EXHIBIT
4.4
COMMON STOCK PURCHASE
AGREEMENT
COMMON STOCK PURCHASE
AGREEMENT (the “Agreement”), dated
as of December 16, 2005, by and between HEPALIFE TECHNOLOGIES,
INC. , a Florida corporation (the “Company”), and
FUSION CAPITAL FUND II, LLC , an Illinois limited liability
company (the “Buyer”). Capitalized terms used
herein and not otherwise defined herein are defined in Section 10
hereof.
WHEREAS:
Subject to the terms and
conditions set forth in this Agreement, the Company wishes to sell
to the Buyer, and the Buyer wishes to buy from the Company, up to
Fifteen Million Dollars ($15,000,000) of the Company's common
stock, par value $0.001 per share (the “Common Stock”).
The shares of Common Stock to be purchased hereunder are
referred to herein as the "Purchase Shares."
NOW
THEREFORE ,
the Company and the Buyer hereby agree as follows:
1.
PURCHASE OF COMMON
STOCK.
Subject to the terms and
conditions set forth in Sections 6, 7 and 9 below, the Company
hereby agrees to sell to the Buyer, and the Buyer hereby agrees to
purchase from the Company, Purchase Shares as follows:
(a)
Commencement of
Purchases of Common Stock . The purchase and sale of
Purchase Shares hereunder shall commence (the "Commencement")
within five (5) Trading Days following the date of satisfaction of
the conditions to the Commencement set forth in Sections 6 and 7
below (the date of such Commencement, the "Commencement
Date").
(b)
Buyer's Purchase
Rights and Obligations . Subject to the
Company’s right to suspend purchases under Section 1(d)(ii)
hereof, the Buyer shall buy Purchase Shares (“Daily
Purchases”) on each Trading Day during each Monthly Period
equal to the Daily Purchase Amount (as defined in Section 1(c)(i))
at the Purchase Price. From time to time, the Company shall
also have the right but not the obligation, by its delivery to the
Buyer of a Block Purchase Notice (as defined in Section 1(c)(iv)),
to require the Buyer to buy Purchase Shares (a “Block
Purchase”) equal to the Block Purchase Amount (as defined in
Section 1(c)(iv)) at the Block Purchase Price (as defined in
Section 1(c)(iv)). The Buyer shall pay to the Company
an amount equal to the Purchase Amount with respect to such
Purchase Shares as full payment for the purchase of the Purchase
Shares so received. The Company shall not issue any fraction
of a share of Common Stock upon any purchase. If the issuance
would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common
Stock up or down to the nearest whole share. All payments
made under this Agreement shall be made in lawful money of the
United States of America by check or wire transfer of immediately
available funds to such account as the Company may from time to
time designate by written notice in accordance with the provisions
of this Agreement. Whenever any amount expressed to be due by
the terms of this Agreement is due on any day that is not a Trading
Day, the same shall instead be due on the next succeeding day which
is a Trading Day.
(c)
The Daily Purchase
Amount; Company's Right to Decrease or Increase the Daily Purchase
Amount; the Block Purchase Amount .
(i)
The Daily Purchase
Amount .
As used herein the term “Original Daily Purchase
Amount” shall mean Twenty Thousand Five Dollars ($25,000) per
Trading Day. As used herein, the term “Daily Purchase
Amount” shall mean initially Twenty Thousand Five Dollars
($25,000) per Trading Day, which amount may be increased or
decreased from time to time pursuant to this Section
1(c).
(ii)
Company’s Right
to Decrease the Daily Purchase Amount . The Company shall always
have the right at any time to decrease the amount of the Daily
Purchase Amount by delivering written notice (a “Daily
Purchase Amount Decrease Notice”) to the Buyer which notice
shall specify the new Daily Purchase Amount. The decrease in
the Daily Purchase Amount shall become effective one Trading Day
after receipt by the Buyer of the Daily Purchase Amount Decrease
Notice. Any purchases by the Buyer which have a Purchase Date
on or prior to the first (1st) Trading Day after receipt by the
Buyer of a Daily Purchase Amount Decrease Notice must be honored by
the Company as otherwise provided herein. The decrease in the
Daily Purchase Amount shall remain in effect until the Company
delivers to the Buyer a Daily Purchase Amount Increase Notice (as
defined below).
