EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November
14, 2002, between ViroLogic, Inc., a corporation organized under the laws of the
State of Delaware (the "COMPANY"), and each of the purchasers (individually, a
"PURCHASER" and collectively the "PURCHASERS") set forth on the execution pages
hereof (the "EXECUTION PAGES, and each an "EXECUTION PAGE").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. The Company desires to sell, and each Purchaser desires to purchase,
upon the terms and conditions stated in this Agreement, units (the "UNITS"),
each Unit consisting of (i) one share of the Company's Series C Convertible
Preferred Stock, par value $.001 per share (the "PREFERRED SHARES"), convertible
into approximately 8,264.46 shares of the Company's common stock, par value
$.001 per share (the "COMMON STOCK"), and (ii) a warrant, in the form attached
hereto as Exhibit B (the "WARRANTS"), to acquire approximately 6,198.35 shares
of Common Stock. The rights, preferences and privileges of the Preferred Shares,
including the terms upon which such Preferred Shares are convertible into shares
of Common Stock, are set forth in the form of Certificate of Designations,
Preferences and Rights attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATION"). The shares of Common Stock issuable upon conversion of the
Preferred Shares pursuant to the Certificate of Designation are referred to
herein as the "CONVERSION SHARES" and the shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants are referred to herein as the
"WARRANT SHARES." The Preferred Shares, the Warrants, the Conversion Shares and
the Warrant Shares are collectively referred to herein as the "SECURITIES" and
each of them may individually be referred to herein as a "SECURITY."
C. In connection with the Closing (as defined herein) pursuant to this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws. This Agreement,
the Certificate of Designation, the Warrants and the Registration Rights
Agreement are collectively referred to herein as the "TRANSACTION DOCUMENTS."
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
(a) Purchase of Units. The issuance, sale and purchase of the Units
shall take place in one closing, which is referred to herein as the "CLOSING."
On the Closing Date (as defined below), subject to the satisfaction (or waiver)
of the conditions set forth in Section 6 and Section
7 below, the Company shall issue and sell to each Purchaser, and each Purchaser
agrees to purchase from the Company, such number of Units as is set forth on
such Purchaser's Execution Page attached hereto. The purchase price (the
"PURCHASE PRICE") per Unit shall be equal to Ten Thousand Dollars ($10,000).
(b) Form of Payment. On the Closing Date, each Purchaser shall pay the
applicable purchase price by wire transfer to the Company in accordance with the
Company's written wiring instructions, against delivery of the Units being
purchased at the Closing by such Purchaser, and the Company shall deliver such
Units against delivery of the applicable purchase price.
(c) Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units to each of the Purchasers pursuant to this
Agreement at the Closing shall be 12:00 noon, New York City time, on November
18, 2002, subject to a two business day grace period at either party's option,
but in any event not later than November 20, 2002, or such other time as may be
mutually agreed upon by the Company and the Purchasers purchasing a majority of
the Units at the Closing (the "CLOSING DATE"). The Closing shall occur at the
offices of Drinker Xxxxxx & Xxxxx LLP at Xxx Xxxxx Xxxxxx, 00xx & Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx, XX 00000.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Each Purchaser severally, but not
jointly, represents and warrants to the Company as follows:
(a) Purchase for Own Account, Etc.. Such Purchaser is purchasing the
Units for such Purchaser's own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales that are exempt
from the registration requirements of the Securities Act and/or sales registered
under the Securities Act. Such Purchaser understands that Purchaser must bear
the economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities or
blue sky laws or an exemption from such registration is available, and that the
Company has no present intention of registering the resale of any such
Securities other than as contemplated by the Registration Rights Agreement.
Notwithstanding anything in this Section 2(a) to the contrary, by making the
representations herein, the Purchaser does not agree to hold 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 from the registration requirements under the
Securities Act.
(b) Accredited Investor Status. Such Purchaser is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act; the Purchaser is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to,
investments in shares presenting an investment decision like that involved in
the purchase of the Units, including investments in securities issued by the
Company and investments in comparable companies; and the Purchaser has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Units.
