EXHIBIT 4.3
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "Agreement") is made
as of the 28th day of January, 2005 by and among Pacifichealth Laboratories,
Inc., a Delaware corporation (the "Company") and Hormel Health Labs, LLC, a
Delaware limited liability Company (the "Purchaser").
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
1.1. Sale and Issuance of Series A Preferred Stock.
(a) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the Closing (as defined below) the
Certificate of Designation in the form of Exhibit A attached to this Agreement
(the "Certificate of Designation").
(b) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to the Purchaser at the Closing 90,909 shares of Series A Preferred Stock
at a purchase price of $11.00 per share. The shares of Series A Preferred Stock
issued to the Purchaser pursuant to this Agreement shall be referred to in this
Agreement as the "Shares."
1.2. Closing; Delivery.
(a) The purchase and sale of the Shares shall take place
remotely via the exchange of documents and signatures, at 12:00 Noon, central
time, on January 28, 2005, or at such other time and place as the Company and
the Purchasers mutually agree upon, orally or in writing (which time and place
are designated as the "Closing").
(b) At Closing, the Company shall deliver to the Purchaser a
certificate representing the Shares being purchased by such Purchaser at such
Closing against payment of the purchase price therefore by check payable to the
Company or by wire transfer of immediately available funds to a bank account
designated by the Company.
1.3. Defined Terms Used in this Agreement. In addition to the terms
defined above, the following terms used in this Agreement shall be construed to
have the meanings set forth or referenced below.
"Affiliate" means with respect to any person or entity (a "Person")
any Person which, directly or indirectly, controls, is controlled by, or is
under common control with such Person, including, without limitation, any
partner, officer, director, or member of such Person and any venture capital
fund now or hereafter existing which is controlled by or under common
control with one or more general partners or shares the same management company
with such Person.
"Code" means the Internal Revenue Code of 1986, as amended.
"Investors' Rights Agreement" means the agreement between the
Company and the Purchasers, dated as of the date of the Closing, in the form of
Exhibit C attached to this Agreement.
"Manufacturing Agreement" means the agreement between the Company
and the Purchaser, dated as of the date of the Closing, in the form of Exhibit E
attached to this Agreement.
"Material Adverse Effect" means a material adverse effect on the
business, assets (including intangible assets), liabilities, financial
condition, property, prospects or results of operations of the Company.
"Purchaser" has the meaning given in the preamble of this Agreement.
"Right of First Refusal and Co-Sale Agreement" means the agreement among the
Company, certain Purchasers, and certain other stockholders of the Company,
dated as of the date of the Closing, in the form of Exhibit D attached to this
Agreement.
"Securities" means the Shares and the shares of the Company's Common
Stock issuable upon conversion of the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Company's Series A Convertible
Preferred Stock, par value $.01 per share.
"Shares" means the shares of Series A Preferred Stock issued at the
Closing.
"Transaction Agreements" means this Agreement, the Investors' Rights
Agreement, the Right of First Refusal and Co-Sale Agreement, and the
Manufacturing Agreement.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser that, except as set forth on the
Disclosure Schedule attached as Exhibit B to this Agreement which exceptions
shall be deemed to be part of the representations and warranties made hereunder,
the following representations are true and complete as of the date of the
Closing, except as otherwise indicated. The Disclosure Schedule shall be
arranged in sections corresponding to the numbered and lettered sections and
subsections contained in this Section 2, and the disclosures in any section or
subsection of the Disclosure Schedule shall qualify other sections and
subsections in this Section 2 only to the extent it is readily apparent from a
reading of the disclosure that such disclosure is applicable to such other
sections and subsections.
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For purposes of these representations and warranties, the phrase "to
the Company's knowledge" shall mean the actual knowledge of Company executive
officers. In addition, for purposes of these representations and warranties
(other than those in Sections 2.1, 2.2, 2.3, 2.4 and 2.5), the term "the
Company" shall include any subsidiaries of the Company, unless otherwise noted
herein.