(iii)
Company’s Right
to Increase the Daily Purchase Amount . The Company shall have the
right (but not the obligation) to increase the amount of the Daily
Purchase Amount in accordance with the terms and conditions set
forth in this Section 1(c)(iii) by delivering written notice to the
Buyer stating the new amount of the Daily Purchase Amount (a
“Daily Purchase Amount Increase Notice”). A Daily
Purchase Amount Increase Notice shall be effective five (5) Trading
Days after receipt by the Buyer. The Company shall always
have the right at any time to increase the amount of the Daily
Purchase Amount up to the Original Daily Purchase Amount.
With respect to increases in the Daily Purchase Amount above
the Original Daily Purchase Amount, as the market price for the
Common Stock increases the Company shall have the right from time
to time to increase the Daily Purchase Amount as follows. For
every $0.10 increase in Threshold Price above $1.50 (subject to
equitable adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction), the
Company shall have the right to increase the Daily Purchase Amount
by up to an additional $2,500 in excess of the Original Daily
Purchase Amount. “Threshold Price” for purposes
hereof means the lowest Sale Price of the Common Stock during the
five (5) consecutive Trading Days immediately prior to the
submission to the Buyer of a Daily Purchase Amount Increase Notice
(subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction). For example, if the Threshold Price is $2.00,
the Company shall have the right to increase the Daily Purchase
Amount to up to $37,500 in the aggregate. If the Threshold
Price is $3.00, the Company shall have the right to increase the
Daily Purchase Amount to up to $62,500 in the aggregate. Any
increase in the amount of the Daily Purchase Amount shall continue
in effect until the delivery to the Buyer of a Daily Purchase
Amount Decrease Notice. However, if at any time during any
Trading Day the Sale Price of the Common Stock is below the
applicable Threshold Price, such increase in the Daily Purchase
Amount shall be void and the Buyer’s obligations to buy
Purchase Shares hereunder in excess of the applicable maximum Daily
Purchase Amount shall be terminated. Thereafter, the Company
shall again have the right to increase the amount of the Daily
Purchase Amount as set forth herein by delivery of a new Daily
Purchase Amount Increase Notice only if the Sale Price of the
Common Stock is above the applicable Threshold Price on each of
five (5) consecutive Trading Days immediately prior to such new
Daily Purchase Amount Increase Notice.
(iv)
The Block Purchase
Amount .
As used herein the term “Block Purchase Amount”
shall mean such Purchase Amount as specified by the Company in a
Block Purchase Notice. As used herein the term “Block
Purchase Notice” shall mean an irrevocable written notice
from the Company to the Buyer directing the Buyer to buy the
Purchase Amount in Purchase Shares as specified by the Company
therein at the Block Purchase Price. For a Block Purchase
Notice to be valid the following conditions must be met: (1) the
Block Purchase Amount shall not exceed Two Hundred Fifty Thousand
Dollars ($250,000) per Block Purchase Notice, (2) the Company must
deliver the Purchase Shares on the same day as the Block Purchase
Notice is delivered and (3) the Sale Price of the Common Stock must
have been above $2.50 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction) during the ten (10) Trading Days prior
to the delivery of the Block Purchase Notice. The Block
Purchase Amount may be increased to up to $500,000 if the Sale
Price of the Common Stock is above $4.00 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) during the ten
(10) Trading Days prior to the delivery of the Block Purchase
Notice. The Company may deliver multiple Block Purchase
Notices as it shall determine; provided however, at least ten (10)
Trading Days must have passed since the most recent Block Purchase
was completed. As used herein, the term “Block Purchase
Price” shall mean the lowest Purchase Price during the
previous fifteen (15) Trading Days prior to the date that the Block
Purchase Notice was received by the Buyer. The daily
purchases shall be automatically suspended for ten (10) trading
days each time any such block purchase notice is
delivered.
(d)
Limitations on
Purchases .
