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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July
____, 1997, by and among Abaxis, Inc., a California corporation, with
headquarters located at 0000 Xxxxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000
(the "COMPANY"), and each of the purchasers set forth on the signature pages
hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized a new series of preferred stock, designated as
its Series B Convertible Preferred Stock (the "PREFERRED STOCK"), having the
rights, preferences and privileges set forth in the Certificate of Determination
of Rights, Preferences, Privileges and Restrictions substantially in the form
attached hereto as EXHIBIT "A" (the "CERTIFICATE OF DETERMINATION");
C. The Preferred Stock is convertible into shares of Common Stock, no par
value per share, of the Company (the "COMMON STOCK"), upon the terms and subject
to the limitations and conditions set forth in the Certificate of Determination;
D. The Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, an aggregate of three
thousand (3,000) shares of Preferred Stock, at a price per share equal to One
Thousand Dollars ($1,000), the stated value thereof, or an aggregate purchase
price of Three Million Dollars ($3,000,000);
E. Each Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, the number of shares of Preferred Stock set forth immediately below
its name on the signature pages hereto; and
F. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "B" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall issue and sell to
each Buyer and each Buyer severally agrees to purchase from the Company such
number of shares of Series B Preferred Stock as is set forth immediately below
such Buyer's name on the signature
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pages hereto (collectively, together with any Preferred Stock issued in
replacement thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, the "PREFERRED SHARES") at a price per
share equal to One Thousand Dollars ($1,000) (the "PER SHARE PURCHASE PRICE").
The issuance, sale and purchase of the Preferred Shares shall take place in one
closing (the "CLOSING"). Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, at the Closing,
the Company shall issue and sell to each Buyer and each Buyer shall purchase
from the Company Preferred Shares for a price per Preferred Share equal to the
Per Share Purchase Price. The aggregate number of Preferred Shares to be issued
at the Closing is Three Thousand (3,000) for an aggregate purchase price of
Three Million Dollars ($3,000,000).
b. Form of Payment. On the Closing Date (as defined below), (i) each
Buyer shall pay the purchase price for the Preferred Shares to be issued and
sold to it at the Closing (the "PURCHASE PRICE") by wire transfer of immediately
available funds to the Company, in accordance with the Company's written wiring
instructions, against delivery of a duly executed certificate(s) representing
such number of Preferred Shares which such Buyer is purchasing, and (ii) the
Company shall deliver such certificate(s) against delivery of such Purchase
Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Preferred Shares pursuant to this Agreement (the
"CLOSING DATE") shall be 12:00 noon Eastern Standard Time on July 14, 1997 or
such other mutually agreed upon time. The Closing shall occur at the offices of
Xxxx Xxxx Xxxx & Freidenrich, A Professional Corporation, 000 Xxxxxxxx Xxxxxx,
Xxxx Xxxx, Xxxxxxxxxx 00000 or such other mutually agreed upon place.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and warrants to the
Company solely as to such Buyer that:
a. Investment Purpose. As of the date hereof, the Buyer is
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "CONVERSION SHARES" and, collectively with the Preferred
Shares, the "SECURITIES") for its own account for investment only and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 0000 Xxx.
b. Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying 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.
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4. Information. The Buyer 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 Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. No Governmental Review. The Buyer 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 Securities.
f. Restricted Transfer; Resale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement thereunder, or (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (c) sold pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule); (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such 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 0000 Xxx) 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 such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement).
g. Legends. The Buyer understands that the Preferred Shares and,
until such time as the Conversion Shares have been registered under the 1933
Act, as contemplated by the Registration Rights Agreement, the Conversion
Shares, may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities
have been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance
and scope reasonably acceptable to the Company, that registration is
not required under said Act or unless sold pursuant to Rule 144 under
said Act."