2.1. Organization, Good Standing, Corporate Power and Qualification.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as presently conducted and as
proposed to be conducted. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.
2.2. Capitalization. The capitalization of the Company as of the
date hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable and
reserved for issuance pursuant to securities (other than the Shares) exercisable
or exchangeable for, or convertible into, any shares of capital stock and the
number of shares to be reserved for issuance upon exercise of the Shares is set
forth in Section 2.2 of the Disclosure Schedule. All of such outstanding shares
of capital stock have been, or upon issuance in accordance with the terms of any
such exercisable, exchangeable or convertible securities will be, validly
issued, fully paid and non-assessable. The rights, privileges and preferences of
the Series A Preferred Stock are as stated in the Certificate of Designation and
as provided by the general corporation law of the jurisdiction of the Company's
formation. 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. Except for the Securities and as set forth in the SEC
Documents or Section 2.2 of the Disclosure Schedule, (i) 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 exercisable or exchangeable for, 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, nor are any such issuances, contracts,
commitments, understandings or arrangements contemplated, (ii) there are no
contracts, commitments, understandings or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of its or
their securities under the Securities Act (except the Investors' Rights
Agreement); (iii) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries that 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 or otherwise acquire any security of the Company or any of its
Subsidiaries; and (iv) the Company does not have any shareholder rights plan,
"poison pill" or other anti-takeover plans or similar arrangements. Section 2.2
of the Disclosure Schedule sets forth all of the securities or instruments
issued by the Company or any of its Subsidiaries that contain anti-dilution or
similar provisions, and, except as and to the extent set forth thereon, the sale
and issuance of the Securities will not trigger any anti-dilution adjustments to
any such securities or instruments. The Company has furnished to the Purchaser
true and correct copies of
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the Company's Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), the Company's Bylaws as in effect on the date
hereof (the "Bylaws"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company, all of which instruments and agreements are set forth in Section
2.2 of the Disclosure Schedule. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or any such Subsidiary.
2.3. Subsidiaries. Except as disclosed in its SEC Reports, the
Company does not currently own or control, directly or indirectly, any interest
in any other corporation, partnership, trust, joint venture, limited liability
company, association, or other business entity. The Company is not a participant
in any joint venture, partnership or similar arrangement.
2.4. Authorization. All corporate action required to be taken by the
Company's Board of Directors and stockholders in order to authorize the Company
to enter into the Transaction Agreements, and to issue the Shares at the Closing
and the Common Stock issuable upon conversion of the Shares, has been taken or
will be taken prior to the Closing. All action on the part of the officers of
the Company necessary for the execution and delivery of the Transaction
Agreements, the performance of all obligations of the Company under the
Transaction Agreements to be performed as of the Closing, and the issuance and
delivery of the Shares has been taken or will be taken prior to the Closing. The
Transaction Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies, or (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
2.5. Valid Issuance of Shares. The Shares, when issued, sold and
delivered in accordance with the terms and for the consideration set forth in
this Agreement, will be validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement, applicable state and federal
securities laws and liens or encumbrances created by or imposed by a Purchaser.
Assuming the accuracy of the representations of the Purchasers in Section 3 of
this Agreement and subject to the filings described in Section 2.6(ii) below,
the issuance of the Shares will not require registration under any applicable
federal and state securities laws. The Common Stock issuable upon conversion of
the Shares has been duly reserved for issuance, and upon issuance in accordance
with the terms of the Certificate of Designation, will be validly issued, fully
paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under the Transaction Agreements, applicable federal
and state securities laws and liens or encumbrances created by or imposed by a
Purchaser. Based in part upon the representations of the Purchaser in Section 3
of this Agreement, and subject to Section 2.6 below, the Common Stock issuable
upon
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conversion of the Shares will be issued in compliance with all applicable
federal and state securities laws.
