SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is dated as
of January 11, 2000 among IGEN International, Inc., a Delaware corporation (the
"COMPANY"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "PURCHASER" and, collectively, the
"PURCHASERS.")
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "COMMISSION") under
Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES ACT");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, an aggregate principal amount of
$35,000,000 of 5% Subordinated Convertible Debentures due January 11, 2005 (the
"Debentures"), in the form of EXHIBIT A annexed hereto and warrants (the
"WARRANTS") to purchase 282,258 shares of the Company's common stock, par value
$0.001 per share (the "COMMON STOCK"), in the form of EXHIBIT B annexed hereto;
and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form of EXHIBIT C annexed hereto (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS
1.1 PURCHASE AND SALE. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, shall purchase from the Company on the
Closing Date (as defined below), the principal amount of Debentures as set
forth for such Purchaser on SCHEDULE I.
1.2 CLOSING.
a. THE CLOSING. The closing of the purchase and sale of the
Debentures and the issuance of the Warrants (the "CLOSING") shall take place
at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison
Avenue, New York, New York 10022, or by transmission by facsimile and
overnight courier, immediately following the execution hereof, or such later
date or different location as the parties shall agree, but not prior to the
date that the conditions set forth in Section 4.1 have been satisfied or
waived by the appropriate party (the "CLOSING DATE"). At the Closing:
Each Purchaser shall deliver, as directed by the Company, its portion of the
purchase price as set forth next to its name on SCHEDULE I in United States
dollars in immediately available funds to an account or accounts designated in
writing by the Company;
The Company shall deliver to each Purchaser a Debenture(s) in the form of
EXHIBIT A hereto representing the principal amount of Debentures purchased by
such Purchaser as set forth on SCHEDULE I hereto;
The Company shall deliver to each Purchaser a Warrant, in the form of EXHIBIT B
hereto, representing the right to acquire the number of shares of Common Stock
as set forth on SCHEDULE I hereto; and
The parties shall execute and deliver each of the documents referred to in
Section 4.1 hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to each of
the Purchasers. Any information disclosed in any Schedule hereto shall be
deemed to have been disclosed in all Schedules hereto.
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a. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Except as set forth on SCHEDULE 2.1(a), the
Company has no subsidiaries (collectively, the "SUBSIDIARIES"). Each of the
Subsidiaries (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns the majority of such entity's
capital stock or holds an equivalent equity or similar interest) is a
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly qualified to do business as
a foreign corporation and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality, validity
or enforceability of any of this Agreement or the Transaction Documents (as
defined in Section 2.1(b)) or any of the transactions contemplated hereby or
thereby, (y) have or result in a material adverse effect on the results of
operations, assets or financial condition of the Company and its
Subsidiaries, taken as a whole or (z) impair the Company's ability to perform
fully on a timely basis its obligations under any Transaction Document (any
of (x), (y) or (z), being a "MATERIAL ADVERSE EFFECT").
b. AUTHORIZATION; ENFORCEMENT. Subject to the receipt of
written waiver of the Notice of the Special Meeting of the Board of Directors
of the Company held on January 10, 2000: (i) the Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement, the Debentures, the Warrants and
the Registration Rights Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and otherwise to carry out its obligations hereunder and
thereunder, (ii) the execution and delivery of each of this Agreement and the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further action is required by the Company,
its Board of Directors or its stockholders, and (iii) each of this Agreement
and the Transaction Documents has been duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application, and except that rights to indemnification and contribution may
be limited by Federal or state securities laws or public policy relating
thereto.
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c. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company is as set forth in SCHEDULE 2.1(c). All of such
outstanding shares of capital stock have been, or upon issuance will be,
validly authorized and issued, fully paid and nonassessable and were issued
in accordance with the registration or qualification provisions of the
Securities Act, or pursuant to valid exemptions therefrom. Except as
disclosed in the SEC Documents or on SCHEDULE 2.1(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, nor
is any holder of the Common Stock entitled to preemptive or similar rights
arising out of any agreement or understanding with the Company by virtue of
any Transaction Document, (ii) 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 or
exchangeable for, or giving any Person (as defined below) any right to
subscribe for or acquire, 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, (iii) there are no outstanding debt securities 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 Securities Act (except the
Registration Rights Agreement), (v) there are no outstanding securities 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 Debentures
or Warrants, or upon the conversion of the Debentures or exercise of the
Warrants, (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements, or any similar plan or agreement and
(viii) except as specifically disclosed in the SEC Documents (as defined in
Section 2.1(k) hereof), to the knowledge of the Company, no Person (as
defined below) or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT")) or has the right to acquire by agreement
with or by obligation binding upon the Company beneficial ownership of in
excess of 5% of the Common Stock. "PERSON" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or other entity of any kind.
