EXHIBIT 10.1
____________________________________________________________________________
PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
by and among
▇▇▇▇▇▇▇▇▇▇ LABORATORIES, INC.
and
THE PARTIES NAMED HEREIN ON SCHEDULE 1, AS PURCHASERS
November 18, 2005
____________________________________________________________________________
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS .............................................. 1
1.1 Definitions ................................................... 1
ARTICLE II PURCHASE AND SALE ........................................ 3
2.1 Closing ....................................................... 3
2.2 Conditions to Obligations of Purchasers to Effect the Closing.. 4
2.3 Conditions to Obligations of the Company to Effect the Closing. 5
ARTICLE III REPRESENTATIONS AND WARRANTIES ......................... 5
3.1 Representations and Warranties of the Company ................. 5
3.2 Representations And Warranties Of The Purchasers .............. 8
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES .......................... 11
4.1 Transfer Restrictions. ........................................ 11
4.2 Legends ....................................................... 11
4.3 Public Announcements .......................................... 12
4.4 Registration Rights. .......................................... 12
4.5 Fees and Expenses ............................................. 15
4.6 Indemnification for Brokerage Fees ............................ 15
4.7 Allocation of Partial Prepayments ............................. 15
4.8 Reservation of Warrant Shares ................................. 15
4.9 Consent of Purchasers ......................................... 15
ARTICLE V TERMINATION, AMENDMENT, AND WAIVER ....................... 15
5.1 Termination ................................................... 15
5.2 Effect of Termination ......................................... 16
5.3 Amendment ..................................................... 16
5.4 Waiver ........................................................ 16
ARTICLE VI SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION ............. 16
6.1 Survival ...................................................... 16
6.2 Indemnification by Company .................................... 16
6.3 Indemnification by the Purchasers ............................. 16
6.4 Procedure for Indemnification ................................. 16
ARTICLE VII MISCELLANEOUS .......................................... 17
7.1 Notices ....................................................... 17
7.2 Entire Agreement .............................................. 17
7.3 Binding Effect; Assignment; No Third Party Benefit ............ 17
7.4 Severability .................................................. 17
7.5 Governing Law ................................................. 18
7.6 Counterparts .................................................. 18
PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
THIS PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement")
is dated as of November 18, 2005, among ▇▇▇▇▇▇▇▇▇▇ Laboratories, Inc., a
Texas corporation (the "Company"), and the purchasers identified on Schedule
1 hereto (each a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined
below), and Rule 506 promulgated thereunder, the Company desires to issue
and sell to the Purchasers, and the Purchasers, severally and not jointly,
desire to purchase from the Company in the aggregate, $5,000,000 principal
amount of the Company's 6.0% Subordinated Promissory Notes and Warrants to
purchase 5,000,000 shares of Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the Company and each
Purchaser agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule
144. With respect to a Purchaser, any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as
such Purchaser will be deemed to be an Affiliate of such Purchaser.
"Agreement" shall have the meaning ascribed to such term in the
Preamble.
"Applicable Law" means any statute, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or property is subject.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking
institutions in the State of Texas are authorized or required by law or
other governmental action to close.
"Closing" shall have the meaning ascribed to such term in Section
2.1(a).
"Closing Date" shall have the meaning ascribed to such term in
Section 2.1(a).
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock of the Company, $.01 par
value per share, and any securities into which such common stock may
hereafter be reclassified.
"Company" shall have the meaning ascribed to such term in the
Preamble.
"Damages" shall have the meaning ascribed to such term in Section
6.2.
"Disclosure Schedules" means the Disclosure Schedules concurrently
delivered herewith.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Memorandum" means that certain final Private Placement
Memorandum dated November 14, 2005 provided by the Company to the Purchasers
relating to the private offering of the Securities.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any public, governmental or regulatory
body, agency, department, commission, board, bureau or other authority or
instrumentality (domestic or foreign).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PPM Draft" means that certain draft Private Placement Memorandum
dated November 14, 2005 provided by the Company to the Purchasers relating
to the private offering of the Securities.
"Proceedings" means all proceedings, actions, suits,
investigations, and inquiries by or before any arbitrator or Governmental
Entity.
"Promissory Notes" means the 6.0% Subordinated Promissory Notes of
the Seller, which shall be in the form attached as Exhibit A hereto.
"Purchaser" shall have the meaning ascribed to such term in the
Preamble.