2.6. Governmental Consents and Filings. Assuming the accuracy of the
representations made by the Purchasers in Section 3 of this Agreement, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Company in connection with
the consummation of the transactions contemplated by this Agreement, except for
(i) the filing of the Certificate of Designation, which will have been filed as
of the Closing, and (ii) filings pursuant to Regulation D of the Securities Act,
and applicable state securities laws, which have been made or will be made in a
timely manner.
2.7. Litigation. Except as set forth in the SEC Documents, there is
no claim, action, suit, proceeding, arbitration, complaint, charge or
investigation pending or to the Company's knowledge, currently threatened in
writing (i) against the Company or any officer of the Company, which to the
Company's knowledge, would reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect; or (ii) that questions the
validity of the Transaction Agreements or the right of the Company to enter into
them, or to consummate the transactions contemplated by the Transaction
Agreements; . Neither the Company nor, to the Company's knowledge, any of its
officers, is a party or is named as subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality which, to the Company's knowledge, that would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. There is no action, suit, proceeding or investigation by the Company
pending or which the Company has decided to initiate. The foregoing includes,
without limitation, actions, suits, proceedings or investigations pending or
threatened in writing involving the prior employment of any of the Company's
employees, their services provided in connection with the Company's business, or
any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
2.8. Intellectual Property. The Company owns or possesses sufficient
legal rights to (i) all trademarks, service marks, tradenames, copyrights, trade
secrets, licenses, information and proprietary rights and processes and (ii) to
the Company's knowledge, all patents and patent right, (such rights are
collectively referred to herein as the "Company Intellectual Property") as are
necessary to the conduct of the Company's business as now conducted and as
presently proposed to be conducted, without any known conflict with, or
infringement of, the rights of others. To the Company's knowledge, no product or
service marketed or sold (or proposed to be marketed or sold) by the Company
violates or will violate any license or infringe any intellectual property
rights of any other party. Other than with respect to commercially available
software products under standard end-user object code license agreements, there
are no outstanding options, licenses, agreements, claims, encumbrances or shared
ownership interests of any kind relating to the foregoing, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. The Company has not received any communications within
the previous 36 months alleging that the Company has violated or, by conducting
its
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business, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity. The Company has obtained and possesses valid
licenses to use all of the software programs present on the computers and other
software-enabled electronic devices that it owns or leases or that it has
otherwise provided to its employees for their use in connection with the
Company's business. To the Company's knowledge, it will not be necessary to use
any inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company. Each employee who has access to
or involvement with research and development activities or the development of
intellectual property has executed the form of assignment agreement attached to
the Disclosure Schedule. Section 2.8 of the Disclosure Schedule lists all
patents, patent applications, registered trademarks, trademark applications,
registered service marks, service xxxx applications, registered copyrights and
domain names of the Company. For purposes of this Section 2.8, the Company shall
be deemed to have knowledge of a patent right if the Company has actual
knowledge of the patent right.
2.9. Compliance with Other Instruments. The Company is not in
violation or default (i) of any provisions of its Certificate of Incorporation
or Bylaws, (ii) of any instrument, judgment, order, writ or decree, (iii) under
any note, indenture or mortgage, or (iv) under any lease, agreement, contract or
purchase order to which it is a party or by which it is bound that is required
to be listed on the Disclosure Schedule, or, to its knowledge, of any provision
of federal or state statute, rule or regulation applicable to the Company, the
violation of which would have a Material Adverse Effect. The execution, delivery
and performance of the Transaction Agreements and the consummation of the
transactions contemplated by the Transaction Agreements will not result in any
such violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either (i) a default under any such provision,
instrument, judgment, order, writ, decree, contract or agreement or (ii) an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, forfeiture, or nonrenewal
of any material permit or license applicable to the Company. The businesses of
the Company and its Subsidiaries are not being conducted, and shall not be
conducted so long as the Purchaser owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either individually or in the aggregate have
not had and would not have a Material Adverse Effect. 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 Subsidiary has, in the course of
his actions for, or on behalf of, the Company or any Subsidiary, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity, made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds, violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, provincial or foreign regulatory authorities that are material to the
conduct of its business, and neither the Company nor any of its Subsidiaries has
received any notice of proceeding relating to the revocation or modification of
any such certificate, authorization or permit.