(c) Reliance on Exemptions. Such Purchaser understands that the Units
are being offered and sold to such Purchaser in reliance upon specific
exemptions from the registration
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requirements of United States federal and state securities laws and that the
Company is relying 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 Securities.
(d) Information. Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been specifically requested by such Purchaser or its counsel. Such
Purchaser and its counsel have been afforded the opportunity to ask questions of
the Company and have received what such Purchaser believes to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other
investigation conducted by such Purchaser or its counsel or any of its
representatives shall modify, amend or affect such Purchaser's right to rely on
the Company's representations and warranties contained in Section 3 below. Such
Purchaser understands that such Purchaser's investment in the Securities
involves a high degree of risk.
(e) Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Transfer or Resale. Such Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (b)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) ("RULE 144"); or (d) sold or
transferred in accordance with applicable securities laws to an affiliate of
such Purchaser who agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 2(f) and who is an Accredited
Investor; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws (other than pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement, provided such pledge is consistent
with applicable laws, rules and regulations.
(g) Legends. Such Purchaser understands that the certificates for the
Preferred Shares, Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement or otherwise may be sold by such Purchaser under
Rule 144(k), the certificates for the Conversion Shares and Warrant Shares shall
bear a restrictive legend in substantially the following form:
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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.
The Company agrees that at any time the Registration Statement is
effective, and assuming compliance with the applicable provisions of the
Certificate of Designation or the Warrant, as applicable, the Company shall
instruct its transfer agent to issue (and provide such transfer agent with any
additional documentation that may be necessary to cause the Conversion Shares
and the Warrant Shares to be issued without the restrictive legend above), in
connection with the issuance of the Conversion Shares and Warrant Shares,
certificates representing such Conversion Shares and Warrant Shares without the
restrictive legend above, provided such Conversion Shares and Warrant Shares are
to be sold pursuant to the prospectus contained in the Registration Statement.
The parties acknowledge that the Company has certain rights with respect to
transfers of the Securities as set forth in the Registration Rights Agreements.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement and the Security is sold pursuant to and as set forth in such
Registration Statement and in the Securities Act; (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Security may be made without registration under the
Securities Act; or (c) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance written notice to such Purchaser
the Company may require that the above legend be placed on any such Security
that cannot then be sold pursuant to an effective registration statement or
under Rule 144 and such Purchaser shall cooperate in the replacement of such
legend. Such legend shall thereafter be removed when such Security may again be
sold pursuant to an effective registration statement or under Rule 144.
(h) Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Purchaser and are valid and binding agreements of such
Purchaser enforceable against such Purchaser in accordance with their terms.
(i) Residency. Such Purchaser is a resident of the jurisdiction set
forth under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
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The Purchasers' representations and warranties made in this Article 2
are made solely for the purpose of permitting the Company to make a
determination that the offer and sale of the Preferred Shares and Warrants
pursuant to this Agreement complies with applicable U.S. federal and state
securities laws and not for any other purpose. Accordingly, the Company should
not rely on such representations and warranties for any other purpose.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a
Schedule of Exceptions executed and delivered by the Company to the Purchasers
at Closing (the "SCHEDULE OF EXCEPTIONS"), the Company represents and warrants
to each Purchaser as follows:
(a) Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
or under the Certificate of Designation, the Warrants or the Registration Rights
Agreement or (iii) the business, operations, properties, prospects or financial
condition of the Company and its subsidiaries, taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue and
sell the Units in accordance with the terms hereof, to issue the Conversion
Shares upon conversion of the Preferred Shares in accordance with the terms of
the Certificate of Designation and to issue the Warrant Shares upon exercise of
the Warrants in accordance with the terms of such Warrants; (ii) the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Preferred Shares and Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares) have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or any committee of the Board of Directors is
required, and (iii) this Agreement constitutes, and, upon execution and delivery
by the Company of the Warrants and the Registration Rights Agreement, such
agreements will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
(c) Stockholder Authorization. Neither the execution, delivery or
performance by the Company of this Agreement, the Warrants or the Registration
Rights Agreement nor the consummation by it of the transactions contemplated
hereby or thereby (including, without limitation, the issuance of the Preferred
Shares or Warrants or the issuance or reservation for issuance of the Conversion
Shares or Warrant Shares) requires any consent or authorization of the Company's
stockholders.