d. AUTHORIZATION, VALIDITY AND ISSUANCE OF SHARES. The shares
of Common Stock issuable upon conversion of the Debentures and exercise of
the Warrants (collectively, the "UNDERLYING SHARES") are and will at all
times hereafter continue to be duly authorized and reserved for issuance and
the shares of Common Stock issued upon conversion of the Debentures (the
"DEBENTURE SHARES") and exercise of the Warrants (the "WARRANT SHARES") will
be validly issued, fully paid and non-assessable, free and clear of all
liens, encumbrances and Company rights of first refusal, other than liens and
encumbrances created by the Purchasers (collectively, "LIENS") and will not
be subject to any preemptive or similar rights.
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e. NO CONFLICTS. The execution, delivery and performance of
this Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby (including the issuance of the Underlying Shares) do not and will not
(i) conflict with or violate any provision of the Company's Certificate of
Incorporation as amended and in effect on the date hereof (the "CERTIFICATE
OF INCORPORATION"), the Company's Bylaws, as in effect on the date hereof
(the "BYLAWS") or other organizational documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a breach or 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, patent, patent license or instrument
(evidencing a Company or Subsidiary debt or otherwise) to which the Company
or any Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
any Subsidiary is subject (including Federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange
on which the Common Stock is traded or listed) applicable to the Company or
any of its Subsidiaries, or by which any material property or asset of the
Company or any Subsidiary is bound or affected; except in each case where
such occurrence could not reasonably be expected to result in a Material
Adverse Effect.
f. CONSENTS AND APPROVALS. Except as set forth on
SCHEDULE 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or
other governmental authority, regulatory or self regulatory agency, or other
Person in connection with the execution, delivery and performance by the
Company of this Agreement or the Transaction Documents, other than (i) the
filing of a registration statement with the Commission, which shall be filed
in accordance with and in the time periods set forth in the Registration
Rights Agreement, (ii) the application(s) or any letter(s) acceptable to the
National Market System of Nasdaq Stock Market ("NASDAQ") for the listing of
the Underlying Shares with Nasdaq (and with any other national securities
exchange or market on which the Common Stock is then listed), which shall be
filed in accordance with, and in the time periods set forth in, Section
3.6(b) hereof, and (iii) any filings, notices or registrations under
applicable state securities laws (together with the consents, waivers,
authorizations, orders, notices and filings referred to on SCHEDULE 2.1(f),
the "REQUIRED APPROVALS").
g. LITIGATION; PROCEEDINGS. Except as set forth in the SEC
Documents or on SCHEDULE 2.1(g), there is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties or
assets before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of
any of this Agreement or the Transaction Documents or (ii) could reasonably
be expected to, individually or in the aggregate, have a Material Adverse
Effect.
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h. NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
other credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties or assets is bound, (ii) is in
violation of any order of any court, arbitrator or governmental body
applicable to it, (iii) is in violation of any statute, rule or regulation of
any governmental authority to which it is subject or (iv) is in any material
violation of any of the provisions of its respective certificate of
incorporation, bylaws or other charter documents such that any right of a
holder of the Debentures would be affected. The business of the Company and
its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance, rule or regulation of any governmental
entity, except where such violations have not resulted or would not
reasonably result, individually or in the aggregate, in a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is in breach of any
agreement where such breach, individually or in the aggregate, would have a
Material Adverse Effect.
i. DISCLOSURE; ABSENCE OF CERTAIN CHANGES. None of this
Agreement, the Schedules to this Agreement, the Transaction Documents or any
other written information, report, financial statement, exhibit, schedule or
document furnished by or on behalf of the Company in connection with the
negotiation of the transactions contemplated hereby contained at the time it
was so furnished or now contains any untrue statement of a material fact or
omitted at such time or now omits to state any material fact necessary in
order to make the statements made herein and therein, in light of the
circumstances under which they were made, not misleading. Except as disclosed
on SCHEDULE 2.1(i) or in SEC Documents filed on EDGAR at least five business
days prior to the date hereof, since September 30, 1999, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities or results of
operations of the Company or the 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 proceedings.