(i)
Limitation on
Beneficial Ownership . The Buyer shall not have the
right or the obligation to purchase shares of Common Stock under
this Agreement to the extent that after giving effect to such
purchase the Buyer together with its affiliates would beneficially
own in excess of 9.9% of the outstanding shares of the Common Stock
following such purchase. For purposes hereof, the number of
shares of Common Stock beneficially owned by the Buyer and its
affiliates or acquired by the Buyer and its affiliates, as the case
may be, shall include the number of shares of Common Stock issuable
in connection with a purchase under this Agreement with respect to
which the determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (1) a
purchase of the remaining Available Amount which has not been
submitted for purchase, and (2) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any notes or warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Buyer and its
affiliates. For purposes of this Section, in determining the
number of outstanding shares of Common Stock the Buyer may rely on
the number of outstanding shares of Common Stock as reflected in
(1) the Company's most recent Form 10-Q or Form 10-K (or Form
10-KSB or Form 10-QSB), as the case may be, (2) a more recent
public announcement by the Company or (3) any other written
communication by the Company or its Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the
reasonable written or oral request of the Buyer, the Company shall
promptly confirm orally and in writing to the Buyer the number of
shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined
after giving effect to any purchases under this Agreement by the
Buyer since the date as of which such number of outstanding shares
of Common Stock was reported. Except as otherwise set forth
herein, for purposes of this Section 1(d)(i), beneficial ownership
shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended.
(ii)
Company's Right to
Suspend Purchases . The Company may, at any
time, give written notice (a " Daily Purchase Suspension Notice")
to the Buyer suspending Daily Purchases of Purchase Shares by the
Buyer under this Agreement. The Daily Purchase Suspension
Notice shall be effective only for Daily Purchases that have a
Purchase Date later than one (1) Trading Day after receipt of the
Daily Purchase Suspension Notice by the Buyer. Any Daily Purchase
by the Buyer that has a Purchase Date on or prior to the first
(1st) Trading Day after receipt by the Buyer of a Daily Purchase
Suspension Notice from the Company must be honored by the Company
as otherwise provided herein. Such Daily Purchase suspension
shall continue in effect until a revocation in writing by the
Company, at its sole discretion.
(iii)
Purchase Price
Floor .
The Company shall not affect any sales under this Agreement
and the Buyer shall not have the right nor the obligation to
purchase any Purchase Shares under this Agreement on any Trading
Day where the Purchase Price for any purchases of Purchase Shares
would be less than the Floor Price. “Floor Price”
means $0.50, which shall be
appropriately adjusted for any reorganization, recapitalization,
non-cash dividend, stock split or other similar
transaction.
(e)
Records of
Purchases .
The Buyer and the Company shall each maintain records showing
the remaining Available Amount at any give time and the dates and
Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.
(f)
Taxes
. The Company
shall pay any and all transfer, stamp or similar taxes that may be
payable with respect to the issuance and delivery of any shares of
Common Stock to the Buyer made under this Agreement.
2.
BUYER'S
REPRESENTATIONS AND WARRANTIES.
The Buyer represents and
warrants to the Company that as of the date hereof and as of the
Commencement Date:
(a)
Investment
Purpose .
The Buyer is entering into this Agreement and acquiring the
Commitment Shares, (as defined in Section 4(f) hereof) (this
Agreement and the Commitment Shares are collectively
referred to herein as the "Securities"), for its own account for
investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof; provided
however, by making the representations herein, the Buyer does not
agree to hold any of the Securities for any minimum or other
specific term.
(b)
Accredited Investor
Status .
The Buyer is an "accredited investor" as that term is defined
in Rule 501(a)(3) of Regulation D.
(c)
Reliance on
Exemptions .
The Buyer understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the
truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
(d)
Information . The Buyer has been furnished
with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and
sale of the Securities that have been reasonably requested by the
Buyer, including, without limitation, the SEC Documents (as defined
in Section 3(f) hereof). The Buyer understands that its
investment in the Securities involves a high degree of risk.