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2.10. Agreements; Actions.
(a) Except for the Transaction Agreements and except as
disclosed in the Select SEC Documents, there are no material agreements,
understandings, instruments, contracts or proposed transactions to which the
Company is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of $100,000,
(ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company, (iii) the grant of rights to manufacture, produce,
assemble, license, market, or sell its products to any other person or affect
the Company's exclusive right to develop, manufacture, assemble, distribute,
market or sell its products, or (iv) indemnification by the Company with respect
to infringements of proprietary rights.
(b) Except as previously disclosed to the Purchaser, the
Company has not engaged in the past six months in any discussion with any
representative of any corporation, partnership, trust, joint venture, limited
liability company, association or other entity, or any individual, regarding (i)
a sale of all or substantially all of the Company's assets, or (ii) any merger,
consolidation or other business combination transaction of the Company with or
into another corporation, entity or person.
2.11. Affiliate Transactions. Except as set forth in the Select SEC
Documents, and except for bridge loans from the officers and directors in the
aggregate amount of $60,000 to be repaid with the proceeds of sale of the
Shares, none of the officers, directors, or employees of the Company or any of
its Subsidiaries is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for ordinary course services solely in their
capacity as officers, directors or employees), 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 such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
2.12. Rights of Registration and Voting Rights. Except as provided
in the Investors' Rights Agreement, the Company is not under any obligation to
register under the Securities Act any of its currently outstanding securities or
any securities issuable upon exercise or conversion of its currently outstanding
securities. To the Company's knowledge, except as contemplated in the Right of
First Refusal and Co-Sale Agreement, no stockholder of the Company has entered
into any agreements with respect to the voting of capital shares of the Company.
2.13. Absence of Liens. Except for the liens in the Company's assets
granted to the Purchaser under the Company's accounts receivable financing
facility, and except as disclosed on Section 2.13 of the Disclosure Schedule,
the property and assets that the Company owns are free and clear of all
mortgages, deeds of trust, liens, loans and encumbrances, except for statutory
liens for the payment of current taxes that are not yet delinquent and
encumbrances and liens that arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to its knowledge, holds a valid leasehold
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interest free of any liens, claims or encumbrances other than those of the
lessors of such property or assets.
2.14. SEC Documents, Financial Statements. Since January 1, 2002,
the Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, 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. None of the statements
made in any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have been amended or
updated in subsequent filings made prior to the date hereof). 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
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
consistently applied, during the periods involved (except as may be otherwise
indicated in such financial statements or the notes thereto or, 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 and its consolidated
Subsidiaries 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, immaterial year-end audit adjustments). Except
as set forth in the financial statements of the Company included in the Select
SEC Documents , the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which liabilities and
obligations referred to in clauses (i) and (ii), individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. To the extent required by the rules and regulations of the SEC
applicable thereto, the Select SEC Documents contain a complete and accurate
list of all material undischarged written or oral contracts, agreements, leases
or other instruments to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of the properties
or assets of the Company or any Subsidiary is subject (each, a "Material
Contract"). Except as set forth in the Select SEC Documents, none of the
Company, its Subsidiaries or, to the best knowledge of the Company, any of the
other parties thereto is in breach or violation of any Material Contract, which
breach or violation could have a Material Adverse Effect. For purposes of this
Agreement, "Select SEC Documents" means the Company's (A) Proxy Statement for
its most recent Annual Meeting, (B) Annual Report on Form
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10-KSB for the fiscal year ended December 31, 2003 (the "2003 Annual Report"),
(C) Quarterly Reports on Form 10-QSB filed since December 31, 2003 and (D) all
Reports on Form 8-K filed since December 31, 2003.