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The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (c) such holder provides the
Company with reasonable assurances that such Security can be sold pursuant to
Rule 144 under the 1933 Act (or a successor rule thereto) without any
restriction as to the number of Securities acquired as of a particular date that
can then be immediately sold. The Buyer agrees to sell all Securities, including
those represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, usury
and other laws of general application affecting the enforcement of creditors'
rights.
i. Residency. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
j. No Brokers. No Buyer has taken any action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with Xxxxxxx Capital Partners, Ltd., whose commissions and
fees will be paid for by the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer as of the Closing
Date, except as otherwise described in this Agreement or on a schedule provided
to the Buyers (which schedule shall specifically refer to the section hereof
modified thereby), that:
a. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company has no Subsidiaries (as defined below). The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "MATERIAL ADVERSE
EFFECT" means any material adverse effect on the business, operations, assets or
financial condition of the Company, or on the transactions contemplated hereby
or by the agreements or instruments to be entered into in connection herewith.
"SUBSIDIARIES" means any corporation or
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other organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, any equity or other ownership interest.
b. Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Determination and to enter into and perform this Agreement and
the Registration Rights Agreement and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including without
limitation the filing of the Certificate of Determination, the issuance of the
Preferred Shares and the issuance and reservation for issuance of the Conversion
Shares issuable upon conversion thereof) have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board or Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered and the Certificate of
Determination has been duly filed by the Company, and (iv) each of this
Agreement and the Certificate of Determination constitutes, and upon execution
and delivery by the Company of the Registration Rights Agreement, such
instrument will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, usury and other laws of general application affecting the
enforcement of creditors' rights.
c. Capitalization. As of July 2, 1997, the authorized capital stock
of the Company consists of (i) 35,000,000 shares of Common Stock of which
11,886,153 shares are issued and outstanding, 1,156,924 shares are reserved for
issuance pursuant to the Company's stock option plans, 105,647 shares are
reserved for issuance pursuant to securities (other than the Preferred Shares)
exercisable for, or convertible into or exchangeable for shares of Common Stock
and 2,376,042 shares (19.99% of outstanding stock) are reserved for issuance
upon conversion of the Preferred Shares (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(g) below); and (ii) 5,000,000 shares
of preferred stock, none of which shares are issued and outstanding (exclusive
of the Preferred Shares). All of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in this Section 3(c) or SCHEDULE 3(C), as of
the effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company, or arrangements by
which the Company is or may become bound to issue additional shares of capital
stock of the Company, and (ii) there are no agreements or arrangements under
which the Company is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Preferred Shares or
Conversion Shares. The Company has furnished to the Buyer true and correct
copies of the
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Company's Restated Articles of Incorporation as in effect on the date hereof
("ARTICLES OF INCORPORATION"), the Company's By-laws, as in effect on the date
hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto.
d. Issuance of Shares. The Preferred Shares and the Conversion
Shares are duly authorized and, upon issuance in accordance with the terms of
this Agreement (including the issuance of the Conversion Shares upon conversion
of the Preferred Shares in accordance with the Certificate of Determination)
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens and charges with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of shareholders of the Company. The
term Conversion Shares includes the shares of Common Stock issuable upon
conversion of the Preferred Shares, including without limitation, such
additional shares, if any, as are issuable as a result of the events described
in Section 2(c) of the Registration Rights Agreement. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of the Conversion Shares upon conversion of the Preferred Shares. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement and the
Certificate of Determination is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
e. No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Determination
and the issuance and reservation for issuance of the Conversion Shares) will not
(i) conflict with or result in a violation of any provision of the Articles of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could 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 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) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for
such breaches, conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). The Company is not in violation of its Articles
of Incorporation, By-laws or other organizational documents and the Company is
not in default (and no event has occurred which with notice or lapse of time or
both could put the Company in default) under, and the Company has not taken any
action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party or by which any property
or assets of the Company is bound or affected, except for possible defaults,
terminations, amendments, accelerations or cancellations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except as would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any
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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 this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. Except as discussed in SCHEDULE 3(E), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is not
in violation of the listing requirements of the Nasdaq National Market
("NASDAQ") and does not reasonably anticipate that the Common Stock will be
delisted by the Nasdaq in the foreseeable future.
f. SEC Documents, Financial Statements. Since March 31, 1995, 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 Exchange Act of 1934, as amended (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 (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, 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,
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 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 not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and the absence of footnote disclosures and
other presentation items. Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 1997 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not material
to the financial condition or operating results of the Company.
g. Absence of Certain Changes. Since March 31, 1997, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition or results of
operations of the Company.