j. PRIVATE OFFERING. The Company and all Persons acting on
its behalf have not made, directly or indirectly, and will not make, offers
or sales of any securities or solicited any offers to buy any security under
circumstances that would require registration of the Debentures, the
Warrants, the Debenture Shares or the Warrant Shares or the issuance of such
securities under the Securities Act. The offer, sale and issuance of the
Debentures, the Warrants, the Debenture Shares and the Warrant Shares to the
Purchasers will not be integrated with any other offer, sale and issuance of
the Company's securities (past, current, or future) under the Securities Act
in a manner that would require the registration under the Securities Act of
the sale of the Debentures, the Warrants, the Debenture Shares or the Warrant
Shares to any purchaser. Subject to the accuracy and completeness of the
representations and warranties of the respective Purchasers contained in
Section 2.2 hereof, the offer, sale and issuance by the Company to the
Purchasers of the Debentures, the Warrants and the Underlying Shares are
exempt from the registration requirements of the Securities Act.
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k. SEC DOCUMENTS; FINANCIAL STATEMENTS. The Common Stock is
registered pursuant to Section 12(g) of the Exchange Act. The Company has
filed all reports, schedules, forms, statements and other documents required
to be filed by it with the Commission pursuant to the reporting requirements
of the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof
(the foregoing materials and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein being collectively referred to
herein as the "SEC DOCUMENTS"), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior
to the expiration of any such extension. As of their respective dates, the
SEC Documents complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, 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, 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 Commission with respect thereto as
in effect at the time of filing. Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments.
l. INVESTMENT COMPANY. The Company is not, and is not
controlled by or under common control with an affiliate (an "AFFILIATE") of
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
m. BROKER'S FEES. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement or the
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as
set forth in SCHEDULE 2.1(m). The Company has not entered into any agreement
or undertaken any obligation whereby the Purchasers shall have any obligation
with respect to any fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section 2.1(m) that
may be due in connection with the transactions contemplated by this Agreement
and the Transaction Documents.
n. FORM S-3 ELIGIBILITY. The Company is, and at the Closing
Date will be, eligible to register securities (including the Underlying
Shares) for resale with the Commission under Form S-3 (or any successor form)
promulgated under the Securities Act.
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o. LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The
principal market on which the Common Stock is currently traded is Nasdaq.
Except as disclosed on SCHEDULE 2.1(o), the Company has not in the two years
preceding the date hereof received notice (written or oral) from Nasdaq (or
any stock exchange, market or trading facility on which the Common Stock is
or has been listed (or on which it has been quoted)) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such market or exchange. The Company is not aware of any facts which would
reasonably be expected to lead to delisting or suspension of the Common Stock
by Nasdaq. After giving effect to the transactions contemplated by this
Agreement and the Transaction Documents, the Company is and will be in
compliance with all such maintenance requirements.
p. INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own, possess, or have the right to acquire adequate rights or
licenses to use all material trademarks, trademark applications, trade names
and service marks, whether or not registered, and all patents, patent
applications, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and intellectual property rights (collectively,
"INTELLECTUAL PROPERTY RIGHTS") which are reasonably necessary for use in
connection with their respective businesses as now conducted and as described
in the SEC Documents, except for such Intellectual Property Rights as the
Company could acquire with commercially reasonable efforts. Except as set
forth in the SEC Documents or on SCHEDULE 2.1(p), none of the Company's
Intellectual Property Rights reasonably necessary for use in connection with
the Company's business as now conducted has expired or terminated, or are
expected to expire or terminate within two years from the date of this
Agreement. Neither the Company nor any of its Subsidiaries has infringed or
is infringing on any of the Intellectual Property Rights of any Person and,
except as set forth in the SEC Documents or on SCHEDULE 2.1(p), there is no
claim, action or proceeding which has been made or brought or alleged
against, or to the Company's knowledge, is being made, brought or threatened
against, the Company or its Subsidiaries regarding the infringement of any of
the Intellectual Property Rights, except where any of the foregoing would not
have a Material Adverse Effect. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of their material intellectual properties.
q. EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that
relations with their employees are satisfactory. Except as set forth on
SCHEDULE 2.1(q), since September 30, 1999 no executive officer (as defined in
Rule 501(f) under the Securities Act) has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.
