Exhibit 10.1
PW EAGLE, INC.
AND
THE PURCHASERS NAMED
HEREIN
COMMON STOCK AND WARRANT PURCHASE
AGREEMENT
December 5,
2005
PW EAGLE INC.
COMMON STOCK AND WARRANT PURCHASE
AGREEMENT
T HIS C OMMON S TOCK AND W ARRANT P URCHASE A GREEMENT (this “Agreement”) is made as of
December 5, 2005 by and between PW E
AGLE , I NC . , a
Minnesota corporation with its principal office at 1550 Valley
River Drive, Eugene, OR 97440 (the “Company”), and
those purchasers listed on the attached Exhibit A, as such exhibit
may be amended from time to time (each a “Purchaser”,
and collectively, the “Purchasers”).
R ECITALS
W HEREAS , the
Company has authorized the sale and issuance of up to 1,000,000
shares (the “Shares”) of the common stock of the
Company, $.01 par value per share (the “Common Stock”),
and warrants to purchase 250,000 shares of Common Stock to certain
investors in a private placement (the
“Offering”).
W HEREAS , pursuant to Section 4(2) of the
Securities Act of 1933, as amended and Rule 506 promulgated
thereunder, the Company desires to sell to the Purchasers listed on
the attached Exhibit A, as such exhibit may be amended from time to
time, and such Purchasers desire to purchase from the Company an
aggregate of 1,000,000 shares of common stock of the Company, par
value $0.01, (the “Common Shares”) and warrants to
purchase 250,000 shares of Common Stock on the terms and subject to
the conditions set forth in this Agreement.
N OW ,
T HEREFORE
, in consideration of the foregoing
recitals and the mutual covenants and agreements contained herein,
the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Purchase of the Securities.
1.1 Agreement to Sell and
Purchase. At the Closing
(as hereinafter defined), the Company will sell to the Purchasers,
and the Purchasers will purchase from the Company, the number of
Common Shares and warrants to purchase Common Stock of the Company
(the “Warrants” and together with the Common Shares,
the “Securities”) set forth opposite each
Purchaser’s name on Exhibit A for an aggregate purchase price
of $18.75 (the “Purchase Price”). The Warrants shall be
in the form set forth hereto as Exhibit B.
1.2 Placement Agent
Fee . The Purchasers
acknowledge that the Company intends to pay to Craig-Hallum Capital
Group LLC, in its capacity as the placement agent for the Offering
(the “Placement Agent”), a fee in respect of the sale
of Securities to any Purchaser. The Company shall indemnify and
hold harmless the Purchasers from and against all fees,
commissions, or other payments owing by the Company to the
Placement Agent or any other persons from or acting on behalf of
the Company hereunder.
1.3 Closing; Closing
Date. The completion of
the sale and purchase of the Securities (the “Closing”)
shall be held at 9:00 a.m. (Central Time) as soon as practicable
following the satisfaction of the conditions set forth in
Section 4 (the “Closing Date”), at the offices of
Fredrikson & Byron, P.A., 200 South 6
th
Street, Suite 4000,
Minneapolis, MN or at such other time and place as the Company and
Purchasers may agree.
1.4 Delivery of the
Shares. At the Closing,
subject to the terms and conditions hereof, the Company will
deliver to the Purchasers a stock certificate or certificates and
Warrant or Warrants, in such denominations and registered in such
names as the Purchasers may designate by notice to the Company,
representing the Securities, dated as of the Closing Date (each a
“Certificate”), against payment of the purchase price
therefor by cash in the form of wire transfer, unless other means
of payment shall have been agreed upon by the Purchasers and the
Company.
2. Representations and Warranties of the
Company. The Company
hereby represents and warrants to the Purchasers:
2.1 Authorization.
All corporate action on the part of
the Company, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement has
been taken. The Company has the requisite corporate power to enter
into this Agreement and carry out and perform its obligations under
the terms of this Agreement. At the Closing, the Company will have
the requisite corporate power to issue and sell the Securities and
the Common Stock issuable upon exercise of the Warrants (the
“Warrant Shares”). This Agreement has been duly
authorized, executed and delivered by the Company and, upon due
execution and delivery by the Purchasers, this Agreement will be a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by
equitable principles.
2.2 No Conflict with Other
Instruments. The
execution, delivery and performance of this Agreement, the issuance
and sale of the Securities to be sold by the Company under this
Agreement, the issuance of the Warrant Shares upon exercise of the
Warrants and the consummation of the actions contemplated by this
Agreement (which for all purposes herein shall include exercise of
the Warrants) will not (A) result in any violation of, be in
conflict with, or constitute a default under, with or without the
passage of time or the giving of notice: (i) any provision of
the Company’s or its subsidiaries’ Articles of
Incorporation or Bylaws as in effect on the date hereof or at the
Closing; (ii) any provision of any judgment, arbitration
ruling, decree or order to which the Company or its subsidiaries
are a party or by which they are bound; (iii) any bond,
debenture, note or other evidence of indebtedness, or any material
lease or contract, mortgage, indenture, deed of trust, loan
agreement, joint venture or other material agreement, instrument or
commitment to which the Company or any subsidiary is a party or by
which they or their respective properties are bound; or
(iv) any statute, rule, law or governmental regulation
applicable to the Company; or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the properties or assets of the
Company or any subsidiary or any acceleration of indebtedness
pursuant to any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of
trust or any other agreement or instrument to which the Company or
any subsidiary are a party or by which they are bound or to which
any of the property or assets of the Company or any subsidiary is
subject. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body is required for
the execution and delivery of this Agreement by the Company and the
valid issuance or sale of the Securities by the Company pursuant to
this Agreement, other than such as have been made or obtained and
that remain in full force and effect, and except for the filing of
a Form D or any filings required to be made under state securities
laws.