The Buyer (i) is able to bear the economic risk of an
investment in the Securities including a total loss, (ii) has such
knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the proposed
investment in the Securities and (iii) has had an opportunity to
ask questions of and receive answers from the officers of the
Company concerning the financial condition and business of the
Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due
diligence investigations conducted by the Buyer or its
representatives shall modify, amend or affect the Buyer's right to
rely on the Company's representations and warranties contained in
Section 3 below. The Buyer has sought such accounting, legal
and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the
Securities.
(e)
No Governmental
Review .
The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on
or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor
have such authorities passed upon or endorsed the merits of the
offering of the Securities.
(f)
Transfer or
Resale .
The Buyer understands that except as provided in the
Registration Rights Agreement (as defined in Section 4(a) hereof):
(i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder or (B) an exemption exists permitting such
Securities to be sold, assigned or transferred without such
registration; (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register
the Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption
thereunder.
(g)
Validity;
Enforcement .
This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable against the Buyer in accordance
with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors'
rights and remedies.
(h)
Residency
. The Buyer is a
resident of the State of Illinois.
(i)
No Prior Short
Selling .
The Buyer represents and warrants to the Company that at no
time prior to the date of this Agreement has any of the Buyer, its
agents, representatives or affiliates engaged in or effected, in
any manner whatsoever, directly or indirectly, any (i) "short sale"
(as such term is defined in Rule 3b-3 of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) of the Common Stock or
(ii) hedging transaction, which establishes a net short position
with respect to the Common Stock.
3.
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
The Company represents
and warrants to the Buyer that as of the date hereof and as of the
Commencement Date:
(a)
Organization and
Qualification . The Company and its
"Subsidiaries" (which for purposes of this Agreement means any
entity in which the Company, directly or indirectly, owns 50% or
more of the voting stock or capital stock or other similar equity
interests) are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authority
to own their properties and to carry on their business as now being
conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership of property
or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to
be so qualified or be in good standing could not reasonably be
expected to have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse
effect on any of: (i) the business, properties, assets, operations,
results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or (ii) the authority or
ability of the Company to perform its obligations under the
Transaction Documents (as defined in Section 3(b) hereof).
The Company has no Subsidiaries except as set forth on
Schedule 3(a).
(b)
Authorization;
Enforcement; Validity . (i) The Company has the
requisite corporate power and authority to enter into and perform
its obligations under this Agreement, the Registration Rights
Agreement and each of the other agreements entered into by
the parties on the Commencement Date and attached hereto as
exhibits to this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including without
limitation, the issuance of the Commitment Shares and the
reservation for issuance and the issuance of the Purchase Shares
issuable under this Agreement, have been duly authorized by the
Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or
its shareholders, (iii) this Agreement has been, and each other
Transaction Document shall be on the Commencement Date, duly
executed and delivered by the Company and (iv) this Agreement
constitutes, and each other Transaction Document upon its execution
on behalf of the Company, shall constitute, the valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies. The Board of Directors of the Company
has approved the resolutions (the “Signing
Resolutions”) substantially in the form as set forth as
Exhibit C-1 attached hereto to authorize this Agreement and
the transactions contemplated hereby. The Signing Resolutions
are valid, in full force and effect and have not been modified or
supplemented in any respect other than by the resolutions set forth
in Exhibit C-2 attached hereto regarding the registration
statement referred to in Section 4 hereof. The Company has
delivered to the Buyer a true and correct copy of a unanimous
written consent adopting the Signing Resolutions executed by all of
the members of the Board of Directors of the Company. No
other approvals or consents of the Company’s Board of
Directors and/or shareholders is necessary under applicable laws
and the Company’s Certificate of Incorporation and/or Bylaws
to authorize the execution and delivery of this Agreement or any of
the transactions contemplated hereby, including, but not limited
to, the issuance of the Commitment Shares and the issuance of the
Purchase Shares.