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(d) 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 Preferred Shares and Warrants)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants is set forth on Schedule 3(d)
of the Schedule of Exceptions. All of such outstanding shares of capital stock
have been, or upon issuance in accordance with the terms of any such warrants,
options or preferred stock, will be, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company (including the
Preferred Shares, the Conversion Shares and the Warrant Shares) 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 on
Schedule 3(d) of the Schedule of Exceptions, as of the date of this Agreement,
(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 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 or arrangements contemplated, and (ii) there are no
agreements 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 Registration Rights Agreements). Schedule 3(d) of the
Schedule of Exceptions sets forth all of the Company issued securities or
instruments containing antidilution or similar provisions that will be triggered
by, and all of the resulting adjustments that will be made to such securities
and instruments as a result of, the issuance of the Securities in accordance
with the terms of this Agreement, the Certificate of Designation or the
Warrants. The Company has furnished to the Purchasers true and correct copies of
the Company's Certificate of Incorporation as in effect on the date hereof
("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect on the date
hereof (the "BY-LAWS"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company. The Certificate of Designation, in the form attached hereto, will
be duly filed prior to Closing with the Secretary of State of the State of
Delaware and, upon the issuance of the Preferred Shares in accordance with the
terms hereof, each Purchaser shall be entitled to the rights set forth therein.
(e) Issuance of Shares. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances (other than restrictions on transfer contained in this
Agreement and in the Registration Rights Agreements) and will not be subject to
preemptive rights, rights of first refusal or other similar rights of
stockholders of the Company and will not impose personal liability on the
holders thereof. The Conversion Shares are duly authorized and reserved for
issuance, and, upon conversion of the Preferred Shares in accordance with the
terms thereof, will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances (other than restrictions on
transfer contained in this Agreement and in the Registration Rights Agreements)
and will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof. The Warrant Shares shall be duly authorized
and reserved for issuance, and, upon exercise of the Warrants in accordance with
the terms
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thereof, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances (other than restrictions on transfer
contained in this Agreement and in the Registration Rights Agreements) and will
not be subject to preemptive rights, rights of first refusal or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.
(f) No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations and rules or regulations of
any self-regulatory organizations to which either the Company or its securities
are subject) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Preferred Shares, in violation of any law, ordinance
or regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Warrants or the Registration Rights Agreement or to
perform its obligations under the Certificate of Designation, in each case in
accordance with the terms hereof or thereof. The Company is not in violation of
the listing requirements of the Nasdaq National Market ("NNM") and has received
no notice regarding the potential delisting of the Common Stock by the NNM.
(g) SEC Documents, Financial Statements. Since December 31, 2001, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements
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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, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Purchaser true
and complete copies of the SEC Documents. To the extent that any SEC Document is
available under the SEC's XXXXX filing system prior to the date hereof, such SEC
Document shall be deemed to have been delivered to each of the Purchasers. 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 (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company 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
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, 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.
(h) Absence of Certain Changes. Since December 31, 2001, 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, except as disclosed in
the SEC Documents filed prior to the date hereof.
(i) Absence of Litigation. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body, including, without limitation, the SEC or
NASDAQ, pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or any of
their
8
respective directors or officers in their capacities as such. There are no facts
which, if known by a potential claimant or governmental authority, could give
rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(j) Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any Intangibles.
Except as set forth on Schedule 3(j) of the Schedule of Exceptions, neither the
Company nor any of its subsidiaries has received written notice of any pending
conflict with or infringement upon such third party Intangibles. Except as set
forth on Schedule 3(j) of the Schedule of Exceptions, the termination of the
Company's ownership of, or right to use, any single Intangible would not result
in a Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has entered into any consent agreement, indemnification agreement,
forbearance to xxx or settlement agreement with respect to the validity of the
Company's or its subsidiaries' ownership or right to use its Intangibles and, to
the best knowledge of the Company, there is no reasonable basis for any such
claim to be successful. The Intangibles are valid and enforceable and no
registration relating thereto has lapsed, expired or been abandoned or canceled
or is the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and in good standing. The Company and its
subsidiaries have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Intangibles used
pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company or its
subsidiaries.