2.3 Articles of Incorporation;
Bylaws. The Company has
made available to the Purchasers true, correct and complete copies
of the Articles of Incorporation and Bylaws of the Company, as in
effect on the date hereof.
2.4 Organization, Good Standing
and Qualification. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and has all
requisite corporate power and authority to carry on its business as
now conducted. The Company and each of its subsidiaries has full
power and authority to own, operate and occupy its properties and
to conduct its business as presently conducted and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a
material adverse effect on its or its subsidiaries’ business,
financial condition, properties operations or assets or its ability
to perform its obligations under this Agreement (a “Material
Adverse Effect”).
2.5 SEC Filings.
The consolidated financial
statements contained in each report, registration statement (on a
form other than Form S-3 or S-8) and definitive proxy statement
filed by the Company with the Securities and Exchange Commission
(the “SEC”) between January 1, 2001 and the date
of this Agreement (the “Company SEC Documents”):
(i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto and
were timely filed; (ii) the information contained therein as
of the respective dates thereof did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in light
of the circumstances under which they were made not misleading;
(iii) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as
permitted by Form 10-Q of the SEC, and except that unaudited
financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iv) fairly present the
consolidated financial position of the Company and its subsidiaries
as of the respective dates thereof and the consolidated results of
operations cash flows and the changes in shareholders’ equity
of the Company and its subsidiaries for the periods covered
thereby. Except as set forth in the financial statements included
in the Company SEC Documents, neither the Company nor its
subsidiaries has any liabilities, contingent or otherwise, other
than liabilities incurred in the ordinary course of business
subsequent to September 30, 2005, and liabilities of the type
not required under generally accepted accounting principles to be
reflected in such financial statements. Such liabilities incurred
subsequent to September 30, 2005, are not, in the aggregate,
material to the financial condition or operating results of the
Company and its subsidiaries, taken as a whole.
2.6 Capitalization.
The authorized capital stock of the
Company consists of (i) 30,000,000 shares of Common Stock, of
which (A) 9,595,243 shares of Common Stock and 595,508 shares
of Class B common stock were issued and outstanding as of
December 2, 2005, and (B) 2,032,922 shares of Common
Stock were reserved for issuance upon the exercise or conversion,
as the case may be, of outstanding options, warrants or other
convertible securities as of the date of this Agreement. All issued
and outstanding shares of Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable have been
issued and sold in compliance with the registration requirements of
federal and state securities laws or the applicable statutes of
limitation have expired, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. The Company owns all of the outstanding capital stock
of each subsidiary, free and clear of all liens, claims and
encumbrances. Except as set forth herein or the Company SEC
Documents, there are no (i) outstanding rights (including,
without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the
Company, or any contract, commitment, agreement, understanding or
arrangement of any kind to which the Company or any subsidiary is a
party and relating to the issuance or sale of any capital stock or
convertible or exchangeable security of the Company or any
subsidiary, other than options for the purchase of 183,096 shares
of Common Stock granted to directors and employees of the Company
pursuant to its 1997 Stock Option Plan and non-qualified stock
option plan and to former holders of options to purchase common
stock of a former majority-owned subsidiary of the Company
(“USPoly”), which were issued as partial consideration
to USPoly minority shareholders in the October 2, 2005 merger
in which USPoly became a wholly-owned subsidiary of the Company; or
(ii) obligations of the Company to purchase redeem or
otherwise acquire any of its outstanding capital stock or any
interest therein or to pay any dividend or make any other
distribution in respect thereof. Except as disclosed in the Company
SEC Documents, there are no anti-dilution or price adjustment
provisions, co-sale rights, registration rights, rights of first
refusal or other similar rights contained in the terms governing
any outstanding security of the Company that will be triggered by
the issuance of the Securities or the Warrant Shares.
2.7 Subsidiaries.
Except as set forth in the Company
SEC Documents, the Company does not presently own or control,
directly or indirectly, and has no stock or other interest as owner
or principal in, any other corporation or partnership, joint
venture, association or other business venture or entity (each a
“subsidiary”). Each subsidiary is duly incorporated or
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization and has all
requisite power and authority to carry on its business as now
conducted. Each subsidiary is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure
to so qualify would have a material adverse effect on its business
or properties. All of the outstanding capital stock or other voting
securities of each subsidiary is owned by the Company, directly or
indirectly, free and clear of any liens, claims, or
encumbrances.
2.8 Valid Issuance of
Securities. The
Securities and the Warrant Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof or
the Warrants, as the case may be, will be duly and validly
authorized and issued, fully paid and nonassessable, free from all
taxes, liens, claims, encumbrances and charges with respect to the
issue thereof; provided, however, that the Securities and the
Warrant Shares may be subject to restrictions on transfer under
state and/or federal securities laws or as otherwise set forth
herein. The issuance, sale and delivery of the Securities and the
Warrant Shares in accordance with the terms hereof or the Warrant,
as the case may be, will not be subject to preemptive rights of
shareholders of the Company. The Warrant Shares have been duly
reserved for issuance upon exercise of the Warrant.