2.15. Internal Controls. The Company and each of its Subsidiaries
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the Company and
designed such disclosures controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Annual Report on Form 10-KSB or Current
Reports on Form 8-K, as the case may be, is being prepared. The Company's
certifying officers have evaluated the effectiveness of the Company's controls
and procedures as the end of the period covered by the most recent Form 10-KSB
and Form 10-QSBs filed during 2004 (each such date, an "Evaluation Date"). The
Company presented in the 2003 Annual Report and its most recently filed Report
on Form 10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the respective Evaluation Date. Since the Evaluation Date for
the 2003 Annual Report, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Exchange Act) or, to the Company's knowledge, in other factors that
could significantly affect the Company's internal controls.
2.16. Anti-takeover Provisions. 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, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under its Certificate of Incorporation or the laws of
the jurisdiction of its incorporation or other laws or regulations which are or
could become applicable to any Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any and all Purchaser's ownership of the
Securities.
2.17. Changes. Except as set forth in the Select SEC Documents,
since September 30, 2004, there has been no material adverse change and no
material adverse development in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, provided that the Company has continued to
experience losses and negative cash flow since September 30, 2004. The Company
has not taken any steps, and does not currently expect to take any steps, to
seek protection pursuant to any bankruptcy or receivership 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 with respect
to the Company or any of its Subsidiaries.
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2.18. No General Solicitation or Integrated Offering. Neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Securities being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Company for purposes of the Securities Act,
which result of such integration would require registration under the Securities
Act, or any applicable stockholder approval provisions.
2.19. Employee Matters. Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. The Company and its Subsidiaries believe that their relations with
their employees are good. No executive officer (as defined in Rule 501(f) of 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. The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, result in a
Material Adverse Effect.
2.20. Tax Returns and Payments. There are no federal, state, county,
local or foreign taxes dues and payable by the Company which have not been
timely paid. There are no accrued and unpaid federal, state, country, local or
foreign taxes of the Company which are due, whether or not assessed or disputed.
There have been no examinations or audits of any tax returns or reports by any
applicable federal, state, local or foreign governmental agency. The Company has
duly and timely filed all federal, state, county, local and foreign tax returns
required to have been filed by it and there are in effect no waivers of
applicable statutes of limitations with respect to taxes for any year.
2.21. Insurance. The Company and each of its Subsidiaries has in
force fire, casualty, product liability and other insurance policies, with
extended coverage, sufficient in amount to allow it to replace any of its
material properties or assets which might be damaged or destroyed or sufficient
to cover liabilities to which the Company may reasonably become subject, and
such types and amounts of other insurance with respect to its business and
properties, on both a per occurrence and an aggregate basis, as are customarily
carried by persons engaged in the same or similar business as the Company. No
default or event has occurred that could give rise to a default under any such
policy.
2.22. Confidential Information and Invention Assignment Agreements.
Each current employee, consultant and officer of the Company has executed an
agreement with the Company regarding confidentiality and proprietary information
substantially in the form or forms delivered to the counsel for the Purchasers.
(the "Confidential Information Agreements"), except for employees and
consultants who do not have access to material confidential or proprietary
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information. No current or former employee, consultant or officer of the Company
has excluded works or inventions from his or her assignment of inventions
pursuant to such employee's, consultant's or officer's Confidential Information
Agreements. The Company is not aware that any of its employees, consultants or
officers is in violation thereof.
2.23. Permits. The Company and each of its subsidiaries has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could reasonably be expected to have
a Material Adverse Effect. The Company is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority.