"Registrable Securities" means (a) the Warrant Shares or other
securities issued or issuable to each Purchaser or its transferee or
designee (i) upon exercise of the Warrants, or (ii) upon any distribution
with respect to, any exchange for or any replacement of such Warrants or
(iii) upon any conversion, exercise or exchange of any securities issued in
connection with any such distribution, exchange or replacement; (b)
securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to the foregoing; and (c) any
other security issued as a dividend or other distribution with respect to,
in exchange for, or in replacement or redemption of, any of the securities
referred to in the preceding clauses; provided, however, that such
securities shall cease to be Registrable Securities when such securities
have been sold to or through a broker dealer or underwriter in a public
distribution or a public securities transaction or when such securities may
be sold without any restriction pursuant to Rule 144(k) as determined by
counsel to the Company.
"Registration Statement" shall have the meaning ascribed to such
term in Section 4.4(b).
"Required Minimum" means the maximum aggregate number of shares of
Common Stock then issued or issuable pursuant to the Transaction Documents.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Filings" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Promissory Notes, the Warrants and the
Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Warrants" means the Series A Common Stock Purchase
Warrants, in the form of Exhibit B hereto.
"Series B Warrants" means the Series B Common Stock Purchase
Warrants, in the form of Exhibit C hereto.
"Subordination Agreement" means the Subordination Agreement, dated
as of the date hereof, by and among the Purchasers, the Company and Comerica
Bank, in the form of Exhibit D hereto.
"Subscription Amount" means, as to each Purchaser, the amount set
forth beside such Purchaser's name on Schedule 1 hereto, in United States
dollars and in immediately available funds.
"Transaction Documents" means this Agreement, the Promissory
Notes, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Warrants" means the Series A Warrants and the Series B Warrants.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing.
(a) The closing of the transactions contemplated under this
Agreement (the "Closing") will take place as promptly as practicable, but no
later than five (5) Business Days following satisfaction or waiver of the
conditions set forth in Sections 2.2 and 2.3 (other than those conditions
which by their terms are not to be satisfied or waived until the Closing),
at the offices of the Company at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(or remotely via exchange of documents and signatures) or at such other
place or day as may be mutually acceptable to the Purchasers and the
Company. The date on which the Closing occurs is the "Closing Date".
(b) At the Closing, the Purchasers shall purchase, severally and
not jointly, and the Company shall issue and sell, in the aggregate,
$5,000,000 principal amount of Promissory Notes, Series A Warrants to
purchase 2,500,000 shares of Common Stock and Series B Warrants to purchase
2,500,000 shares of Common Stock on the Closing Date. Each Purchaser shall
purchase severally, and not jointly, from the Company, and the Company shall
issue and sell to each Purchaser, a Promissory Note in a principal amount
equal to such Purchaser's Subscription Amount and Warrants to purchase the
number of shares of Common Stock as indicated on Schedule 1 for such
Purchaser.
2.2 Conditions to Obligations of Purchasers to Effect the Closing. The
obligations of each Purchaser to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may
be waived, in writing, by such Purchaser:
(a) At the Closing (unless otherwise specified below) the Company
shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement, duly executed by the Company;
(ii) a Promissory Note in the principal amount equal to such
Purchaser's Subscription Amount as set forth on Schedule 1 hereto,
registered in the name of such Purchaser;
(iii) a Series A Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire
up to the number of shares of Common Stock as set forth on Schedule 1
hereto; and
(iv) a Series B Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire
up to the number of shares of Common Stock as set forth on Schedule 1
hereto.
(b) All representations and warranties of the Company contained
herein shall remain true and correct as of the Closing Date as though such
representations and warranties were made on such date (except those
representations and warranties that address matters only as of a particular
date will remain true and correct as of such date) and the Purchaser shall
have received a certificate signed by the Company's chief executive officer
and chief financial officer to such effect.
(c) The Company shall sell Promissory Notes with a minimum
aggregate principal amount of $2,500,000.
(d) No Proceeding shall, on the Closing Date, be pending or
threatened seeking to restrain, prohibit, or obtain damages or other relief
in connection with any Transaction Document or the consummation of the
transactions contemplated thereby.
2.3 Conditions to Obligations of the Company to Effect the Closing. The
obligations of the Company to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions with respect to
such Purchaser, any of which may be waived, in writing, by the Company:
(a) At the Closing, such Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement, duly executed by such Purchaser;
(ii) a Subordination Agreement; and
(iii) such Purchaser's Subscription Amount, by wire transfer
of immediately available funds.
(b) All representations and warranties of each such Purchaser
contained herein shall remain true and correct as of the Closing Date as
though such representations and warranties were made on such date.
(c) No Proceeding shall, on the Closing Date, be pending or
threatened seeking to restrain, prohibit, or obtain damages or other relief
in connection with any Transaction Document or the consummation of the
transactions contemplated thereby.