2.9 Offering.
Assuming the accuracy of the
representations of the Purchasers in Section 3.3 of this
Agreement on the date hereof, on the Closing Date and solely as
this Section 2.9 relates to the issue and sale of the Warrant
Shares on the date(s) of exercise of the Warrant, the offer, issue
and sale of the Securities and issuance of the Warrant Shares upon
exercise of the Warrant (assuming no change in applicable law prior
to the date the Warrant Shares are issued), are and will be exempt
from the registration and prospectus delivery requirements of the
Securities Act of 1933 (the “Securities Act”) and have
been or will be registered or qualified (or are or will be exempt
from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities
laws. Neither the Company, nor any of its affiliates, nor any
person acting on its or 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 under the Securities Act of the issuance of the
Securities to the Purchasers or the issuance of the Warrant Shares
upon exercise of the Warrants. Other than the Company SEC
Documents, the Company has not distributed and will not distribute
prior to the Closing Date any offering material in connection with
the offering and sale of the Securities or Warrant Shares. The
Company has not taken any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would bring the
offer, issuance or sale of the Securities or the issuance of the
Warrant Shares upon exercise of the Warrants, within the provisions
of Section 5 of the Securities Act, unless such offer,
issuance or sale was or shall be within the exemptions of
Section 4 of the Securities Act.
2.10 Litigation.
Except as set forth in the Company
SEC Documents, there is no action, suit, proceeding nor
investigation pending or, to the Company’s knowledge,
currently threatened against the Company or any of its subsidiaries
that would be required to be disclosed in the Company’s
Annual Report on Form 10-K under the requirements of Item 103
of Regulation S-K. The foregoing includes, without limitation, any
action, suit, proceeding or investigation, pending or threatened,
that questions the validity of this Agreement or the right of the
Company to enter into such Agreement and perform its obligations
hereunder. Neither the Company nor any subsidiary is subject to any
injunction, judgment, decree or order of any court, regulatory
body, arbitral panel, administrative agency or other government
body.
2.11 Governmental
Consents. No consent,
approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the
part of the Company is required in connection with the consummation
of the transactions contemplated by this Agreement, except for
notices required or permitted to be filed with certain state and
federal securities commissions, which notices will be filed on a
timely basis.
2.12 No Brokers.
Except for any fees payable to the
Placement Agent, no broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by this Agreement
based on arrangements made by the Company.
2.13 Compliance.
The Company is not in violation of
its Articles of Incorporation or Bylaws. Neither the Company nor
the subsidiaries have been advised or have reason to believe, that
it is not conducting its business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable
local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not have a Material
Adverse Effect. Each of the Company and the subsidiaries has all
necessary franchises, licenses, certificates and other
authorizations from any foreign, federal, state or local government
or governmental agency, department or body that are currently
necessary for the operation of the business of the Company and they
subsidiaries as currently conducted, except where the failure to
currently possess such franchises, licenses, certificates and other
authorizations would not reasonably be expected to have a Material
Adverse Effect.
2.14 No Material
Changes. Except as
disclosed in the Company SEC Documents, since September 30,
2005, there has been no material adverse change in the assets,
liabilities, business, properties, operations, financial condition
or results of operations of the Company and its subsidiaries, taken
as a whole. Since September 30, 2005, the Company has not
declared or paid any dividend or distribution or its capital
stock.
2.15 Contracts.
Except for matters which are not
reasonably likely to have a Material Adverse Effect and those
contracts that are substantially or fully performed or expired by
their terms, the contracts listed as exhibits to or described in
the Company SEC Documents that are material to the Company or any
of its subsidiaries and all amendments thereto, are in full force
and effect on the date hereof, and neither the Company nor, to the
Company’ knowledge, any other party to such contracts is in
breach of or default under any of such contracts.
2.16 Intellectual
Property.
(i) The Company has ownership or license or legal
right to use all patent, copyright, trade secret, know-how
trademark, trade name customer lists, designs, manufacturing or
other processes, computer software, systems, data compilation,
research results or other proprietary rights used in the business
of the Company (collectively “Intellectual Property”).
All of such patents, registered trademarks and registered
copyrights have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States
Register of Copyrights or the corresponding offices of other
jurisdictions and have been maintained and renewed in accordance
with all applicable provisions of law and administrative
regulations in the United States and all such
jurisdictions.
(ii) The Company believes it has taken all reasonable
steps required in accordance with sound business practice and
business judgment to establish and preserve its and its
subsidiaries ownership of all material Intellectual Property with
respect to their products and technology.
(iii) To the knowledge of the Company, the present
business, activities and products of the Company and its
subsidiaries do not infringe any intellectual property of any other
person, except where such infringement would not have a Material
Adverse Effect. No proceeding charging the Company with
infringement of any adversely held Intellectual Property has been
filed.
(iv) No proceedings have been instituted or pending
or, to the knowledge of the Company, threatened, which challenge
the rights of the Company to the use of the Intellectual Property.
The Company has the right to use, free and clear of material claims
or rights of other persons, all of its customer lists, designs,
computer software, systems, data compilations, and other
information that are required for its products or its business as
presently conducted. Neither the Company nor any subsidiary is
making unauthorized use of any confidential information or trade
secrets of any person. The activities of any of the employees on
behalf of the Company or of any subsidiary do not violate any
agreements or arrangements between such employees and third parties
are related to confidential information or trade secrets of third
parties or that restrict any such employee’s engagement in
business activity of any nature.