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h. Absence of Litigation. There is no action, suit, claim,
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 threatened against or affecting the Company (or any of
its officers and directors) that could have a Material Adverse Effect. SCHEDULE
2(H) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company, without regard to
whether it would have a Material Adverse Effect.
i. Patents, Copyrights, etc. The Company owns or possesses the
requisite licenses or rights to use all patents, patent rights, inventions,
know-how, trade secrets, trademarks, service marks, service names, trade names
and copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to conduct its
business as now operated; there is no claim or action by any person pertaining
to, or proceeding pending, or to the Company's knowledge threatened which
challenges the right of the Company with respect to any Intellectual Property
necessary to enable it to conduct its business as now operated; to the best of
the Company's knowledge, the Company's current and intended products, services
and processes do not infringe on any Intellectual Property or other rights held
by any person; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of its
Intellectual Property.
j. Tax Status. Except as set forth on SCHEDULE 3(J), the Company 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 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 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 for any such return, and the Company knows
of no basis for any such claim.
k. Certain Transactions. Except as disclosed in the SEC Documents
pursuant to Item 404 of Regulation S-K, and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms which are, to the Company's knowledge, no less favorable than the
Company could obtain from third parties and other than the grant 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 (other than for services as employees, officers and directors) that is
material to the Company, 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 a substantial interest or is an officer, director,
trustee or partner.
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l. Disclosure. All information relating to or concerning the Company
set forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its business, properties, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purposes that the Company's reports filed under the
1934 Act are being incorporated into an effective registration statement filed
by the Company under the 1933 Act).
m. Acknowledgment Regarding Buyers' Purchase of Preferred Shares.
The Company acknowledges and agrees that the Buyers 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 Buyer
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 advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers, purchase of the
Preferred Shares. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
n. No Integrated Offering. Neither the Company nor, to the knowledge
of the Company, any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities to the Buyers.
The issuance of the Securities to the Buyers will not be integrated with any
other issuance of the Company's securities which requires shareholder approval
under the rules of The Nasdaq Stock Market.
o. No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with Xxxxxxx Capital Partners, Ltd., whose commissions and
fees will be paid for by the Company.
p. Permits; Compliance. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "COMPANY PERMITS"), and there is no action pending
or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits which, if determined adversely to the
Company, would have a Material Adverse Effect. To its knowledge, the Company is
not in conflict with, or in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. During the period commencing on March 31, 1997 and ending on the
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date hereof, the Company has not received any notification with respect to
possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
q. Environmental Matters.
(i) Except as set forth in SCHEDULE 3(Q), there are, to the
Company's knowledge, with respect to the Company or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and the Company has not
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company's knowledge, threatened in connection with any of the
foregoing which, if determined adversely to the Company, would have a Material
Adverse Effect. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) To the Company's knowledge, other than those that are or
were stored, used or disposed of in compliance with applicable law, no Hazardous
Materials are contained on or about any real property currently owned, leased or
used by the Company and no Hazardous Materials were released on or about any
real property previously owned, leased or used by the Company during the period
the property was owned, leased or used by the Company except in the normal
course of the Company's business which would result in a Material Adverse
Effect.
(iii) Except as set forth in SCHEDULE 3(Q), to the Company's
knowledge, there are no underground storage tanks on or under any real property
owned, leased or used by the Company that are not in compliance with applicable
law with such exceptions as would not have a Material Adverse Effect.
r. Title to Property . Except as set forth in SCHEDULE 3(R), the
Company has 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, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 3(s) or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company are held by them under valid,
subsisting and enforceable leases with such exceptions as would not have a
Material Adverse Effect.
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s. Insurance. The Company's insurance policies are set forth in
SCHEDULE 3(S). The Company believes that it maintains a reasonable level of
insurance, taking into consideration the costs and benefits of such insurance.