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r. REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
described on SCHEDULE 2.1(r) hereto, (i) the Company has not granted or
agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission
or any other governmental authority which has not been satisfied and (ii) no
Person, including, but not limited to, current or former stockholders of the
Company, underwriters, brokers or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by this Agreement or any Transaction
Document.
s. TITLE. Except as disclosed on SCHEDULE 2.1(s), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property and 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, except for Liens that 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 the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and, to the Company's best knowledge,
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 the Subsidiaries.
t. PERMITS. The Company and each of its Subsidiaries possess
all certificates, authorizations, licenses, easements, consents, approvals,
orders and permits necessary to own, lease and operate their respective
properties and to conduct their respective businesses as currently conducted
except such permits as the Company could obtain within 60 days or where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and there is no
proceeding pending, or, to the knowledge of the Company, threatened, relating
to the revocation, modification, suspension or cancellation of any Material
Permit. Neither the Company nor any of the Subsidiaries is in conflict with
or default or violation of any Material Permit.
u. 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. Neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverages 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.
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v. TAX STATUS; FIRPTA. Except as set forth on
SCHEDULE 2.1(w), the Company and each of the Subsidiaries has made or filed all
federal and state income and all other 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 (which are set forth on SCHEDULE 2.1(w) hereof), and has set aside on
its books provisions 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. The Company is not a "United
States real property holding corporation" within the meaning of Section
847(c)(2) of the Internal Revenue Code of 1986, as amended.
w. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
SEC Documents or on SCHEDULE 2.1(x), and other than the granting of stock
options and documents disclosed on SCHEDULE 2.1(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 entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner that is
required to be disclosed in the SEC Documents.
x. APPLICATION TO TAKEOVER PROTECTION. The Company and its
Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination or
other similar anti-takeover provision under the Certificate of Incorporation,
Bylaws or the laws of the state of incorporation which is or could become
applicable to the Purchasers or the Transaction Documents as a result of the
transactions contemplated by this Agreement or the Transaction Documents.
To the best of the Company's knowledge (based solely upon reports under
Section 13 of the Exchange Act filed with respect to the Company's Common Stock
and relying on the accuracy of the Purchasers' representations under
Section 2.2 hereof), none of the transactions contemplated by this Agreement
or the Transaction Documents, including the conversion of the Debentures and
the exercise of the Warrants, will trigger any poison pill provisions of any
of the Company's stockholders' rights or similar agreements.
y. ENVIRONMENTAL LAWS. Except as set forth on
SCHEDULE 2.1(z), 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 permits, licenses or other approvals except where the
failure of any of the foregoing would not result in a Material Adverse Effect.
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z. 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 (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds, (iii) violated (or is in violation of) any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
aa. SOLICITATION MATERIALS. The Company has not
(i) distributed any offering materials in connection with the offering and
sale of the Debentures or the Warrants, other than the SEC Documents, the
Schedules to this Agreement, any amendments and supplements thereto and the
materials listed on SCHEDULE 2.1(bb), or (ii) solicited any offer to buy or
sell the Debentures or the Warrants by means of any form of general
solicitation or advertising. Neither the Company, nor any of its Affiliates,
nor any Person acting on its or their behalf, has engaged or will engage in
any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) in connection with the offer or
sale of the Debentures or Warrants.
bb. ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges
that its obligation to issue Debenture Shares and Warrant Shares upon
conversion of the Debentures or exercise of the Warrants in accordance with
this Agreement, the Debentures and the Warrants is unaffected by any dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
cc. ACKNOWLEDGEMENT REGARDING PURCHASERS' PURCHASE OF
DEBENTURES. The Company acknowledges and agrees that the Purchasers are
acting solely in the capacity of arm's length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any statement made by any
Purchaser or any of their respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or
a recommendation and is merely incidental to the Purchasers' purchase of the
Debentures. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
dd. SOLVENCY. Both before and after giving effect to the
transactions contemplated by this Agreement, (i) the fair value of the
Company's assets is greater than the sum of the Company's debts and (ii) the
Company believes that it has the ability to pay its existing debts as they
mature.