(v) All licenses or other agreements under which
(i) the Company or any subsidiary employs rights in
Intellectual Property, or (ii) the Company or any subsidiary
has granted rights to others in Intellectual Property owned or
licensed by the Company or any subsidiary are in full force and
effect, and there is no default (and there exists no condition
which, with the passage of time or otherwise, would constitute a
default by the Company or such subsidiary) by the Company or any
subsidiary with respect thereto.
2.17 Exchange
Compliance. The
Company’s common stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the
“Exchange Act”) and is listed on the Nasdaq National
Market, and the Company has taken no action designed to, or likely
to have the effect of, terminating the registration of the common
stock under the Exchange Act or delisting the common stock
(including the Common Shares and Warrant Shares) from the Nasdaq
National Market. The Company is in compliance with all of the
presently applicable requirements for continued listing of the
Common Stock on the Nasdaq National Market. The issuance of the
Securities and the Warrant Shares does not require shareholder
approval including, without limitation, pursuant to the Nasdaq
Marketplace Rules or any other rule of the Nasdaq Stock
Market.
2.18 No Manipulation; Disclosure
of Information . The
Company has not taken and will not take any action designed to or
that might reasonably be expected to cause or result in an unlawful
manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities. The Company confirms that, to its
knowledge, with the exception of the proposed sale of Securities as
contemplated herein (as to which the Company makes not
representation),
neither it nor any other person acting on its
behalf has provided any of the Purchasers or their agents or
counsel with any information that constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing
representations in effecting transactions in securities of the
Company. All disclosures provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby,
including the exhibits to this Agreement, furnished by the Company
are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
2.19 Accountants.
PricewaterhouseCoopers LLP, who
expressed their opinion with respect to the consolidated financial
statements contained in the Company’s Annual Report on Form
10-K for the year ended December 31, 2004, to be incorporated
by reference into the Registration Statement (as hereinafter
defined) and the prospectus which forms a part thereof (the
“Prospectus”), have advised the Company that they are,
and to the knowledge of the Company they are, independent
accountants as required by the Securities Act and the rules and
regulations promulgated thereunder. The Company covenants to file
its Form 10-K containing audited consolidated financial statements
for the year ended December 31, 2005 within the time period
required by applicable securities laws and further represents and
warrants that it has no reason to believe that the auditors will
not be able to express an unqualified opinion with respect to such
financial statements, assuming the Closing occurs as contemplated
herein.
2.20 Taxes.
The Company has filed all necessary
federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and the Company has
no knowledge of a tax deficiency which has been or might be
asserted or threatened against it.
2.21 Insurance.
The Company maintains and will
continue to maintain insurance of the types and in the amounts that
the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks
customarily insured against by similarly situated companies, all of
which insurance is in full force and effect.
2.22 Transfer Taxes.
On the Closing Date, all stock
transfer or other taxes (other than income taxes) that are required
to be paid in connection with the sale and transfer of the
Securities hereunder will be, or will have been, fully paid or
provided for by the Company and the Company will have complied with
all laws imposing such taxes.
2.23 Investment
Company. The Company
(including its subsidiaries) is not an “investment
company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for
an investment company, within the meaning of the Investment Company
Act of 1940 and will not be deemed an “investment
company” as a result of the transactions contemplated by this
Agreement.
2.24 Related Party
Transactions . To the
knowledge of the Company, no transaction has occurred between or
among the Company or any of its affiliates (including, without
limitation, any of its subsidiaries), officers or directors or any
affiliate or affiliates of any such affiliate officer or director
that with the passage of time will be required to be disclosed
pursuant to Section 13, 14 or 15(d) of the Exchange Act other
than those transactions that have already been so
disclosed.
2.25 Books and
Records. The books,
records and accounts of the Company and its subsidiaries accurately
and fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the operations of, the Company
and its subsidiaries.
2.26 Disclosure
Controls.
(a) The Company has established and
maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15 under the Exchange Act, which (i) are
designed to ensure that material information relating to the
Company is made known to their Company’s principal executive
officer and its principal financial officer by others within those
entities particularly during the periods in which the periodic
reports required under the Exchange Act are being prepared; and
(ii) provide for the periodic evaluation of the effectiveness
of such disclosure controls and procedures as of the end of the
period covered by the Company’s most recent annual or
quarterly report filed with the SEC.
(b) The Company is not aware of
(i) any significant deficiency in the design or operation of
internal controls which could adversely affect the Company’s
or any of its subsidiary’s ability to record, process,
summarize and report financial data or any material weaknesses in
internal controls; or (ii) any fraud, whether or not material,
that involves management or other employees who have a significant
role in the Company’s or any of its/subsidiary’s
internal controls.
(c) Since the date of the most
recent evaluation of such disclosure controls and procedures, there
have been no changes that have materially affected, or are
reasonably likely to materially affect, the Company’s or any
of its subsidiary’s internal control over financial
reporting, including any corrective actions with regard to
significant deficiencies and material weaknesses.