The Company has no 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 have a Material Adverse Effect.
t. Internal Accounting Controls. The Company believes that, based
upon the results of audits of its financial statements, maintains a system of
internal accounting controls sufficient, in the judgment of the Company's board
of directors, to provide reasonable assurance that transactions are executed in
accordance with management's general or specific authorizations and that
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability.
4. COVENANTS.
a. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to such Closing Date.
b. Reporting Status, Eligibility to Use Form S-3. The Company's
Common Stock is registered under Section 12(g) of the 1934 Act. So long as any
Buyer beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. The Company currently meets, and shall use
reasonable efforts to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3.
c. Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares for working capital and general corporate purposes and
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person.
d. Additional Equity Capital; Right of First Refusal. Subject to the
exceptions described below, the Company agrees that during the period beginning
on the date hereof and ending one hundred eighty (180) days following the
Closing Date (the "LOCK-UP PERIOD"), the Company will not, without the prior
written consent of a majority-in-interest of the Buyers, negotiate or contract
with any party to obtain additional equity financing (including debt financing
with an equity component) unless at any time within twenty (20) days prior to
the consummation of such financing, the closing bid price of the Common Stock is
greater than one hundred fifty
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percent (150%) of the Fixed Conversion Price (as defined in the Certificate of
Determination) for five (5) consecutive trading days. In addition, subject to
the exceptions described below, the Company will not conduct any equity
financing (including debt with an equity component) ("FUTURE OFFERINGS") during
the period beginning on the first day of the Lock-Up Period and ending three
hundred sixty-five (365) days following the Closing unless it shall have first
delivered to each Buyer, at least fifteen (15) business days prior to the
closing of such Future Offering, written notice describing the proposed Future
Offering, including the terms and conditions thereof, and providing each Buyer
an option during the ten (10) day period following delivery of such notice to
purchase its pro rata share (based on the ratio that the number of Preferred
Shares purchased by it hereunder bears to the aggregate number of Preferred
Shares purchased hereunder) of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this and the immediately preceding sentence are
collectively referred to as the "CAPITAL RAISING LIMITATIONS"). The Capital
Raising Limitations shall not apply to any transaction involving (i) issuances
of securities in a firm commitment underwritten public offering (excluding a
continuous offering pursuant to Rule 415 under the 1933 Act), (ii) warrants
issued in connection with equipment, inventory or receivables financing through
commercial banks, (iii) issuances of securities as consideration for a merger,
consolidation or sale of assets, or in connection with any strategic partnership
or joint venture (the primary purpose of which is not to raise equity capital),
or in connection with the disposition or acquisition of a business, product or
license by the Company or (iv) issuances of securities (not exceeding 30,000
shares of Common Stock or securities convertible or exercisable into not more
than 30,000 shares of Common Stock in any calendar quarter) to the Company's
consultants, service providers or vendors in the ordinary course of business in
exchange for bona fide services, which issuances are or have been approved by a
majority of the Company's disinterested directors. The Capital Raising
Limitations also shall not apply to the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof or to the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by a majority of the Company's
disinterested directors.
e. Expenses. The Company shall reimburse Xxxx Xxxx Capital
Management, L.P. ("RGC") for all expenses incurred by it in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith, and the
preparation and filing of the Registration Statement to be filed pursuant to the
Registration Rights Agreement, including, without limitation, attorneys' and
consultants' fees and expenses. The Company's obligation to reimburse RGC's
expenses under this Section 4(f) and Section 5 of the Registration Rights
Agreement shall be limited to Seven Thousand Five Hundred Dollars ($7,500).
f. Financial Information. So long as a Buyer owns Preferred Shares,
the Company agrees to send the following reports to such Buyer: (i) within ten
(10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) within one (1) day after release, copies of all press releases issued by
the Company; and (iii) contemporaneously with the making available or giving to
the shareholders of the Company, copies of any notices or other information the
Company makes available or gives to such shareholders.