2.24. Environmental and Safety Laws. Except as could not reasonably
be expected to have a Material Adverse Effect (a) the Company is and has been in
compliance with all Environmental Laws; (b) to the Company's knowledge there has
been no release or threatened release of any pollutant, contaminant or toxic or
hazardous material, substance or waste, or petroleum or any fraction thereof,
(each a "Hazardous Substance") on, upon, into or from any site currently or
heretofore owned, leased or otherwise used by the Company; (c) to the Company's
knowledge, there have been no Hazardous Substances generated by the Company that
have been disposed of or come to rest at any site that has been included in any
published U.S. federal, state or local "superfund" site list or any other
similar list of hazardous or toxic waste sites published by any governmental
authority in the United States; and (d) there are no underground storage tanks
located on, no polychlorinated biphenyls ("PCBs") or PCB-containing equipment
used or stored on, and no hazardous waste as defined by the Resource
Conservation and Recovery Act, as amended, stored on, any site owned or operated
by the Company, except for the storage of hazardous waste in compliance with
Environmental Laws. The Company has made available to the Purchasers true and
complete copies of all material environmental records, reports, notifications,
certificates of need, permits, pending permit applications, correspondence,
engineering studies, and environmental studies or assessments.
For purposes of this Section 2.24, "Environmental Laws" means any law,
regulation, or other applicable requirement relating to (a) releases or
threatened release of Hazardous Substance; (b) pollution or protection of
employee health or safety, public health or the environment; or (c) the
manufacture, handling, transport, use, treatment, storage, or disposal of
Hazardous Substances.
2.25. Disclosure. All information relating to or concerning the
Company and/or any of its Subsidiaries set forth in this Agreement or provided
to the Purchaser pursuant to Section 2 hereof or 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, and taken together as a whole, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its Subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to a primary issuance of the
Company's securities.
11
Note: the following sections need to be renumbered., as there is no Section 3.
3. Representations and Warranties of the Purchasers. The Purchaser hereby
represents and warrants to the Company, severally and not jointly, that
3.1 Authorization. The Purchaser has full power and authority to
enter into the Transaction Agreements. The Transaction Agreements to which such
Purchaser is a party, when executed and delivered by the Purchaser, will
constitute valid and legally binding obligations of the Purchaser, enforceable
in accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies, or (b) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Purchaser has not been formed for the specific purpose of
acquiring the Shares.
3.3 Disclosure of Information. The Purchaser has had an opportunity
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Stock with the Company's management and
has had an opportunity to review the Company's facilities and SEC Documents. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Purchasers to
rely thereon.
3.4 Restricted Securities. The Purchaser understands that the Shares
have not been, and will not be, registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
The Purchaser understands that the Shares are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the Shares indefinitely unless they are registered
with the Securities and Exchange Commission and qualified by state authorities,
or an exemption from such registration and qualification requirements is
available. The Purchaser acknowledges that the Company has no obligation to
register or qualify the Shares, or the Common Stock into which it may be
converted, for resale except as set forth in the Investors' Rights Agreement.
The Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be
12
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Shares, and on requirements relating
to the Company which are outside of the Purchaser's control, and which the
Company is under no obligation and may not be able to satisfy.
3.5 Legends. The Purchaser understands that the Shares and any
securities issued in respect of or exchange for the Shares, may bear one or all
of the following legends:
(a) "The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or the securities
laws of any state of the United States or in any other jurisdiction. The
securities represented hereby may not be offered, sold or transferred in the
absence of an effective registration statement for the securities under
applicable securities laws unless offered, sold or transferred pursuant to an
available exemption from the registration requirements of those laws."
(b) Any legend set forth in, or required by, the other
Transaction Agreements.
(c) Any legend required by the securities laws of any state to
the extent such laws are applicable to the Shares represented by the certificate
so legended.
3.6 Accredited Investor. The Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.7 No General Solicitation. Neither the Purchaser, nor any of its
officers, directors, employees, agents, stockholders or partners has either
directly or indirectly, including through a broker or finder (a) engaged in any
general solicitation, or (b) published any advertisement in connection with the
offer and sale of the Shares.
3.8 Exculpation Among Purchasers. Purchaser acknowledges that it has
reviewed such materials it deems necessary to make an informed investment
decision and has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Stock and the
merits and risks of investing in the Securities; (ii) access to information
about the Company and the Subsidiaries and their respective financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of such materials it has reviewed and the
Company's representations and warranties contained in the Transaction Documents.