(d) Except as described in the SEC
Reports, there are no material off-balance sheet arrangements (as
defined in Item 303 of Regulation S-K), or any other
relationships with unconsolidated entities (in which the Company or
its control persons have an equity interest) that may have a
material current or future effect on the Company’s or any of
its/subsidiary’s financial condition, revenues or expenses,
changes in financial condition, results of operations, liquidity,
capital expenditures or capital resources.
(e) To the knowledge of the Company,
neither the Board of Directors nor the audit committee has been
informed, nor is any director of the Company aware, of (1) any
significant deficiencies in the design or operation of the
Company’s internal controls which could adversely affect the
Company’s or any subsidiary’s ability to) record,
process, summarize
and report financial data or any material
weakness in the Company’s or any subsidiary’s internal
controls; or (2) any fraud, whether or not material, that
involves management or other employees of the Company or any of its
subsidiaries who have a significant role in the Company’s or
any subsidiary’s internal controls.
3. Representations and Warranties of the
Purchasers.
The Purchasers severally, and not
jointly, hereby represent and warrant to the Company:
3.1 Legal Power.
Each Purchaser has the requisite
authority to enter into this Agreement and to carry out and perform
its obligations under the terms of this Agreement. All action on
each Purchaser’s part required for the lawful execution and
delivery of this Agreement have been or will be effectively taken
prior to the Closing.
3.2 Due Execution.
This Agreement has been duly
authorized, executed and delivered by the Purchaser, and, upon due
execution and delivery by the Company, this Agreement will be a
valid and binding agreement of the Purchaser, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ rights generally or by equitable
principles.
3.3 Investment
Representations. In
connection with the sale and issuance of the Securities and Warrant
Shares, each Purchaser makes the following
representations:
(a) Investment for Own
Account. The Purchaser is
acquiring the Securities and the Warrant Shares for its own
account, not as nominee or agent, for investment and not with a
view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act;
provided, however, that by making the representations herein, the
Purchaser does not agree to hold any of the Securities for any
minimum or 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 from the registration
requirements of the Securities Act of 1933, as amended (the
Securities Act).
(b) Transfer Restrictions;
Legends. Such Purchaser
understands that (i) the Securities and Warrant Shares have
not been registered under the Securities Act; (ii) the
Securities and Warrant Shares are being offered and sold pursuant
to an exemption from registration, based in part upon the
Company’s reliance upon the statements and representations
made by the Purchasers in this Agreement, and that the Securities
and Warrant Shares must be held by such Purchaser indefinitely, and
that Purchaser must, therefore, bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such
registration; (iii) each Certificate representing the
Securities and Warrant Shares will be endorsed with the following
legend:
THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF
ANY STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
UNLESS SOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(iv) the Company will instruct any transfer
agent not to register the transfer of the Securities or Warrant
Shares (or any portion thereof) unless the conditions specified in
the foregoing legends are satisfied or, if the opinion of counsel
referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of
the Securities Act or this Agreement, or other satisfactory
assurances of such nature are given to the Company.
(c) Financial Sophistication; Due
Diligence. The Purchaser
has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of the
investment in connection with the transactions contemplated in this
Agreement. Such Purchaser has, in connection with its decision to
purchase the Securities, relied only upon the representations and
warranties contained herein and the information contained in the
Company SEC Documents. Further, the Purchaser has had such
opportunity to obtain additional information and to ask questions
of, and receive answers from, the Company, concerning the terms and
conditions of the investment and the business and affairs of the
Company, as the Purchaser considers necessary in order to form an
investment decision.
(e) Accredited Investor
Status. The Purchaser is
an “accredited investor” as such term is defined in
Rule 501(a) of the rules and regulations promulgated under the
Securities Act.
(f) Residency.
The Purchaser is organized under the
laws of the State set forth opposite such Purchaser’s name on
the attached Exhibit A, and its principal place of operations is in
the State set forth opposite such Purchaser’s name on the
attached Exhibit A.
(g) General
Solicitation. The
Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or
broadcast over the television or radio or presented at any seminar
or any other general solicitation or general advertisement. Prior
to the time that the Purchaser was first contacted by the Company
or the Placement Agent such Purchaser had a pre-existing and
substantial relationship with the Company or the Placement
Agent.
3.4 No Investment, Tax or Legal
Advice . Each Purchaser
understands that nothing in the Company SEC Documents, this
Agreement, or any other materials presented to the Purchaser in
connection with the purchase and sale of the Securities constitutes
legal, tax or
investment advice. Each Purchaser has consulted
such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with
its purchase of Securities.
3.5 Additional
Acknowledgement. Each
Purchaser acknowledges that it has independently evaluated the
merits of the transactions contemplated by this Agreement, that it
has independently determined to enter into the transactions
contemplated hereby, that it is not relying on any advice from or
evaluation by any other person. Each Purchaser acknowledges that
the Placement Agent has acted solely as placement agent for the
Company in connection with the Offering of the Securities by the
Company, that the information and data provided to the Purchaser in
connection with the transaction contemplated hereby has not been
subjected to independent verification by the Placement Agent, and
that the Placement Agent has made no representation or warrant
whatsoever with respect to the accuracy or completeness of such
information, data or other related disclosure material. Each
Purchaser acknowledges that it has not taken any actions that would
deem the Investors to be members of a “group” for
purposes of Section 13(d) of the Exchange Act.