(d) The Company shall sell Promissory Notes with a minimum
aggregate principal amount of $2,500,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following
representations and warranties as of the date hereof and as of the Closing
Date to each Purchaser:
(a) Corporate Organization. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Texas and has all requisite corporate power and corporate authority
to own, lease, and operate its properties and to carry on its business as
now being conducted.
(b) Qualification. The Company is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
property owned, leased, or operated by it or the conduct of its business
requires such qualification or licensing, except jurisdictions in which the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a material adverse effect on the business, assets, results
of operations, or financial condition of the Company.
(c) Capitalization of the Company.
(i) The authorized capital stock of the Company consists of
(i) 30,000,000 shares of Common Stock, of which, as of November 14, 2005,
10,790,230 shares were outstanding, and (ii) 1,000,000 shares of Preferred
Stock, par value $100 per share, of which, as of November 14, 2005, none of
which were outstanding. All outstanding shares of capital stock of the
Company have been validly issued and are fully paid and nonassessable, and
no shares of capital stock of the Company are subject to, nor have any been
issued in violation of, preemptive or similar rights. As of November 14,
2005, (A) an aggregate of 1,444,881 shares of Common Stock are issuable upon
the exercise of outstanding options granted under the Company's 1995 Stock
Option Plan, (B) an aggregate of 500,000 shares of Common Stock are reserved
for issuance under the Company's 2004 Stock Option Plan, of which an
aggregate of 170,500 shares of Common Stock are issuable upon the exercise
of outstanding options granted thereunder, (C) an aggregate of 1,250,000
shares of Common Stock are reserved for issuance under the Company's
Employee Stock Purchase Plan, of which an aggregate of 960,112 shares of
Common Stock have been issued thereunder, and (D) an aggregate of 300,000
shares of a series of the Company's Preferred Stock designated as Series D
Preferred Stock are reserved for issuance upon the exercise of certain
preferred share purchase rights associated with the Common Stock, which
rights become exercisable by the holders thereof upon the occurrence of
certain events, including the acquisition of, or the announcement of the
intention to acquire, more than 15% of the outstanding Common Stock by any
Person or group.
(ii) Except as set forth above in this Section 3(c) and as
contemplated by this Agreement, as of November 14, 2005, there are
outstanding (A) no shares of capital stock or other voting securities of the
Company, (B) no securities of the Company convertible into or exchangeable
for shares of capital stock or other voting securities of the Company, (C)
no options or other rights to acquire from the Company, and no obligation of
the Company to issue or sell, any shares of capital stock or other voting
securities of the Company or any securities of the Company convertible into
or exchangeable for such capital stock or voting securities, and (D) no
equity equivalents, interests in the ownership or earnings, or other similar
rights of or with respect to the Company.
(d) Authority Relative to this Agreement. The Company has full
corporate power and corporate authority to execute, deliver, and perform the
Transaction Documents and to consummate the transactions contemplated
thereby. The execution, delivery, and performance by the Company of the
Transaction Documents, and the consummation by it of the transactions
contemplated thereby, have been duly authorized by all necessary corporate
action of the Company. The Transaction Documents have been duly executed
and delivered by the Company and constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms, except that such enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws affecting creditors' rights generally, (ii) equitable
principles which may limit the availability of certain equitable remedies
(such as specific performance) in certain instances, and (iii) public
policy considerations with respect to the enforceability of rights of
indemnification.
(e) Noncontravention. The execution, delivery, and performance by
the Company of the Transaction Documents and the consummation by it of the
transactions contemplated thereby do not and will not (i) conflict with or
result in a violation of any provision of the Restated Articles of
Incorporation or Bylaws of the Company, (ii) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with
or without the giving of notice or the passage of time or both) to any right
of termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, agreement, or other instrument or
obligation to which the Company is a party or by which the Company or any of
its properties may be bound, (iii) result in the creation or imposition of
any lien or encumbrance upon the properties of the Company, or (iv) assuming
compliance with the matters referred to in Section 3.1(f), violate any
Applicable Law (as hereinafter defined) binding upon the Company, except, in
the case of clauses (ii), (iii), and (iv) above, for any such conflicts,
violations, defaults, terminations, cancellations, accelerations, liens, or
encumbrances which would not, individually or in the aggregate, have a
material adverse effect on the business, assets, results of operations, or
financial condition of the Company or on the ability of the Company to
consummate the transactions contemplated hereby.