(k) Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(l) Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to any Purchaser pursuant to Section
2(d) 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, not
misleading.
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(m) Acknowledgment Regarding Purchasers' Purchase of the Units. The
Company acknowledges and agrees that none of the Purchasers is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and the Purchasers is "arms-length" and any
statement made by any Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser's purchase of Securities and has not been
relied upon by the Company, its officers or directors in any way. The Company
further acknowledges that the Company's decision to enter into this Agreement
has been based solely on an independent evaluation by the Company and its
representatives.
(n) Listing. The Company has secured the listing of the Conversion
Shares and the Warrant Shares upon each national securities exchange or
automated quotation system upon which shares of Common Stock are currently
listed (subject to official notice of issuance).
(o) Form S-3 Eligibility. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement). The Company has no basis to believe that its past or present
independent public auditors will withhold their consent to the inclusion, or
incorporation by reference, of their audit opinion concerning the Company's
financial statements which are included in the Registration Statement required
to be filed pursuant to the Registration Rights Agreement.
(p) No General Solicitation. 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.
(q) No Integrated Offering. 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 or any applicable stockholder
approval provisions, including, without limitation, Rule 4350(i) of the NASD or
any similar rule.
(r) No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions or finder's fees or for
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby.
(s) Acknowledgment Regarding Securities. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase in certain
circumstances. The Company's executive officers have studied and fully
understand the nature of the Securities being sold hereunder. The Company
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with the Certificate of Designation is, other
than as set forth in the Certificate of Designation, absolute and unconditional,
regardless
10
of the dilution that such issuance may have on the ownership interests of other
stockholders and the availability of remedies provided for in the Transaction
Documents relating to a failure or refusal to issue Conversion Shares. Taking
the foregoing into account, the Company's Board of Directors has determined in
its good faith business judgment that the issuance of the Preferred Shares and
Warrants hereunder and the consummation of the other transactions contemplated
hereby are in the best interests of the Company and its stockholders. The
Company's Board of Directors and executive officers fully intend to honor their
obligations hereunder to issue Conversion Shares upon conversion of the
Preferred Shares regardless of the dilution that such issuance may have on the
ownership interests of other stockholders and the availability of remedies
provided for in the Transaction Documents relating to their failure or refusal
to issue Conversion Shares.
(t) Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to all
personal property owned by them that is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
(u) Tax Status. Except as set forth in the SEC Documents, the Company
and each of its subsidiaries has made or filed all foreign, U.S. federal, state
and local income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
any statute of limitations relating to the assessment or collection of any
federal, state or local tax. None of the Company's tax returns is presently
being audited by any taxing authority.
(v) Key Employees. Each of the Company's directors, officers and any Key
Employee (as defined below) is currently serving the Company in the capacity
disclosed in the SEC Documents. No Key Employee, to the best of the knowledge of
the Company and its subsidiaries, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each Key Employee does not subject the Company or any of its subsidiaries to
any liability with respect to any of the foregoing matters. No Key Employee has,
to the knowledge of the Company and its subsidiaries, any intention to terminate
or limit his employment with, or services to, the Company or any of its
subsidiaries, nor, to the knowledge
11
of the Company, is any such Key Employee subject to any constraints which would
cause such employee to be unable to devote his full time and attention to such
employment or services. "KEY EMPLOYEE" means the persons listed on Schedule 3(v)
of the Schedule of Exceptions and any individual who assumes or performs any of
the duties of a Key Employee.
(w) Insurance. The Company and its subsidiaries have in force fire,
casualty, product liability and other insurance policies, with extended coverage
and in such amounts as are customarily carried by persons engaged in the same or
similar business as the Company and its subsidiaries. No default or event has
occurred that could give rise to a default under any such policy.