3.6 Limited Ownership.
The purchase of the Securities
issuable to each Purchaser at the Closing will not result in such
Purchaser (individually or together with any other person or entity
with whom such Purchaser has identified, or will have identified,
itself as part of a “group” in a public filing made
with the SEC involving the Company’s securities) acquiring,
or obtaining the right to acquire, in excess of 19.999% of the
outstanding shares of Common Stock or voting power of the Company
on a post-transaction basis that assumes that the Closing shall
have occurred. Such Purchaser does not presently intend to, along
or together with others, make a public filing with the SEC to
disclose that it has (or that it together with such other persons
or entities have) acquired, or obtained the right to acquire, as a
result of the Closing (when added to any other securities of the
Company that it or they then own or have the right to acquire), in
excess of 19.999% of the outstanding shares of Common Stock or the
voting power of the Company on a post-transaction basis that
assumes that the Closing shall have occurred.
4. Conditions to Closing.
4.1 Conditions to Obligations of
Purchasers at Closing. The Purchasers’ obligation to purchase the
Securities at the Closing is subject to the fulfillment to the
Purchasers’ reasonable satisfaction, on or prior to the
Closing, of all of the following conditions, any of which may be
waived by such Purchaser:
(a) Representations and
Warranties True; Performance of Obligations.
The representations and warranties
made by the Company in Section 2 hereof shall be true and
correct in all respects on the Closing Date with the same force and
effect as if they had been made on and as of said date and the
Company shall have performed and complied with all obligations and
conditions herein required to be performed or complied with by it
on or prior to the Closing and a certificate duly executed by an
officer of the Company, to the effect of the foregoing, shall be
delivered to the Purchasers.
(b) Proceedings and
Documents. All corporate
and other proceedings in connection with the transactions
contemplated at the Closing and all documents and instruments
incident to such transactions shall be reasonably satisfactory in
substance and form to counsel to the Purchasers, and counsel to the
Purchasers shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably
request. The Company shall have delivered (or caused to have been
delivered) to each Purchasers, the certificates required by this
Agreement. The Warrant Shares shall have been duly authorized and
reserved for issuance upon exercise of the Warrant.
(c) Qualifications, Legal
Investment. All
authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state
that are required in connection with the lawful sale and issuance
of the Securities and Warrant Shares shall have been duly obtained
and shall be effective on and as of the Closing. No stop order or
other order enjoining the sale of the Securities or Warrant Shares
shall have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities and Warrant Shares
shall be legally permitted by all laws and regulations to which
Purchasers and the Company are subject. No litigation, statute,
rule, regulation, executive order, decree, ruling or injunction
will have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(d) Execution of
Agreements. The Company
shall have executed this Agreement and have delivered this
Agreement to the Purchasers.
(e) Secretary’s
Certificate . The Company
shall have delivered to the Purchasers a certificate of the
Secretary of the Company certifying as to the truth and accuracy of
the resolutions of the Board of Directors relating to the
transaction contemplated hereby (a copy of which shall be included
with such certificate).
(f) Trading and
Listing. Trading and
listing of the Company’s common stock on the Nasdaq National
Market shall not have been suspended by the SEC or the Nasdaq Stock
Market.
(g) Nasdaq Listing.
The Company will comply with all of
the requirements of the National Association of Securities Dealers
with respect to the issuance of the Securities and the Warrant
Shares and will list the Common Shares and the Warrant Shares on
the Nasdaq National Market no later than the earlier of
(a) the effective date of the Registration Statement (as
hereinafter defined) or (b) 120 days following the Closing
Date.
(h) Blue Sky.
The Company shall have obtained all
necessary “blue sky” law permits and qualifications, or
have the availability of exemptions therefrom, required by any
state for the offer and sale of the Securities and issuance of the
Warrant Shares upon exercise of the Warrant.
(i) Material Adverse
Change. Since the date of
this Agreement, there shall not have occurred any event which
results in a Material Adverse Effect.
(j) Opinion.
The Company shall have delivered to
Purchasers the opinion of Fredrikson & Byron, P.A.,
counsel to the Company, dated as of the Closing Date in
substantially the form attached hereto as Exhibit C.
4.2 Conditions to Obligations of
the Company. The
Company’s obligation to issue and sell the Securities at the
Closing is subject to the fulfillment to the Company’s
reasonable satisfaction, on or prior to the Closing of the
following conditions, any of which may be waived by the
Company:
(a) Representations and
Warranties True. The
representations and warranties made by the Purchasers in
Section 3 hereof shall be true and correct in all material
respects on the Closing Date with the same force and effect as if
they had been made on and as of said date.
(b) Performance of
Obligations. The
Purchasers shall have performed and complied with all agreements
and conditions herein required to be performed or complied with by
them on or before the Closing. The Purchasers shall have delivered
the Purchase Price, by wire transfer, to the account designated by
the Company for such purpose.
(c) Qualifications, Legal
Investment. All
authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state
that are required in connection with the lawful sale and issuance
of the Securities and Warrant Shares shall have been duly obtained
and shall be effective on and as of the Closing. No stop order or
other order enjoining the sale of the Securities or Warrant Shares
shall have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities and the Warrant
Shares shall be legally permitted by all laws and regulations to
which the Purchasers and the Company are subject. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction will have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
(d) Execution of
Agreements. The
Purchasers shall have executed this Agreement and delivered this
Agreement to the Company.