(c)
Capitalization
. As of July 8,
2005, the authorized capital stock of the Company consists of (i)
300,000,000 shares of Common Stock, of which as of the date hereof,
69,332,832 shares are issued and outstanding, no shares are held as
treasury shares, 16,933,000 shares are reserved for issuance
pursuant to the Company's stock option plans of which only
approximately 22,922,000 shares remain available for future grants
and no shares are issuable and reserved for issuance pursuant to
securities (other than stock options issued pursuant to the
Company's stock option plans) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 1,000,000 shares
of Preferred Stock, $0.10 par value of which as of the date hereof
no shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company,
(ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock
of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the
1933 Act (except the Registration Rights Agreement), (v) there are
no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is
or may become bound to redeem a security of the Company or any of
its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this
Agreement and (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the
Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as
amended and as in effect on the date hereof (the "By-laws"), and
summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents
containing the material rights of the holders thereof in respect
thereto.
(d)
Issuance of
Securities .
The Commitment Shares have been duly authorized and, upon
issuance in accordance with the terms hereof, the Commitment Shares
shall be (i) validly issued, fully paid and non-assessable and (ii)
free from all taxes, liens and charges with respect to the issue
thereof. 10,000,000 shares of Common Stock have been duly
authorized and reserved for issuance upon purchase under this
Agreement. Upon issuance and payment therefor in
accordance with the terms and conditions of this Agreement, the
Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
(e)
No
Conflicts .
Except as disclosed in Schedule 3(e), the execution, delivery
and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby
and thereby (including, without limitation, the reservation for
issuance and issuance of the Purchase Shares) will not (i) result
in a violation of the Certificate of Incorporation, any Certificate
of Designations, Preferences and Rights of any outstanding series
of preferred stock of the Company or the By-laws or (ii) conflict
with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
the rules and regulations of the Principal Market applicable to the
Company or any of its Subsidiaries) or by which any property or
asset of the Company or any of its Subsidiaries is bound or
affected, except in the case of conflicts, defaults and violations
under clause (ii), which could not reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in Schedule
3(e), neither the Company nor its Subsidiaries is in violation of
any term of or in default under its Certificate of Incorporation,
any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or By-laws or
their organizational charter or by-laws, respectively. Except
as disclosed in Schedule 3(e), neither the Company nor any of its
Subsidiaries is in violation of any term of or is in default under
any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations or amendments
which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of
any law, ordinance, regulation of any governmental entity, except
for possible violations, the sanctions for which either
individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act
or applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by
the Transaction Documents in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence shall be
obtained or effected on or prior to the Commencement Date.
Except as listed in Schedule 3(e), since January 1, 2003, the
Company has not received nor delivered any notices or
correspondence from or to the Principal Market. The Principal
Market has not commenced any delisting proceedings against the
Company.
(f)
SEC Documents;
Financial Statements . Except as disclosed in Schedule
3(f), since January 1, 2004, the Company has timely filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates (except as they
have been correctly amended), the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC (except as they may have been properly
amended), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As
of their respective dates (except as they have been properly
amended), the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
Except as listed in Schedule 3(f), the Company has received
no notices or correspondence from the SEC since January 1, 2003.
The SEC has not commenced any enforcement proceedings against
the Company or any of its subsidiaries.
(g)
Absence of Certain
Changes .
Except as disclosed in Schedule 3(g), since March 31, 2005,
there has been no material adverse change in the business,
properties, operations, financial condition or results of
operations of the Company or its Subsidiaries. The Company
has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any Bankruptcy Law nor does
the Company or any of its Subsidiaries have any knowledge or reason
to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings. The Company is
financially solvent and is generally able to pay its debts as they
become due .
(h)
Absence of
Litigation .
There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, which could
reasonably be expected to have a Material Adverse Effect.
A description of each action, suit, proceeding, inquiry
or investigation before or by any court, public board, government
agency, self-regulatory organization or body which, as of the date
of this Agreement, is pending or threatened in writing against or
affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, is set forth in
Schedule 3(h).
(i)
Acknowledgment
Regarding Buyer's Status . The Company acknowledges and
agrees that the Buyer is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company
further acknowledges that the Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyer
or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Buyer's purchase of the
Securities. The Company further represents to the Buyer that
the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and
its representatives and advisors.
(j)
No General
Solicitation . Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 1933 Act)
in connection with the offer or sale of the Securities.
(k)
Intellectual Property
Rights .