(f) Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity (as hereinafter defined) is required to be obtained or
made by the Company in connection with the execution, delivery, or
performance by the Company of the Transaction Documents or the consummation
by it of the transactions contemplated thereby, other than (i) compliance
with any applicable requirements of the Securities Act; (ii) compliance with
any applicable requirements of the Exchange Act; (iii) compliance with any
applicable state securities laws; and (iv) such consents, approvals, orders,
or authorizations which, if not obtained, and such declarations, filings, or
registrations which, if not made, would not, individually or in the
aggregate, have a material adverse effect on the business, assets, results
of operations, or financial condition of the Company or on the ability of
the Company to consummate the transactions contemplated hereby. The
representations and warranties of the Company contained in this Section
3.1(f), insofar as such representations and warranties pertain to compliance
by the Company with the requirements of the Securities Act and applicable
state securities laws, are based on the representations and warranties of
the Purchasers contained in Section 3.2.
(g) Authorization of Issuance. The Securities have been duly
authorized for issuance and, when issued and delivered by the Company in
accordance with the provisions of the applicable Transaction Documents, will
be validly issued, fully paid, and nonassessable. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable. The Company has reserved from
its duly authorized capital stock a number of shares of Common Stock for
issuance of the Warrant Shares at least equal to the Required Minimum on the
date hereof. The issuance of the Securities and the Warrant Shares is not
subject to any preemptive or similar rights.
(h) Private Placement Memorandum; SEC Filings.
(i) None of the information contained in the Final
Memorandum, as of such date or as of the date hereof, contains any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
(ii) The Company has delivered to each Purchaser accurate and
complete copies of (A) the Company's Annual Report on Form 10-K for the year
ended December 31, 2004, (B) the Company's Annual Report to Shareholders for
the fiscal year ended December 31, 2004, (C) the Company's Proxy Statement
dated April 14, 2005, relating to the 2005 Annual Meeting of Shareholders
and (D) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005, in each case in the form filed by the Company with the
Commission (collectively, the "SEC Filings"). None of the SEC Filings,
including, without limitation, any financial statements or schedules
included therein, as of the date of filing thereof, contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Filings present fairly, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company as of the
dates thereof and its consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end audit adjustments in the
case of any unaudited interim financial statements).
(i) Absence of Undisclosed Liabilities. Except as and to the
extent disclosed in the Private Placement Memorandum and the SEC Filings,
(a) as of September 30, 2005, the Company had no liabilities or obligations
(whether accrued, absolute, contingent, unliquidated, or otherwise) material
to the Company, and (b) since September 30, 2005, the Company has not
incurred any such material liabilities or obligations, other than those
incurred in the ordinary course of business.
(j) Absence of Certain Changes. Except as disclosed in the
Private Placement Memorandum and the SEC Filings, since September 30, 2005,
there has not been any material adverse change in the business, assets,
results of operations, or financial condition of the Company.
(k) Scope of Representations and Warranties. Except as set forth
in this Agreement, the Company makes no representations or warranties to the
Purchasers and hereby disclaims all liability and responsibility for any
representation, warranty, statement, or information made or communicated
(orally or in writing) to any Purchaser (including but not limited to any
opinion, information, projection, or advice that may have been provided to
the Purchasers by any officer, director, employee, agent, consultant or
representative of the Company).
3.2 Representations And Warranties Of The Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of
the date hereof and as of the Closing Date to the Company as follows:
(a) Organization. Such Purchaser (other than individuals) is an
entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization.
(b) Authority Relative to this Agreement. Such Purchaser has full
power and authority to execute, deliver, and perform the Transaction
Documents and to consummate the transactions contemplated thereby. If such
Purchaser is an entity, the execution, delivery, and performance by such
Purchaser of the Transaction Documents to which it is a party, and the
consummation by it of the transactions contemplated thereby, have been duly
authorized by all necessary corporate, or similar action on the part of such
Purchaser. Each of the Transaction Documents to which such Purchaser is a
party has been duly executed and delivered by such Purchaser and constitutes
a valid and legally binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally, (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances, and (iii) public policy considerations with respect to the
enforceability of rights of indemnification.
(c) Noncontravention. The execution, delivery, and performance by
such Purchaser of the Transaction Documents to which it is a party and the
consummation by it of the transactions contemplated thereby do not and will
not (i) if such Purchaser is an entity, conflict with or result in a
violation of any provision of the charter, bylaws, or similar organizational
documents of such Purchaser or (ii) violate any Applicable Law binding upon
such Purchaser, except for any such violations which would not, individually
or in the aggregate affect the ability of such Purchaser to consummate the
transactions contemplated hereby.