5. Additional Covenants.
5.1 Reporting Status.
With a view to making available to
the Purchasers the benefits of certain rules and regulations of the
SEC which may permit the sale of the Common Shares and Warrant
Shares to the public without registration, the Company agrees to
use its
reasonable efforts to file with the SEC, in a
timely manner all reports and other documents required of the
Company under the Exchange Act. The Company will otherwise take
such further action as a Purchaser may reasonably request, all to
the extent required from time to time to enable such Purchaser to
sell the Common Shares and Warrant Shares without registration
under the Securities Act or any successor rule or regulation
adopted by the SEC.
5.2 Listing.
So long as a Purchaser owns any of
the Securities or Warrant Shares, the Company will use its
reasonable efforts to maintain the automated quotation of its
Common Stock, including the Common Shares and Warrant Shares, on
the Nasdaq National Market or an alternative listing on the
American Stock Exchange or the New York Stock Exchange and will
comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers and such exchanges, if
applicable.
5.3 Adjustments in Share Numbers
and Prices.
(a) In the event of any stock split, subdivision,
dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event
occurring after the date hereof, each reference in this Agreement
or the Warrants to a number of shares or price per share shall be
amended appropriately to account for such event.
(b) As to each Purchaser, from the Closing Date
until the 12 month anniversary of the Closing Date, if the Company
or any subsidiary thereof shall issue or agree to issue any
(i) Common Stock or (ii) any securities of the Company or
the subsidiary that would entitle the holder thereof to acquire at
any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that
is at any time directly or indirectly convertible into or
exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock (“Common Stock Equivalents” and
collectively “Additional Shares”), entitling any person
or entity to acquire shares of Common Stock at an effective price
per share less than $18.75, within three trading days of the date
thereof the Company shall issue to such Purchaser that number of
additional shares of Common Stock (the “Anti-Dilution
Shares”) equal to (a) the aggregate Purchase Price paid
by such Purchaser at the Closing divided by the New Adjusted
Purchase Price, less (b) the Common Shares previously issued
to such Purchaser pursuant to this Agreement. For purposes of this
Agreement, New Adjusted Purchase Price = Adjusted Purchase Price x
(A + B) ÷ (A + C). For purposes of the foregoing formula, the
following definitions shall apply: (I) Adjusted Purchase Price
shall mean the Adjusted Purchase Price in effect immediately prior
to such issue of Additional Shares; (II) New Adjusted Purchase
Price means the Adjusted Purchase Price in effect immediately after
such issue of Additional Shares; (III) “A” means the
number of shares of Common Stock outstanding and deemed outstanding
immediately prior to such issue of Additional Shares (treating for
this purpose as outstanding all shares of Common Stock issuable
upon exercise of options and convertible securities as outstanding
immediately prior to such issue; (IV) “B” means the
number of shares of Common Stock that would have been issued if
such Additional Shares had been issued at a price per share equal
to the Discounted Purchase Price (as defined below) (determined by
dividing the aggregate consideration received by the Company in
respect of such issue by the Discounted Purchase Price); and
(V) “C” means the number of such Additional Shares
issued in such transaction.
The term “Discounted Purchase
Price” shall mean the amount actually paid by third parties
for a share of Common Stock. The sale of Common Stock Equivalents
shall be deemed to have occurred at the time of the issuance of the
Common Stock Equivalents and the Discounted Purchase Price covered
thereby shall also include the actual exercise or conversion price
thereof at the time of the issuance, with further adjustments for
changes at conversion or exercise (in addition to the consideration
per share of Common Stock underlying the Common Stock Equivalents
received by the Company upon such sale or issuance of the Common
Stock Equivalents). If shares are issued for a consideration other
than cash, the per share selling price shall be the fair value of
such consideration as determined in good faith by the board of
directors of the Company. The Company may not refuse to issue a
Purchaser additional shares of Common Stock hereunder based on any
claim that such Purchaser or any one associated or affiliated with
such Purchaser has been engaged in any violation of law, agreement
or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining an issuance hereunder shall
have been sought and obtained and the Company posts a surety bond
for the benefit of such Purchaser in the amount of 150% of the
market value of such Shares (based on the closing price of the
Common Stock on the Nasdaq Stock Market, or such other exchange on
which the Common Stock is listed or traded if it is not listed for
trading on the Nasdaq Stock Market, on the date of the event giving
rise to the Company’s obligation hereunder), which is subject
to the injunction, which bond shall remain in effect until the
completion of litigation of the dispute and the proceeds of which
shall be payable to the Purchaser to the extent it obtains
judgment. Nothing herein shall limit a Purchaser’s right to
pursue actual damages for the Company’s failure to deliver
shares hereunder and such Purchaser shall have the right to pursue
all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. On the date of closing of any transaction pursuant to which
securities are issued for a Discounted Purchase Price, the Company
shall give the Purchasers written notice thereof. Notwithstanding
anything to the contrary herein, this section shall not apply to an
Exempt Issuance. “Exempt Issuance” means the issuance
of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or
option plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the
members of a committee of non-employee directors established for
such purpose, (b) securities upon the exercise of or
conversion of any convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease
the exercise or conversion price of any such securities,
(c) securities issued pursuant to acquisitions or strategic
transactions, provided any such issuance shall only be to a person
which is, itself or through its subsidiaries, an operating company
in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing
in securities, and (d) securities upon the exercise or
conversion of convertible securities, options or warrants issued to
a licensed institution or bank lender in connection with debt
financing. “Trading day” means a day on which the
Common Stock is traded on a securities market, automated quotation
system or stock exchange.
