to this Agreement and no additional Shares may
be issued pursuant to the Warrants (such period, the Existing
Registration Statement’s “ Registration
Period ”); (ii) prepare and file with the SEC
such amendments and supplements to the Existing Registration
Statement and the prospectus used in connection with the Existing
Registration Statement (as so amended and supplemented from time to
time, the “ Prospectus ”) as may be
necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Shares by the Purchaser or any of
its Affiliates; (iii) furnish such number of Prospectuses and other
documents incident thereto, including any amendment of or
supplement to the Prospectus, as the Purchaser from time to time
may reasonably request; (iv) cause all Shares to be listed on each
securities exchange and quoted on each quotation service on which
similar securities issued by the Company are then listed or quoted;
and (v) otherwise comply with all applicable rules and
regulations of the SEC, FINRA and Nasdaq.
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(c) Notwithstanding anything else in this
Section 4, if, at any time during which the Shares (including
the Initial Closing Shares, Subsequent Closing Shares and Shares
issuable upon the exercise of the Warrants) and the Warrants
(including the Initial Closing Warrant and all Subsequent Closing
Warrants) may be issued pursuant to the Existing Registration
Statement or a Prospectus is required to be delivered in connection
with the sale of any Shares, the Company determines in good faith
and upon the advice of its outside legal counsel that a development
has occurred or a condition exists as a result of which the
Existing Registration Statement or the Prospectus contains a
material misstatement or omission, or that a material transaction
in which the Company is engaged or proposes to engage would require
an immediate amendment to the Existing Registration Statement, a
supplement to the Prospectus, or a filing under the Exchange Act or
other public disclosure of material information and the disclosure
of such transaction would be premature or injurious to the
consummation of the transaction, the Company will immediately
notify the Purchaser, and any permitted assignee of any Warrant or
additional investment right under Section 2.1(b)(i), thereof by
telephone and in writing. Upon receipt of such notification, all
offers and sales of the Shares pursuant to the Existing
Registration Statement shall be immediately suspended. In such
event, the Company will amend or supplement the Existing
Registration Statement and the Prospectus or make such filings or
public disclosures as promptly as practicable and will take such
other steps as may be required to permit sales of the Shares
thereunder, in accordance with applicable federal and state
securities laws. The Company will promptly notify the Purchaser
after it has determined in good faith that such sales have become
permissible in such manner and will promptly deliver copies of the
Existing Registration Statement and the Prospectus (as so amended
or supplemented, if applicable) to the Purchaser in accordance with
this Section 4.3. Notwithstanding the foregoing,
(i) under no circumstances shall the Company be entitled to
exercise its right to suspend sales of any Shares more than twice
in any twelve (12)-month period, (ii) the period during which
such sales may be suspended (each a “ Blackout Period
”) at any time shall not exceed forty-five (45) calendar
days, and (C) no Blackout Period may commence less than
forty-five (45) calendar days after the end of the preceding
Blackout Period.
4.4 Compliance . With respect to the
acquisition, ownership and disposition of the Shares and Warrants
issued and to be issued pursuant to the terms of this Agreement,
the Purchaser shall use its commercial best efforts to comply with
federal and state laws applicable to the Purchaser and rules and
regulations of federal and state governmental or self-regulatory
agencies and bodies, including, but not limited to, the SEC, FINRA
and Nasdaq, applicable to the Purchaser.
(a) If after the date of this Agreement and
prior to the Expiration Date, a Change of Control or p
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