(d) Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by such Purchaser in
connection with the execution, delivery, or performance by such Purchaser of
the Transaction Documents to which it is a party or the consummation by it
of the transactions contemplated thereby.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(f) No Public Sale or Distribution. Such Purchaser is (i)
acquiring the Promissory Notes and Warrants and (ii) upon exercise of the
Warrants will acquire the Warrant Shares, for its own account and not with a
view towards, or for resale in connection with, the public sale or
distribution thereof; provided, however, that by making the representations
herein, such Purchaser does not agree to hold any of the Securities for any
minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act. Such Purchaser does not
have any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(g) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which
it exercises any Warrants, it will be either: (i) an "accredited investor"
as defined in Rule 501 under the Securities Act or (ii) a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act. Such
Purchaser is a resident of the jurisdiction set forth below such Purchaser's
name on Schedule 1 attached hereto. Such Purchaser is not acquiring the
Securities as part of a "group" as such term is generally understood
pursuant to Section 13(d) of Regulation 13D-G of the Exchange Act or if such
Purchaser is a member of a group, the group will beneficially own, within
the meaning of Section 13(d) of Regulation 13D-G of the Exchange Act, less
than 15% of the Common Stock after giving effect to the transactions
contemplated hereby.
(h) Reliance on Exemptions. Such Purchaser understands that
the Promissory Notes and Warrants are being offered and sold to the
Purchasers in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
the Company is relying in part upon the truth and accuracy of, and such
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in
order to determine the availability of such exemptions and the eligibility
of such Purchaser to acquire the Promissory Notes and Warrants.
(i) Information. Such Purchaser and its advisors, if any, have
been furnished with all publicly available materials relating to the
business, finances and operations of the Company and such other publicly
available materials relating to the offer and sale of the Promissory Notes
and Warrants as have been requested by such Purchaser. Such Purchaser has
received a copy of the Final Memorandum, and acknowledges and agrees that
(a) the Final Memorandum supersedes the PPM Draft and (b) such Purchaser is
not relying on the PPM Draft in making the investment contemplated
hereunder. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Purchaser or its
advisors, if any, or its representatives shall modify, amend or affect such
Purchaser's right to rely on the Company's representations and warranties
contained herein. Such Purchaser understands that its investment in the
Promissory Notes and Warrants involves a high degree of risk. Other than to
other Persons party to this Agreement, Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
(j) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters, including investing in
companies engaged in the business in which the Company is engaged, so as to
be capable of evaluating the merits and risks of the prospective investment
in the Promissory Notes and Warrants, and has so evaluated the merits and
risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Promissory Notes and Warrants and is able to afford
a complete loss of such investment.
(k) No Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement
of the Promissory Notes and Warrants or the fairness or suitability of the
investment in the Promissory Notes and Warrants, nor have such authorities
passed upon or endorsed the merits of the offering of the Promissory Notes
and Warrants.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement, to
the Company or to an Affiliate of a Purchaser (who is an accredited investor
and executes a customary representation letter), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected
by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the
Securities Act.
(b) As a condition to such transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have
the rights of a Purchaser under this Agreement.
(c) While any Warrants of such Purchaser are outstanding, a
Purchaser may not transfer its Promissory Note unless such Purchaser
simultaneously transfers (in compliance with this Agreement) such
Purchaser's Warrants, and while any Promissory Note of such Purchaser is
outstanding, a Purchaser may not transfer any of its Warrants unless such
Purchaser simultaneously transfers (in compliance with this Agreement) such
Purchaser's Promissory Note.
4.2 Legends. It is agreed and understood by each Purchaser that the
form of Promissory Note, form of Warrants and any certificates representing
the Securities to be purchased by it or into which such Securities are
convertible shall each conspicuously set forth on the face or back thereof,
in addition to any other legends required by agreement or Applicable Law, a
legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED,
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT
REQUIRED.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER CONTAINED IN A PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT AMONG THE COMPANY AND
CERTAIN OTHER PARTIES THERETO. A COPY OF SUCH AGREEMENT
AND ALL APPLICABLE AMENDMENTS THERETO WILL BE FURNISHED
BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
4.3 Public Announcements. No Purchaser or any of their respective
Affiliates shall issue any press release or otherwise make any public
statement with respect to the Transaction Documents or the transactions
contemplated thereby without the prior written consent of the Company.
4.4 Registration Rights.
(a) Registration of Registrable Securities. Subject to the
occurrence of the Closing and the terms and provisions of this Agreement,
the Company shall use its commercially reasonable efforts to register the
Registrable Securities with the Commission under the Securities Act to the
extent requisite to permit the sale or other disposition thereof by the
Purchasers.