11
ee. OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Purchasers relating to the terms and
conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents, except for the term sheet
letter, dated December 6, 1999 and as subsequently amended, which the parties
acknowledge shall be terminated and of no force and effect upon the Closing.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. ORGANIZATION; AUTHORITY. Such Purchaser is a corporation
or a limited duration company or a limited liability company or limited
partnership duly formed, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation with the requisite
power and authority, corporate or otherwise, to enter into and to consummate
the transactions contemplated hereby and by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The purchase
by such Purchaser of the Debentures and the Warrants hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed
and delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity, and except that rights to indemnification and
contribution may be limited by Federal or state securities laws or public
policy relating thereto.
b. INVESTMENT INTENT. Such Purchaser is acquiring the
Debentures and the Warrants for its own account and not with a present view
to or for distributing or reselling the Debentures, the Warrants, the
Debenture Shares or the Warrant Shares or any part thereof or interest
therein in violation of the Securities Act; PROVIDED, HOWEVER, that by making
the representations herein, such Purchaser does not agree to hold any of the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the
Debentures at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
c. PURCHASER STATUS. At the time such Purchaser was offered
the Debentures and the Warrants, and at the Closing Date, (i) it was and will
be an "accredited investor" as defined in Rule 501 under the Securities Act
and (ii) such Purchaser, either alone or together with its representatives,
had and will have such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks
of the prospective investment in the Debentures and the Warrants.
d. RELIANCE. Such Purchaser understands and acknowledges that
(i) the Debentures and the Warrants are being offered and sold to such
Purchaser without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities
Act under Section 4(2) of the Securities Act or Regulation D promulgated
thereunder and (ii) the availability of such exemption depends in part on,
and the Company will rely upon the accuracy and truthfulness of, the
representations set forth in this Section 2.2 and such Purchaser hereby
consents to such reliance.
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e. INFORMATION. Such Purchaser and its advisors, if any, have
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
Debentures and Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigation conducted by Purchaser or any of its
advisors or representatives shall modify, amend or affect Purchaser's right
to rely on the Company's representations and warranties contained in Section
2.1 above or representations and warranties of the Company contained in any
other Transaction Document. Such Purchaser understands that its investment in
the Debentures and Warrants involves a significant degree of risk.
f. GOVERNMENTAL REVIEW. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Debentures or Warrants.
g. RESIDENCY. Such Purchaser is a resident of the
jurisdiction set forth immediately below such Purchaser's name on SCHEDULE II
hereto.
h. Such Purchaser is not an Affiliate of, and is not acting in
concert with or as a group (as defined in Rule 13d-3 under the Exchange Act)
with, any reporting person set forth in Amendment No. 2 to Schedule 13D
relating to the Company's Common Stock, filed on February 3, 1999 by, among
others, White Rock Capital, Inc. and, to the best of such Purchaser's
knowledge, upon the Closing, none of such persons will beneficially own any
of the Debentures, Warrants or Underlying Shares.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
13
ARTICLE III.
OTHER AGREEMENTS
3.1 TRANSFER RESTRICTIONS.
a. If any Purchaser should decide to dispose of the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares held by
it, such Purchaser understands and agrees that it may do so only pursuant to
an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from the registration requirements of
the Securities Act or Rule 144 promulgated under the Securities Act ("RULE
144"). In connection with any transfer of any Debentures, Warrants, Debenture
Shares or Warrant Shares other than pursuant to an effective registration
statement, Rule 144 or to the Company, the Company may require the transferor
thereof to provide to the Company a written opinion of counsel experienced in
the area of United States securities laws selected by the transferor, the
form and substance of which opinion shall be customary for opinions of
counsel in comparable transactions, to the effect that such transfer does not
require registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register any transfer by any Purchaser to an Affiliate of such Purchaser,
provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act and
such Affiliate transferee agrees in writing to be bound by the terms of this
Agreement in which case the transferee shall have the rights of a Purchaser
under this Agreement and the Transaction Documents. If a Purchaser provides
the Company with an opinion of counsel, the form and substance of which
opinion shall be customary for opinions of counsel in comparable
transactions, to the effect that a public sale, assignment or transfer of the
Debentures, the Debenture Shares, the Warrants and the Warrant Shares may be
made without registration under the Securities Act. Notwithstanding the
foregoing or anything else contained herein to the contrary, the securities
may be pledged as collateral in connection with a BONA FIDE margin account or
other lending arrangement; PROVIDED, HOWEVER, that any such pledge shall not
affect the requirements of Section 3.1(b) below.
b. Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Debentures,
the Warrants, the Debenture Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR UPON DELIVERY OF AN OPINION
OF COUNSEL THAT THE SECURITIES MAY BE TRANSFERRED PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
14
Neither the Debentures, the Warrants, the Debenture Shares nor the
Warrant Shares shall contain the legend set forth above (or any other legend) if
in the written opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company agrees that
it will provide each Purchaser, upon request, with a certificate or certificates
representing Securities, Warrants, Debenture Shares or Warrant Shares, free from
such legend at such time as such legend is no longer required hereunder. If such
certificate or certificates had previously been issued with such a legend or any
other legend, the Company shall, upon request and delivery of such certificate
or certificates to the Company by such Purchaser, reissue to such Purchaser such
certificate or certificates free of any legend.
c. Each Purchaser agrees not to transfer any Debentures,
Warrants, Debenture Shares or Warrant Shares in violation of the federal
securities laws or the securities laws of any state.
3.2 STOP TRANSFER INSTRUCTION. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1.
3.3 FURNISHING OF INFORMATION. As long as any Purchaser owns the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all reports required to be filed by the Company after the date hereof
pursuant to Section 13, 14 or 15(d) of the Exchange Act and, unless filed by
EDGAR, promptly furnish, but in no event later than two (2) business days
after the filing thereof with the Commission, the Purchasers with true and
complete copies of all such filings, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations. As
long as any Purchaser owns the Debentures, the Warrants, the Debenture Shares
or the Warrant Shares, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made under the Exchange Act. The Company also agrees to send the following to
each Purchaser prior to and during the Effectiveness Period (as defined in
the Registration Rights Agreement) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to
the stockholders. The Company will also include each holder in its
distribution list for press releases by the Company or any of its
Subsidiaries for dissemination in accordance with its general operating
procedures. Upon the request of any such Person, the Company shall deliver to
such Person a written certification of a duly authorized officer as to
whether it has complied with the foregoing requirements. The Company further
covenants that it will take such further action as may be legally required to
enable any holder of
15
the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to sell
the Debentures, the Warrants, the Debenture Shares, or the Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in Section 3.1(b).
3.4 BLUE SKY LAWS. In accordance with the Registration Rights
Agreement, during the Effectiveness Period (as defined in the Registration
Rights Agreement) the Company shall (i) qualify the Debenture Shares and the
Warrant Shares under the securities or "blue sky" laws of such jurisdictions
as the Purchasers may request (or to obtain an exemption from such
qualification), (ii) shall provide evidence of any such action so taken to
each Purchaser on or prior to the Closing Date and (iii) shall continue such
qualification at all times through the resale of all Debenture Shares or
Warrant Shares.
3.5 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer
or sale of the Debentures, the Warrants, the Debenture Shares or the Warrant
Shares in a manner that would require the registration under the Securities
Act of the sale of the Debentures, the Warrants, the Debenture Shares or the
Warrant Shares to any Purchaser. Notwithstanding the foregoing, each
Purchaser acknowledges that the Company may sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security of the
Company, including the Common Stock, for consideration equal to or less than
the current market value of such security.
3.6 LISTING, REGISTRATION AND RESERVATION OF DEBENTURE SHARES AND
WARRANT SHARES.
a. The Company shall (i) not later than three (3) business
days after the Closing Date prepare and file with Nasdaq an additional shares
listing application or a letter acceptable to Nasdaq covering and listing
1,700,000 shares of Common Stock (the "REQUIRED MINIMUM SHARES"), (ii) take
all commercially reasonable steps necessary to cause the Required Minimum
Shares to be approved for listing on Nasdaq as soon as possible thereafter,
(iii) maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all such Required Minimum Shares on Nasdaq (as well
as on any other national securities exchange or market on which the Common
Stock is then listed), and (iv) provide to the Purchasers evidence of such
listing. Neither the Company nor any of its Subsidiaries shall take any
action which may result in the delisting or suspension of the Common Stock on
Nasdaq. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 3.6(a).
b. The number of shares of Common Stock initially included in
the Initial Registration Statement (as defined in the Registration Rights
Agreement) shall be the Required Minimum Shares.