(x) Environmental Matters. There is no environmental litigation or other
environmental proceeding pending or threatened by any governmental regulatory
authority or others with respect to the current or any former business of the
Company or its subsidiaries or any partnership or joint venture currently or at
any time affiliated with the Company or its subsidiaries. No state of facts
exists as to environmental matters or Hazardous Substances (as defined below)
that involves the reasonable likelihood of a material capital expenditure by the
Company or its subsidiaries or that may otherwise have a Material Adverse
Effect. No Hazardous Substances have been treated, stored or disposed of, or
otherwise deposited, in or on the properties owned or leased by the Company or
its subsidiaries or by any partnership or joint venture currently or at any time
affiliated with the Company or its subsidiaries in violation of any applicable
environmental laws. The environmental compliance programs of the Company and its
subsidiaries comply in all respects with all environmental laws, whether
federal, state or local, currently in effect. As used herein, "HAZARDOUS
SUBSTANCES" means any substance, waste, contaminant, pollutant or material that
has been determined by any governmental authority to be capable of posing a risk
of injury to health, safety, property or the environment.
(y) Inventory. All inventory of the Company and its subsidiaries is
valued on the Company's consolidated books and records at the lower of standard
cost, which approximates actual cost, or the fair market value thereof. Except,
to the extent of the Company's reserves for obsolete or unmerchantable inventory
reflected in the Company's SEC Documents, all such inventory, after
consideration of reserves consisting of finished goods is of merchantable
quality and is saleable in the ordinary course of business consistent with past
practice.
(z) Regulatory Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities which are material to conduct its
business, and neither the Company nor any of its subsidiaries has received any
written notice of any proceeding relating to the revocation or modification of
any such certificate, authorization or permit.
4. COVENANTS.
(a) Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
(b) Form D: Blue Sky Laws. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to each
12
Purchaser promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to each Purchaser pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of the
United States or obtain exemption therefrom, and shall provide evidence of any
such action so taken to each Purchaser on or prior to the Closing Date. Within
four (4) trading days after the Closing Date, the Company shall file a Form 8-K
concerning this Agreement and the transactions contemplated hereby, which Form
8-K shall attach this Agreement and its Exhibits as exhibits to such Form 8-K.
(c) Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file (within applicable extension
periods) all reports required to be filed with the SEC pursuant to the Exchange
Act, and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination. In addition, the Company
shall take all actions reasonably necessary to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
(d) Use of Proceeds. The Company shall use the proceeds from the sale of
the Preferred Shares and Warrants for general corporate purposes and working
capital and such proceeds shall not be used to repay indebtedness (other than
indebtedness incurred in the ordinary course of business), make acquisitions, or
make payments to stockholders or affiliates of the Company. Subject to the use
of proceeds as outlined above, the Company will invest the proceeds (i) in
evidences of indebtedness issued or fully guaranteed by the United States of
America and having a maturity of not more than one year from the date of
acquisition; (ii) in certificates of deposit, notes, acceptances and repurchase
agreements having a maturity of not more than one year from the date of
acquisition issued by a bank organized in the United States having capital,
surplus and undivided profits of at least $500,000,000; (iii) in the
highest-rated commercial paper having a maturity of not more than one year from
the date of acquisition; and (iv) in "Money Market" fund shares, or in money
market accounts fully insured by the Federal Deposit Insurance Corporation and
sponsored by banks and other financial institutions, provided that the
investments consist principally of the types of investments described in clauses
(i), (ii), or (iii) above.
(e) [Intentionally Omitted.]
(f) Expenses. The Company shall pay to SDS Capital Partners ("SDS
CAPITAL") at the Closing, reimbursement for the out-of-pocket expenses
reasonably incurred by SDS Capital's advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
SDS Capital's advisors' reasonable due diligence and attorneys' fees and
expenses (the "EXPENSES"); provided, however, that in lieu of such payment SDS
Capital (or its affiliates) shall be permitted to deduct all Expenses from the
purchase price payable by SDS Capital (or its affiliates) hereunder. In
addition, from time to time thereafter, upon SDS Capital's written request, the
Company shall pay to SDS Capital such additional Expenses, if any, not covered
by such payment, in each case to the extent reasonably incurred by SDS Capital's
agents prior to the
13
Closing in connection with the negotiation, preparation, execution and delivery
of this Agreement.
(g) Financial Information. The Company shall send the following reports
to each Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K. To the extent that any of the
foregoing documents is available under the SEC's XXXXX filing system, such
documents shall be deemed to have been delivered to each of the Purchasers.
(h) Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
and the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith, in each case to the extent required by the Certificate of
Designation and the Warrants.