(b) Registration Procedures. The commercially reasonable efforts
of the Company under Section 4.4(a) shall mean that the Company will,
subject to the terms and provisions of this Section 4.4, use its
commercially reasonable efforts to:
(i) prepare and file with the Commission within 90 days
following the Closing a registration statement (the "Registration
Statement") covering the Registrable Securities and cause the Registration
Statement to become effective and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (A) the date when all Registrable Securities covered by such
Registration Statement have been sold pursuant to the Registration
Statement, and (B) with respect to any holder, such time as all Registrable
Securities held by such holder may be sold without any restriction pursuant
to Rule 144;
(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus contained
therein as may be necessary to keep the Registration Statement effective,
and comply with the provisions of the Securities Act, with respect to the
sale or other disposition of the Registrable Securities whenever the
Purchasers shall desire to sell or otherwise dispose of the same, but only
to the extent provided in this Section 4.4;
(iii) furnish to each Purchaser such numbers of copies of the
Registration Statement, the prospectus contained therein (including each
preliminary prospectus), and each amendment and supplement to the
Registration Statement and such prospectus, in conformity with the
requirements of the Securities Act, as such Purchaser may reasonably request
in order to facilitate the sale or other disposition of the Registrable
Securities;
(iv) register or qualify the Registrable Securities for sale
under the securities or blue sky laws of such states as the Purchasers may
reasonably request (except to the extent exemptions from such registration
or qualification are available), and do any and all other acts and things
that may reasonably be necessary under such securities or blue sky laws to
enable the Purchasers to consummate the sale or other disposition of the
Registrable Securities in such states, provided, however, that the Company
shall not in any event be required to keep any such registration or
qualification in effect after the expiration of the period during which the
Company maintains the effectiveness of the Registration Statement and shall
not for any such purpose be required to qualify to do business as a foreign
corporation in any state wherein it is not so qualified or to subject itself
to taxation in any such state; and
(v) before filing the Registration Statement, any prospectus
to be used in connection with the offering to be conducted pursuant to the
Registration Statement, or any amendments or supplements to the Registration
Statement or such prospectus with the Commission, furnish counsel to each
Purchaser with copies of all such documents proposed to be filed.
(c) Required Information. The Company shall not be required to
use its commercially reasonable efforts to register, or maintain the
effectiveness of any registration of, Registrable Securities of a Purchaser
under the Securities Act or the securities or blue sky laws of any states
unless and until such Purchaser furnishes to the Company such information
regarding such Purchaser and its Registrable Securities and the intended
method of disposition of such Registrable Securities as the Company may
reasonably request in order to satisfy the requirements applicable to such
registration.
(d) Limitations on Registration. The rights of the Purchasers
pursuant to this Section 4.4 shall be subject to the following limitations:
(i) If at any time or from time to time during the
effectiveness of the Registration Statement, the Company is engaged in or
proposes to engage in a registered public offering of securities of the
Company or any other transaction or activity which, in the good faith
determination of the Board of Directors of the Company, would be adversely
affected by offers or sales of the Registrable Securities pursuant to the
Registration Statement to the detriment of the Company, then the Purchasers
shall, upon the written request by the Company, cease making offers and
sales of the Registrable Securities pursuant to the Registration Statement
(including sales pursuant to Rule 144 under the Securities Act) for the
period of time specified by the Company, which period shall not (i) in the
case of a registered public offering, exceed the period beginning ten days
prior to the effective date of the registration statement relating to such
offering and ending 120 days after such effective date, and (ii) in the case
of any other transaction or activity, exceed the period beginning ten days
prior to, and ending 120 days after, the date of commencement of such other
activity or date of consummation of such other transaction. Each Purchaser
agrees to enter into such further agreements with the Company or any
underwriter of securities of the Company deemed necessary by the Company or
any such underwriter to carry out the purposes of this subsection (i). The
period of time that the Company is obligated to maintain the effectiveness
of the Registration Statement hereunder shall be tolled during the period
the Purchasers must cease making offers and sales of the Registrable
Securities pursuant to the Company's request under this subsection (i).
(ii) The obligations of the Company pursuant to Sections
4.4(a) and (b) shall cease (i) as to Registrable Securities sold or
otherwise disposed of pursuant to the Registration Statement or Section 4(1)
of the Securities Act, or sold or otherwise disposed of in any manner to a
person which, by virtue of this Section 4.4, is not entitled to the rights
provided by this Section 4.4, and (ii) as to Registrable Securities eligible
for sale pursuant to Rule 144 promulgated under the Securities Act, as
amended from time to time, or any similar rule that may hereafter be
adopted.
(iii) In no event shall the Company be obligated to have more
than one Registration Statement with respect to the registration of
Registrable Securities under the Securities Act be effective at any given
time, however if the conditions in (A) or (B) of Section 4.4(b)(i) are not
satisfied and the resale of the Registrable Securities pursuant to the
Registration Statement will no longer be allowed as a result of the 3 year
limitation of Rule 415 (effective December 1, 2005) promulgated under the
Securities Act (or any other similar provision), the Company shall file
additional Registration Statements and use its commercially reasonable
efforts to fully satisfy the intent of this Section 4.4 to have the
Registrable covered by an effective Registration Statement until such time
as the he conditions in (A) or (B) of Section 4.4(b)(i) are satisfied.