16
c. The Company at all times shall reserve the Required Minimum
Shares. If at any time the number of shares of Common Stock authorized and
reserved for issuance is insufficient to cover the number of Debenture Shares
and Warrant Shares issuable upon conversion of the outstanding Debentures and
exercise of the outstanding Warrants (based on the Conversion Price (as
defined in the Debenture) of the Debentures in effect from time to time and
the Exercise Price (as defined in the Warrants) of the Warrants in effect
from time to time) without regard to any limitation on conversions or
exercises, the Company will promptly take all corporate action reasonably
necessary to authorize and reserve such shares pursuant to Section 3(b) of
the Registration Rights Agreement, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet the
Company's obligations under this Section 3.6(c), in the case of an
insufficient number of authorized shares, and using commercially reasonable
efforts to obtain stockholder approval of an increase in such authorized
number of shares.
3.7 NOTICE OF BREACHES.
a. The Company and each Purchaser shall give prompt written
notice to the other of any breach by it of any representation, warranty or
other agreement contained in this Agreement or in the Transaction Documents,
as well as any events or occurrences arising after the date hereof and prior
to the Closing Date, which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may
be, contained herein to be incorrect or breached as of the Closing Date;
provided such notice will not constitute material non-public information.
However, no disclosure by either party pursuant to this Section 3.7 shall be
deemed to cure any breach of any representation, warranty or other agreement
contained herein or in the Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the
Company shall promptly notify, provided such notification will not constitute
material non-public information, each Purchaser of any notice or claim
(written or oral) that it receives from any lender of the Company or any
Subsidiary with respect to indebtedness in excess of $2,000,000 to the effect
that the consummation of the transactions contemplated hereby and by the
Transaction Documents violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction
Documents shall not be imputed to, and shall have no effect upon, any other
Purchaser or affect the Company's obligations under this Agreement or any
Transaction Document to any non-defaulting Purchaser.
3.8 FORM D. The Company agrees to file a Form D with respect to the
Debentures and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
17
3.9 FUTURE FINANCINGS.
a. Except for issuance of (i) the Underlying Shares,
(ii) shares of Common Stock deemed to have been issued by the Company in
connection with any plan which has been approved by the Board of Directors of
the Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant of the Company, (iii) shares of
Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof and listed in SCHEDULE 2.1(c) hereto,
(iv) shares of Common Stock issued or deemed to have been issued as
consideration for an acquisition by the Company of a division, assets or
business (or stock constituting any portion thereof) from another Person,
(v) shares of Common Stock issuable pursuant to any event for which an
adjustment to the Conversion Price is required pursuant to Section 4.5 of the
Debenture, (vi) any other shares of Common Stock issued for which the Company
receives no consideration, or (vii) shares of Common Stock or other securities
convertible into or exchangeable or exercisable for Common Stock issued in an
offering registered under the Securities Act, if the Company agrees to issue
shares of Common Stock or other securities convertible into or exchangeable
or exercisable for Common Stock (the "NEW SECURITY") while any Debentures are
outstanding (a "FUTURE FINANCING"), the Company shall provide to the
Purchasers written notice of the Future Financing containing in reasonable
detail (i) the proposed terms of the Future Financing, (ii) the amount of the
proceeds that will be raised and (iii) the Person with whom such Future
Financing shall be effected, and attached to which shall be a term sheet or
similar document relating thereto (the "FUTURE FINANCING NOTICE"). Upon
receiving the Future Financing Notice, each Purchaser shall have the pro rata
right (based on the principal amount of the Debentures held by such Purchaser
relative to the aggregate principal amount of Debentures outstanding) to
purchase, on the same terms as the Future Financing, that percentage of the
New Securities equal to (i) the sum of (x) the number of shares of Common
Stock which may be purchased upon conversion by the amount of the then
outstanding principal amount of such Purchaser's Security plus (y) the number
of shares of Common Stock underlying the Purchaser's outstanding Warrants
divided by (ii) the aggregate number of shares of Common Stock outstanding on
a fully diluted basis immediately prior to the issuance of the New
Securities. In the event the terms and conditions of a proposed Future
Financing are amended in any respect after delivery of the Future Financing