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g. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
(based on the Conversion Price of the Preferred Shares in effect from time to
time). The Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of the Preferred Shares without the
consent of each Buyer, which consent will not be unreasonably withheld. The
Company shall use its best efforts at all times to maintain the number of shares
of Common Stock so reserved for issuance at no less than 1.5 times the number
that is then actually issuable upon full conversion of the Preferred Shares
(based on the Conversion Price of the Preferred Shares in effect from time to
time). If at any time the number of shares of Common Stock authorized and
reserved for issuance is below the number of Conversion Shares issued and
issuable upon conversion of the Preferred Shares, the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of shareholders
to authorize additional shares, in the case of an insufficient number of
authorized shares, and using its best efforts to obtain shareholder approval of
an increase in such authorized number of shares.
h. Listing. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Conversion Shares from time
to time issuable upon conversion of the Preferred Shares. The Company will use
its best efforts to obtain and maintain the listing and trading of its Common
Stock on Nasdaq, the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York
Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX"), or any other
equivalent national securities exchange that may be established in the future,
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall promptly
provide to each Buyer copies of any notices it receives from Nasdaq regarding
the continued eligibility of the Common Stock for listing on Nasdaq.
i. Corporate Existence. So long as a Buyer beneficially owns any
Preferred Shares, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on Nasdaq, Nasdaq SmallCap,
NYSE or AMEX, or any other equivalent national securities exchange that may be
established in the future.
j. No Integration. The Company will not conduct any future offering
that will be integrated with the issuance of the Securities solely for purposes
of Rule 4460(i) of the Nasdaq Stock Market.
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5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares in such amounts as specified from time to time by each
Buyer to the Company upon proper conversion of the Preferred Shares (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior
to registration of the Conversion Shares under the 1933 Act), will be given by
the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Securities. If a Buyer provides the
Company with an opinion of counsel, reasonably satisfactory to the Company in
form, substance and scope, that registration of a resale by such Buyer of any of
the Securities is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers, by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section,
that the Buyers shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares to a Buyer at the Closing, is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section l(b) above.
c. The Certificate of Determination shall have been accepted for
filing with the Secretary of State of California.
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d. The representations and warranties of the applicable Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred Shares
at the Closing, is subject to the satisfaction, at or before the Closing Date,
of each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
(i) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
(ii) The Certificate of Determination shall have been accepted for
filing with the Secretary of State of California, and a copy thereof certified
by such Secretary of State shall have been delivered to such Buyer.
(iii) The Company shall have delivered to such Buyer duly executed
certificates (in such denominations as the Buyer shall request) representing the
Preferred Shares being so purchased in accordance with Section l(b) above.
(iv) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
(v) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Articles of Incorporation, By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.
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(vi) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(vii) The Conversion Shares shall have been authorized for quotation
on Nasdaq and trading in the Common Stock on Nasdaq shall not have been
suspended by the SEC or Nasdaq.
(viii) The Buyer shall have received an opinion of the Company's
counsel, dated as of each Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "C"
attached hereto.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws. The parties hereto hereby submit
to the exclusive jurisdiction of the United States Federal Courts located in the
Northern District of California with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
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f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Company:
Abaxis, Inc.
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With copy to:
Xxxx Xxxx Xxxx & Freidenrich,
A Professional Corporation
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder to any
person that purchases Securities convertible into shares of Common Stock valued
at not less than $1,000,000 (based on the closing sale price of the Common Stock
on Nasdaq or on the principal securities exchange or quotation system on which
the Common Stock is traded on the date of transfer) in a private transaction
from a Buyer or to any of its "affiliates," as that term is defined under the
1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers.
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j. Publicity. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, SEC, Nasdaq or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
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IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
ADVANTAGE FUND LTD.
By: ________________________________________
Name: ______________________________________
Its: _______________________________________
RESIDENCE:
ADDRESS:
x/x XXXXX
Xxxx Xxxxxxxxx 0
Xxxxxxx, Xxxxxxxxxxx Antilles
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series B Convertible Preferred Stock: 1.000
Aggregate Purchase Price: $1,000,000