(i) Listing. The Company shall have filed an application for the listing
of the Conversion Shares and the Warrant Shares on the NNM on or before the
Closing. From the time that such application has been approved and thereafter,
the Company shall maintain, so long as any Purchaser (or any of their
affiliates) own any Securities, the listing of all Conversion Shares and Warrant
Shares from time to time issuable upon conversion of the Preferred Shares and
exercise of the Warrants on each national securities exchange or automated
quotation system on which shares of Common Stock are currently listed. The
Company will use its best efforts to continue the listing and trading of its
Common Stock on the NNM, the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX") or the Nasdaq SmallCap Market (the "SMALLCAP") and will
comply in all material respects with the reporting, filing and other obligations
under the bylaws or rules of the NASD and such exchanges, as applicable. The
Company shall promptly provide to each holder of Preferred Shares and/or
Warrants copies of any notices it receives regarding the continued eligibility
of the Common Stock for trading on the NNM or, if applicable, any securities
exchange or automated quotation system on which securities of the same class or
series issued by the Company are then listed or quoted, if any.
(j) Corporate Existence. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Certificate of Designation, the Warrants and the agreements and instruments
entered into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized and
available for issuance in order to effect the conversion of all Preferred Shares
and exercise in full of all Warrants outstanding as of the date of such
transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the NNM, SmallCap, NYSE or AMEX. Notwithstanding the
foregoing, the Company covenants and agrees that it will not engage in any
merger, consolidation or sale of all or substantially all of its assets at any
time prior to the effectiveness of the Registration Statement required to be
filed pursuant to the Registration Rights Agreement without (A) providing each
Purchaser with written notice of such transaction at least 60 days
14
prior to the consummation of such transaction and (B) obtaining the written
consent of the Purchasers holding a majority-in-interest of the then outstanding
Preferred Shares on or before the 10th day after the delivery of such notice by
the Company.
(k) No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
(l) Legal Compliance. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(m) Redemptions and Dividends. So long as any Purchaser beneficially
owns any Preferred Shares, the Company shall not, without first obtaining the
written approval of the holders of a majority of the Preferred Shares then
outstanding, repurchase, redeem, or declare or pay any cash dividend or
distribution on, any shares of capital stock of the Company; provided, however,
that the foregoing shall not prohibit the Company from repurchasing, redeeming
or declaring or paying cash dividends or distributions on shares of the
Company's Series A Convertible Preferred Stock provided that any such
repurchases, redemptions, dividends and distributions are made solely in
accordance with the terms of such Series A Convertible Preferred Stock as in
effect on the date hereof.
(n) Information. The Company will furnish to each Purchaser, so long as
it holds any Preferred Shares:
(i) concurrently with the filing with the SEC of its annual
reports on Form 10-K, a certificate of the President, a Vice President or a
senior financial officer of the Company stating that, based upon such
examination or investigation and review of this Agreement as in the opinion of
the signer is necessary to enable the signer to express an informed opinion with
respect thereto, neither the Company nor any of its subsidiaries is or has
during such period been in default in the performance or observance of any of
the terms, covenants or conditions hereof, or, if the Company or any of its
subsidiaries shall be or shall have been in default, specifying all such
defaults, and the nature and period of existence thereof, and what action the
Company or such subsidiary has taken, is taking or proposes to take with respect
thereto; and
(ii) the information the Company must deliver to any holder or to
any prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144A of the SEC or any similar rule
then in effect.
The Company will keep at its principal executive office a true
copy of this Agreement (as at the time in effect), and cause the same to be
available for inspection at such office during normal business hours by any
holder of Securities or any prospective transferee of Securities designated by a
holder thereof.