(iv) The rights and obligations of the Purchasers under this
Section 4.4 may not be assigned or transferred to any person without the
prior written consent of the Company except with respect to the Transfer of
the Warrants (in which case such rights and obligations are transferred with
such Warrants).
(e) Expenses of Registration. In connection with any registration
of the Registrable Securities pursuant to the provisions of this Section
4.4, each Purchaser shall pay any brokerage and underwriting discounts and
commissions payable in respect of the Registrable Securities sold on such
Purchaser's behalf, all fees and expenses of any attorneys and accountants
employed by such Purchaser, and any other costs directly incurred by such
Purchaser, and the Company shall pay or cause to be paid and shall indemnify
and hold harmless the Purchasers from and against any and all other costs
and expenses incurred in connection with such registration and related blue
sky registrations and qualifications.
(f) Indemnification. In connection with any registration of the
Registrable Securities pursuant to the provisions of this Section 4.4, the
Company shall, to the extent permitted by Applicable Law, indemnify and hold
harmless each Purchaser to the extent that companies generally indemnify and
hold harmless underwriters in connection with public offerings under the
Securities Act, and each Purchaser shall indemnify and hold harmless the
Company, each director and officer of the Company, and each person who
controls the Company within the meaning of the Securities Act to the extent
that selling shareholders generally indemnify and hold harmless issuers of
securities in connection with public offerings under the Securities Act with
respect to the information provided by such Purchaser for use by the Company
in the preparation of the Registration Statement.
(g) Inclusion of Other Securities. Each Purchaser acknowledges
that the Registration Statement, and any prospectus used in connection with
the offering conducted pursuant thereto, may cover, in addition to the
Registrable Securities, other shares of Common Stock or other securities of
the Company to be sold by the Company or other persons.
4.5 Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses incurred in connection with the Transaction
Documents and the transactions contemplated thereby shall be paid by the
party incurring such fee or expense.
4.6 Indemnification for Brokerage Fees. The parties hereto acknowledge
and agree that, except for fees payable by the Company to Stonewall
Securities, Inc., no brokerage or finder's fees or commissions are or will
be payable in connection with the transactions contemplated by this
Agreement. Each of the parties hereto agrees to indemnify and hold harmless
each other party from and against any other claims or demands for a
commission or other compensation by any other financial advisor, broker,
agent, finder, or similar intermediary claiming to have been employed by or
on behalf of such indemnifying party and to bear the cost of legal fees and
expenses incurred in defending against any such claim or demand.
4.7 Allocation of Partial Prepayments. In the case of each partial
prepayments of the Promissory Notes, the Company shall cause the principal
amounts of the Promissory Notes to be paid to be allocated among all of the
Promissory Notes outstanding at such time in proportion, as nearly as
practicable, to the respective unpaid principal amount thereof. Any
Purchaser may waive this requirement with respect to its Promissory Note.
4.8 Reservation of Warrant Shares. So long as any Warrants are
outstanding, the Company shall reserve and set aside from its duly
authorized capital stock a number of shares of Common Stock for issuance of
the Warrant Shares at least equal to the maximum number of shares Common
Stock that may be issued upon the exercise of all then outstanding Warrants.
4.9 Consent of Purchasers. By executing this Agreement, each
Purchaser hereby consents and agrees that one of the Purchasers may be
purchasing a Promissory Note through a profit sharing trust (Related
Purchasing Trust) or similar entity and purchasing the Warrants accompanying
such Promissory Note in such Purchaser's individual capacity (Related
Purchasing Individual). If the foregoing occurs, the Related Purchasing
Trust and Related Purchasing Individual will each executed a copy of this
Agreement and will each hereby agree that all of the terms of this Agreement
and the Transaction Documents shall apply to them as if they were one
Purchaser.
ARTICLE V
TERMINATION, AMENDMENT, AND WAIVER
5.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing in the
following manner:
(a) by mutual written consent of the Company and the Purchasers;
or
(b) by the Company, if, on the Closing Date, any of the conditions
set forth in Section 2.3 shall not have been satisfied and shall not have
been waived by the Company; or
(c) by the Purchasers, if, on the Closing Date, any of the
conditions set forth in Section 2.2 shall not have been satisfied and shall
not have been waived by the Purchasers.