Each Purchaser agrees that no Purchaser nor the respective controlling persons,
officers, directors, partners, agents, or employees of any Purchaser shall be
liable to any other Purchaser for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the purchase of the
Shares.
13
3.9 Residence. The office or offices of the Purchaser in which its
principal place of business is located at the address or addresses of the
Purchaser set forth on the signature page hereto.
3.10 Organization. The Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder.
4. Conditions to the Purchaser's Obligations at Closing. The obligations
of the Purchaser to purchase Shares at the Closing are subject to the
fulfillment, on or before such Closing, of each of the following conditions,
unless otherwise waived:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects as of such Closing, except that any such representations
and warranties shall be true and correct in all respects where such
representation and warranty is qualified with respect to materiality in Section
2 or Section 3, as the case may be.
4.2 Performance. The Company shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
such Closing.
4.3 Compliance Certificate. The President of the Company shall
deliver to the Purchasers at such Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement shall be obtained and effective as of such
Closing.
4.5 Investors' Rights Agreement. The Company and the Purchaser shall
have executed and delivered the Investors' Rights Agreement.
4.6 Right of First Refusal and Co-Sale Agreement. The Company, the
Purchaser, and the other stockholders of the Company named as parties thereto
shall have executed and delivered the Right of First Refusal and Co-Sale
Agreement.
4.7 Manufacturing Agreement. The Company and the parties thereto
shall have executed and delivered the Manufacturing Agreement.
4.8 Certificate of Designation . The Company shall have filed the
Certificate of Designations with the Secretary of State of Delaware on or prior
to the Closing, which shall continue to be in full force and effect as of the
Closing.
14
4.9 Secretary's Certificate. The Secretary of the Company shall have
delivered to the Purchaser at the Closing a certificate certifying (i) the
Bylaws of the Company, (ii) resolutions of the Board of Directors of the Company
approving the Transaction Agreements, the transactions contemplated under the
Transaction Agreements, and the Certificate of Designation.
4.10 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser (or its counsel) shall have received all
such counterpart original and certified or other copies of such documents as
reasonably requested. Such documents may include good standing certificates.
5. Conditions of the Company's Obligations at Closing. The obligations of
the Company to sell Shares to the Purchasers at the Closing are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 3 shall be true and correct in
all material respects as of the Closing.
5.2 Performance. The Purchaser shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by them on or
before such Closing.
5.3 Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
5.4 Investors' Rights Agreement. The Purchaser shall have executed
and delivered the Investors' Rights Agreement.
5.5 Right of First Refusal and Co-Sale Agreement. The Purchaser and
each stockholder party thereto shall have executed and delivered the Right of
First Refusal and Co-Sale Agreement.
5.6 Manufacturing Agreement. The Purchaser or its Affiliate, as
applicable, shall have executed and delivered the Manufacturing Agreement.
6. Miscellaneous.
6.1. Survival of Warranties. Unless otherwise set forth in this
Agreement, the representations and warrants of the Company and the Purchasers
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing for a period of two years following
Closing, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Purchasers or the Company.
15
6.2. Transfer; Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3. Governing Law. This Agreement shall be governed by and
construed in accordance with the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
New Jersey, without regard to its principles of conflicts of laws.
6.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed and delivered by facsimile signature and in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by
confirmed electronic mail or facsimile if sent during normal business hours of
the recipient, and if not so confirmed, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their address as set forth on the signature page, or to such e-mail
address, facsimile number or address as subsequently modified by written notice
given in accordance with this Section 6.6. If notice is given to the Company, a
copy shall also be sent to Xxxx X. Xxxxxx, Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx, LLC,
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 and if notice
is given to the Purchaser, a copy shall also be given to Xxxxxxxxx X. Xxxxxxxx,
Xxxxxx & Xxxxxxx LLP, 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000.