The Company and its Subsidiaries own or possess adequate
rights or licenses to use all material trademarks, trade names,
service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now conducted. Except
as set forth on Schedule 3(k), none of the Company's material
trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or,
by the terms and conditions thereof, could expire or terminate
within two years from the date of this Agreement. The Company
and its Subsidiaries do not have any knowledge of any infringement
by the Company or its Subsidiaries of any material trademark, trade
name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations,
trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical
information by others and, except as set forth on Schedule 3(k),
there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against,
the Company or its Subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or
other infringement, which could reasonably be expected to have a
Material Adverse Effect.
(l)
Environmental
Laws .
To the best of the Company’s knowledge, the Company and
its Subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(“Environmental Laws”), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit,
license or approval, except where, in each of the three foregoing
clauses, the failure to so comply could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect.
(m)
Title
. The Company and
its Subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 3(m) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company and any of its Subsidiaries.
Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
Subsidiaries.
(n)
Insurance
. The Company and
each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent in the
businesses in which the Company and its Subsidiaries are engaged.
Neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of
the Company and its Subsidiaries, taken as a whole.
(o)
Regulatory
Permits .
The Company and its Subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor
any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authorization or permit.
(p)
Tax Status
. The Company and
each of its Subsidiaries has made or filed all federal and state
income and all other material tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries
has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes
and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has
set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
(q)
Transactions With
Affiliates .
Except as set forth on Schedule 3(q) and other than the grant
or exercise of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has an interest or is an officer, director,
trustee or partner.
(r)
Application of
Takeover Protections . The Company and its board of
directors have taken or will take prior to the Commencement Date
all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyer as a result of the
transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the
Buyer's ownership of the Securities.
(s)
Foreign Corrupt
Practices .
Neither the Company, nor any of its Subsidiaries, nor any
director, officer, agent, employee or other person acting on behalf
of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct
or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended; or made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
4.
COVENANTS.
(a)
Filing of Form 8-K
and Registration Statement . If not then otherwise
disclosed in a registration statement the Company agrees that it
shall, within the time required under the 1934 Act file a Report on
Form 8-K disclosing this Agreement and the transaction contemplated
hereby. The Company shall also file within twenty (20)
Trading Days from the date hereof a new registration statement
covering only the sale of the Commitment Shares and at least
10,000,000 Purchase Shares in accordance with the terms of the
Registration Rights Agreement between the Company and the Buyer,
dated as of the date hereof (“Registration Rights
Agreement”). After such registration statement is
declared effective by the SEC, the Company agrees and acknowledges
that any sales by the Company to the Buyer pursuant to this
Agreement are sales of the Company's equity securities in a
transaction that is registered under the 1933 Act.
(b)
Blue Sky
. The Company shall
take such action, if any, as is reasonably necessary in order to
obtain an exemption for or to qualify (i) the initial sale of the
Commitment Shares and any Purchase Shares to the Buyer under this
Agreement and (ii) any subsequent resale of the Commitment Shares
and any Purchase Shares by the Buyer, in each case, under
applicable securities or "Blue Sky" laws of the states of the
United States in such states as is reasonably requested by the
Buyer from time to time, and shall provide evidence of any such
action so taken to the Buyer.
(c)
No Variable Priced
Financing .
Other than pursuant to this Agreement, the Company agrees
that beginning on the date of this Agreement and ending on the date
of termination of this Agreement (as provided in Section 11(k)
hereof), neither the Company nor any of its Subsidiaries shall,
without the prior written consent of the Buyer, contract for any
equity financing (including any debt financing with an equity
component) or issue any equity securities of the Company or any
Subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any Subsidiary (including debt
securities with an equity component) which, in any case (i) are
convertible into or exchangeable for an indeterminate number of
shares of common stock, (ii) are convertible into or exchangeable
for Common Stock at a price which varies with the market price of
the Common Stock, (iii) directly or indirectly provide for any
"re-set" or adjustment of the purchase price, conversion rate or
exercise price after the issuance of the security, or (iv) contain
any "make-whole" provision based upon, directly or indirectly, the
market price of t