In the event of any adjustment under
this Section 5.3, the Company shall promptly amend the
Registration Statement or file a new Registration Statement
pursuant to the provisions of Section 6 to register the
Anti-Dilution Shares. In no event shall the Company issue
Anti-Dilution Shares to a Purchaser under Section 5.3 if such
issuance shall result in the Purchaser acquiring, or obtaining the
right to acquire, in excess of 19.999% of the outstanding shares of
Common Stock or voting power of the Company on a post-transaction
basis that assumes that the closing of the Additional Shares shall
have occurred.
5.4 Confidential
Information. Each
Purchaser covenants that it will maintain in confidence the receipt
and content of any Suspension Notice (as defined herein) under
Section 6.2 until such information (a) becomes generally
publicly available other than through a violation of this provision
by the Purchaser or its agents or (b) is required to be
disclosed in legal proceedings (such as by deposition,
interrogatory, request for documents, subpoena, civil investigation
demand, filing with any governmental authority or similar process);
provided, however, that before making any disclosure in reliance on
this Section 5.4(b), the Purchaser will give the Company at
least 15 days prior written notice (or such shorter period as
required by law) specifying the circumstances giving rise thereto
and the Purchaser will furnish only that portion of the non-public
information which is legally required and will exercise its best
efforts to ensure that confidential treatment will be accorded any
non-public information so furnished.
6. Registration Rights.
6.1 Registration Procedures and
Expenses.
(a) The Company shall prepare and file with the SEC,
as promptly as reasonably practicable following Closing, but in no
event later than 30 days following Closing, a registration
statement on Form S-3 (or any successor to Form S-3), covering the
resale of the Registrable Securities (as defined below) (the
“S-3 Registration Statement”) and as soon as reasonably
practicable thereafter but in no event later than 90 days following
the filing of the S-3 Registration Statement (120 days in the event
of a full review of the S-3 Registration Statement by the SEC), to
effect such registration and any related qualification or
compliance with respect to all Registrable Securities held by the
Purchasers. For purposes of this Agreement, the term
“Registrable Securities” shall mean (i) the
Warrant; (ii) the Common Shares and Warrant Shares; and
(iii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, any Common
Shares or Warrant Shares. In the event that Form S-3 (or any
successor form) is or becomes unavailable to register the resale of
the Registrable Securities at any time prior to the expiration of
the Purchaser’s Registration Rights pursuant to
Section 6.6, the Company shall to prepare and file with the
SEC, as promptly as reasonably practicable following the Closing
but in no event later than 30 days following Closing, a
registration statement on Form S-1 (or any successor to Form S-1),
covering the resale of the Registrable Securities (the “S-1
Registration Statement” and collectively the S-3 Registration
Statement, the “Registration Statement”) and as soon as
reasonably practicable thereafter but in no event later than 90
days following the filing of the S-1 Registration Statement (120
days in the event of a full review of the S-1 Registration
Statement by the SEC), to effect such registration and any related
qualification or compliance with respect
to all Registrable Securities held by such
Purchaser. If the Registration Statement has not been declared
effective by the SEC on or before the date that is 90 days after
the filing date of the Registration Statement, or 120 days after
the filing of the Registration Statement in the event of a full
review of the Registration Statement by the SEC (the
“Required Effective Date”), the Company shall, on the
business day immediately following the Required Effective Date and
each 30 th day thereafter, make a payment to
the Purchaser as compensation for such delay (together, the
“Late Registration Payments”) equal to 1% of the
Purchase Price paid for the Securities then owned by the Purchaser
until the Registration Statement is declared effective by the SEC.
Late Registration Payments will be prorated on a daily basis during
each 30 day period and will be paid to the Purchaser by wire
transfer or check within five business days after the earlier of
(i) the end of each 30 day period following the Required
Effective Date or (ii) the effective date of the Registration
Statement. If the Company fails to pay any liquidated damages
pursuant to this section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of
12% per annum (or such lesser maximum amount that is permitted
to be paid by applicable law) to the Purchasers, accruing daily
from the date such liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full. “Business
day” means any day except Saturday, Sunday and any day that
is a federal legal holiday in the United States.
(b) The Company shall use its best efforts to
prepare and file with the SEC such amendments and supplements to
the Registration Statement and the Prospectus used in connection
therewith as may be necessary or advisable to keep the Registration
Statement current and effective for the Common Shares and Warrant
Shares (collectively, “Shares”) held by a Purchaser for
a period ending on the earlier of (i) the second anniversary
of the Closing Date, (ii) the date on which all of that
Purchaser’s Shares may be sold pursuant to Rule 144 under the
Securities Act or any successor rule (“Rule 144”)
without regard to the volume limitations of Rule 144 or
(iii) such time as all Shares held by that Purchaser have been
sold pursuant to a registration statement or Rule 144. At such time
the Company is no longer required to keep the Registration
Statement current and effective for the Shares held by a Purchaser
(the “Registration Statement Termination Date”), that
Purchaser will no longer accrue any additional liquidated damages
payments pursuant to Sections 6.1(a) or 6.2(c); however, the
Company shall still be obligated to make all payments under
Sections 6.1(a) or 6.2(c) that were