Notice but prior to the closing of the proposed Future Financing to which
such Future Financing Notice relates, the Company shall deliver a new notice
to each Purchaser describing the amended terms and conditions of the proposed
Future Financing and each Purchaser thereafter shall have an option during
the two (2) Trading Day period following delivery of such new notice to
purchase its pro rata share (in accordance with the terms hereof) of the New
Securities being offered on the same terms as contemplated by such proposed
Future Financing, as amended. The foregoing sentence shall apply to
successive amendments to the terms and conditions of any proposed Future
Financing. Those Purchasers desiring to purchase additional shares of Common
Stock must notify the Company of their intention to do so within five (5)
Trading Days after the Company has informed the Purchasers of their right to
purchase additional shares of Common Stock. Within five (5) Trading Days of
the termination of the final notice period, the transactions contemplated by
this Section 3.9 shall close, subject to the completion of mutually
satisfactory documentation, and the Company shall tender to each Purchaser
certificates representing the New Securities that it agreed to purchase and
the Purchasers shall make payment for the entire purchase price in
immediately available funds at the closing of such sale; PROVIDED, HOWEVER,
that each Purchaser, in lieu of providing cash as consideration for the
purchase price, may retire all or a portion of the outstanding principal
amount of and any interest owing on the Debentures as
18
payment of the purchase price for the shares of Common Stock that it desires to
purchase pursuant to this Section 3.9. "TRADING DAY" shall mean a day on which
the Nasdaq (or in the event the Common Stock is not traded on Nasdaq, such other
securities market on which the Common Stock is listed) is open for trading.
b. Except as set forth in 3.9(a)(i)-(v) and 3.9(a)(vii) above,
until such time as the Initial Registration Statement (as defined in the
Registration Rights Agreement) shall be declared effective by the Securities
and Exchange Commission the Company shall not offer any equity securities at
a price lower than the Conversion Price (as defined in the Debenture).
3.10 USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Debentures and the exercise of the Warrants for capital expenditures;
research and development; expansion of sales, customer support and marketing
functions; working capital and possible strategic acquisitions.
3.11 TRANSACTIONS WITH AFFILIATES. So long as any Debentures or
Warrants are outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement involving more than $50,000 with any
of its or any Subsidiary's officers, directors, stockholders who beneficially
own 5% or more of the Common Stock, or Affiliates or any individual related
by blood, marriage or adoption to any such individual or with any entity in
which any such entity or individual owns a 5% or more beneficial interest
(each a "RELATED PARTY"), except for (a) customary employment arrangements
and benefit programs on reasonable terms, (b) any agreement, transaction,
commitment or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than such
Related Party, or (c) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the
Company. "AFFILIATE" for purposes of this section only means, with respect to
any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person
or entity, or (iv) shares common control with that person or entity.
"CONTROL" or "CONTROLS" for purposes of this section means that a person or
entity has the power, direct or indirect, to conduct or govern the policies
of another person or entity.
3.12 TRANSFER AGENT INSTRUCTIONS. At the Closing the Company shall
issue irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in
the name of each such Purchaser or its respective nominee(s), for the
Debenture Shares and/or the Warrant Shares in such amounts as specified from
time to time by each Purchaser to the Company in the form attached hereto as
EXHIBIT F (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.12, and stop transfer instructions
to give effect to Section 3.1 hereof (in the case of the Debenture Shares and
the Warrant Shares, prior to registration of the Debenture Shares and the
Warrant Shares under the Securities Act) will be given by the Company to its
transfer agent and that the Debentures, the Warrants, the Debenture Shares
and the Warrant Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement
and the
19
Transaction Documents. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Purchasers by violating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 3.12 will be inadequate and agrees, in the event of a beach
or threatened breach by the Company of the provisions of this Section 3.12, that
the Purchasers shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer without the necessity of showing economic loss and without
any bond or other security being required.
3.13 ORDINARY COURSE BROKERAGE AND TRADING. Subject to compliance with
all applicable securities laws and Nasdaq