5.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 5.1 by the Company, on the one hand, or the
Purchasers, on the other, written notice thereof shall forthwith be given to
the other party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall become void and have no
effect, except that the agreements contained in this Section and in Sections
4.3, 4.5, and 4.6 and Article VI shall survive the termination hereof.
Nothing contained in this Section shall relieve any party from liability for
any breach of this Agreement.
5.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
5.4 Waiver. No failure or delay by a party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
The provisions of this Agreement may not be waived except by an instrument
in writing signed by or on behalf of the party against whom such waiver is
sought to be enforced.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
6.1 Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto shall survive the Closing, regardless of any
investigation made by or on behalf of any party.
6.2 Indemnification by Company. The Company shall indemnify, defend,
and hold harmless the Purchasers from and against any and all claims,
actions, causes of action, demands, losses, damages, liabilities, costs, and
expenses (including reasonable attorneys' fees and expenses) (collectively,
"Damages"), asserted against, resulting to, imposed upon, or incurred by the
Purchasers, directly or indirectly, by reason of or resulting from any
breach by the Company of any of its representations, warranties, covenants,
or agreements contained in any Transaction Documents.
6.3 Indemnification by the Purchasers. Each Purchaser severally (but
not jointly) shall indemnify, defend, and hold harmless the Company from and
against any and all Damages asserted against, resulting to, imposed upon, or
incurred by the Company, directly or indirectly, by reason of or resulting
from any breach by such Purchaser of any of its representations, warranties,
covenants, or agreements contained in any Transaction Document.
6.4 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 6.2 or 6.3 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is
to be made against an indemnifying party under such Section, give written
notice to the indemnifying party of the commencement thereof, but the
failure so to notify the indemnifying party shall not relieve it of any
liability that it may have to any indemnified party except to the extent the
indemnifying party demonstrates that the defense of such action is
prejudiced thereby. In case any such action shall be brought against an
indemnified party and it shall give written notice to the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified
party. If the indemnifying party elects to assume the defense of such
action, the indemnified party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof. If
the indemnifying party elects not to assume (or fails to assume) the defense
of such action, the indemnified party shall be entitled to assume the
defense of such action with counsel of its own choice, at the expense of the
indemnifying party. If the action is asserted against both the indemnifying
party and the indemnified party and there is a conflict of interests which
renders it inappropriate for the same counsel to represent both the
indemnifying party and the indemnified party, the indemnifying party shall
be responsible for paying for separate counsel for the indemnified party;
provided, however, that if there is more than one indemnified party, the
indemnifying party shall not be responsible for paying for more than one
separate firm of attorneys to represent the indemnified parties, regardless
of the number of indemnified parties. The indemnifying party shall have no
liability with respect to any compromise or settlement of any action
effected without its written consent (which shall not be unreasonably
withheld).
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto
shall be in writing and shall be deemed to have been duly given or made if
delivered personally or transmitted by first class registered or certified
mail, postage prepaid, return receipt requested, to the parties at the
addresses set forth opposite their names on the signature page hereof (in
the case of the Company) and on Schedule 1 hereto (in the case of the
Purchasers) (or at such other addresses as shall be specified by the parties
by like notice).
7.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
7.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors, and permitted
assigns. Except as otherwise provided in this Agreement, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any of the parties hereto. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any person other
than the parties hereto, and their respective heirs, legal representatives,
successors, and permitted assigns, any rights, benefits, or remedies of any
nature whatsoever under or by reason of this Agreement.
7.4 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed
unenforceable, and in all other respects this Agreement shall remain in full
force and effect; provided however, that if any such provision may be made
enforceable by limitation thereof, then such provision shall be deemed to be
so limited and shall be enforceable to the maximum extent permitted by
applicable law.
7.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
7.6 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less
than all, but together signed by all, the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
Address for Notice: ▇▇▇▇▇▇▇▇▇▇ LABORATORIES, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By:
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With a Copy to: Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Patterson, Belknap, ▇▇▇▇ & ▇▇▇▇▇ LLP Title: President and CEO
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
PURCHASER:
[Print Exact Name]
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SSN/EIN:
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Subscription Amount: $
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Schedule 1
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Purchasers and Amount of Promissory Notes and Warrants
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Subscription
Amount and
Principal
Amount of Common Stock Underlying
Name, Address Promissory -----------------------
and Fax Number Copies of Notes Series A Series B
of Purchaser Notices to Purchased Warrants Warrants
-------------- ---------- ------------ -----------------------
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Exhibit A
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Form of Promissory Note
See attached.
Exhibit B
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Form of Series A Warrant
See attached.
Exhibit C
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Form of Series B Warrant
See attached.
Exhibit D
---------
Form of Subordination Agreement
See attached.