6.7. No Finder's Fees. Except as described in any separate written
agreement between the parties regarding finders fees, each party represents that
it neither is nor will be obligated for any finder's fee or commission in
connection with this transaction. Each Purchaser agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finder's fee arising out of this transaction (and the costs and
expenses of defending against such liability or asserted liability) for which
each Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each Purchaser
from any liability for any commission or compensation in the nature of a
finder's or broker's fee arising out of this transaction (and the costs and
expenses of
16
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
6.8. Attorney's Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Transaction Agreements, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
6.9. Amendments and Waivers. Any term of this Agreement may be
amended, terminated or waived only with the written consent of the Company and
(i) the holders of at least a majority of the then-outstanding Shares or (ii)
for an amendment, termination or waiver effected prior to the Closing, the
Purchaser. Any amendment or waiver effected in accordance with this Section 6.9
shall be binding upon the Purchaser and each transferee of the Shares (or the
Common Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.
6.10. Severability. The invalidity of unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
6.11. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
6.12. Entire Agreement. This Agreement (including the Exhibits
hereto, if any), the Certificate of Designation, any prior or contemporaneous
separate written agreement regarding finders fees and the other Transaction
Agreements (as defined in the Stock Purchase Agreement) constitute the full and
entire understanding and agreement between the parties with respect to the
subject matter hereof, and any other written or oral agreement relating to the
subject matter hereof existing between the parties are expressly canceled. .
6.13 Dispute Resolution. Any unresolved controversy or claim arising
out of or relating to this Agreement, except as (i) otherwise provided in this
Agreement, or (ii) any such controversies or claims arising out of either
party's intellectual property rights for which a provisional remedy or equitable
relief is sought, shall be submitted to arbitration by one arbitrator mutually
agreed upon by the parties, and if no agreement can be reached within 30 days
after names of potential arbitrators have been proposed by the American
Arbitration Association (the "AAA"), then by one arbitrator having reasonable
experience in corporate finance transactions of
17
the type provided for in this Agreement and who is chosen by the AAA. The
arbitration shall take place in Newark, New Jersey in accordance with the AAA
rules then in effect, and judgment upon any award rendered in such arbitration
will be binding and may be entered in any court having jurisdiction thereof.
There shall be limited discovery prior to the arbitration hearing as follows:
(a) exchange of witness lists and copies of documentary evidence and documents
relating to or arising out of the issues to be arbitrated, (b) depositions of
all party witnesses and (c) such other depositions as may be allowed by the
arbitrators upon a showing of good cause. Depositions shall be conducted in
accordance with the New Jersey Code of Civil Procedure, the arbitrator shall be
required to provide in writing to the parties the basis for the award or order
of such arbitrator, and a court reporter shall record all hearings, with such
record constituting the official transcript of such proceedings. The prevailing
party shall be entitled to reasonable attorney's fees, costs, and necessary
disbursements in addition to any other relief to which such party may be
entitled. Each of the parties to this Agreement consents to personal
jurisdiction for any equitable action sought in the U.S. District Court for the
District of New Jersey or any court of the State of New Jersey having subject
matter jurisdiction.
[Remainder of Page Intentionally Left Blank]
18
The parties have executed this Series A Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
By: ____________________________________
Name: __________________________________
(print)
Title: _________________________________
Address:
PURCHASER:
Hormel Health Labs, LLC
By: ____________________________________
Name: __________________________________
(print)
Title: _________________________________
Address:
SIGNATURE PAGE TO PURCHASE AGREEMENT
EXHIBITS
Exhibit A - Form of Certificate of Designation
Exhibit B - Disclosure Schedule
Exhibit C - Form of Investors' Rights Agreement
Exhibit D - Form of Right of First Refusal and Co-Sale Agreement
EXHIBIT A
FORM OF CERTIFICATE OF AMENDMENT
EXHIBIT B
DISCLOSURE SCHEDULE
EXHIBIT C
FORM OF INVESTORS' RIGHTS AGREEMENT
EXHIBIT D
FORM OF RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
EXHIBIT E
FORM OF MANUFACTURING AGREEMENT