15
(o) Inspection of Properties and Books. So long as any Purchaser shall
hold any Securities, such Purchaser and its representatives and agents
(collectively, the "INSPECTORS") shall have the right, at such Purchaser's
expense, to visit and inspect any of the properties of the Company and of its
subsidiaries, to examine the books of account and records of the Company and of
its subsidiaries, to make or be provided with copies and extracts therefrom, to
discuss the affairs, finances and accounts of the Company and of its
subsidiaries with, and to be advised as to the same by, its and their officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of the Company is present) all at such
reasonable times and intervals and to such reasonable extent as such Purchaser
may desire; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to such Purchaser) of any such information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement filed pursuant to the Registration Rights Agreement, (b)
the release of such information is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (c) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information to any Inspector until and
unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 4(o). Each Purchaser agrees
that it shall, upon learning that disclosure of such information is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the information deemed confidential. Notwithstanding the
foregoing, the Company shall be permitted to withhold from disclosure under this
paragraph any material protected by attorney-client privilege.
(p) Waivers and Consents. Prior to the effectiveness any Registration
Statement filed in accordance with Section 2(a) of the Registration Rights
Agreement, the Company shall have obtained proper waivers from the stockholders
and warrant holders referred to on Schedule 3(f) of the Schedule of Exceptions
to this Agreement.
(q) Confidential Agreement. Each Purchaser will hold in confidence all
information concerning this Agreement and the placement of shares hereunder
until the earlier of such time as (i) the Company has made a public announcement
concerning the Agreement and the placement of shares hereunder or (ii) this
Agreement is terminated.
(r) Stockholder Approval. The Company shall call a meeting of its
stockholders to be held as promptly as practicable (but in any event no later
than 90 days after the Closing Date) for the purpose of voting upon and
approving (i) the increase in the number of authorized shares of the Company's
Common Stock to a number sufficient to provide for (A) the issuance and
conversion of the Preferred Shares issuable upon conversion of the Notes (as
defined in the Exchange Agreement (as defined herein)) issued pursuant to the
Exchange Agreement, (B) the exercise of all of the Warrants issued by the
Company to the holders of the Notes upon conversion thereof into Preferred
Shares in exchange for outstanding warrants held by such
16
holders (the "NEW SERIES B WARRANTS"), and (C) the conversion or exercise of all
other outstanding securities of the Company that are convertible into or
exercisable for shares of Common Stock (the "AUTHORIZED STOCK APPROVAL"), (ii)
to approve the conversion of the Notes into Preferred Shares and the issuance of
the New Series B Warrants, in accordance with Rule 4350(i) of the NASD or any
similar rule (the "NASD RULE APPROVAL"), and (iii) to amend the Certificate of
Designation to include (a) the right of the Company to pay any premium payments
due thereunder in either cash or shares of Common Stock at the Company's
election and (b) the same anti-dilution protections as are currently afforded to
the Company's Series A Convertible Preferred Stock pursuant to Article XI,
Section G of the Certificate of Designations, Preferences and Rights related
thereto (the "SERIES C AMENDMENT APPROVAL" and, together with the Authorized
Stock Approval and the NASD Rule Approval, the "STOCKHOLDER APPROVAL"). The
Company shall recommend to its stockholders approval of such matters. The
Company shall use its best efforts to solicit from its stockholders proxies in
favor of such matters sufficient to obtain the Stockholder Approval (including
any such approval required by the NASD), and shall vote such proxies, and shall
use its best efforts to cause all "affiliates" (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) of the Company to vote any shares of
Common Stock beneficially owned by such persons or entities, in favor of such
matters. In the event and upon obtaining the Series C Amendment Approval, (x)
the Company shall prepare and, subject to the approval of the holders of
Preferred Shares in accordance with the Certificate of Designation, file an
amendment to the Certificate of Designation to include such additional
provisions, and (y) provided that the stockholders have approved all of the
amendments described in clause (ii) of this Section 4(r), the Purchasers shall,
in their capacity as holders of Preferred Shares, consent to such amendment.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue certificates
(subject to the legend and other provisions hereof and in the Certificate of
Designation and the Warrants), registered in the name of each Purchaser or its
nominee, for the Conversion Shares and the Warrant Shares in such amounts as
specified from time to time by such Purchaser to the Company upon conversion of
the Preferred Shares or exercise of the Warrants, as applicable. To the extent
and during the periods provided in Sections 2(f) and 2(g) of this Agreement, all
such certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 5, the Registration Rights Agreement
and stop transfer instructions to give effect to Section 2(f) hereof in the case
of the transfer of the Conversion Shares or Warrant Shares prior to registration
of the Conversion Shares and Warrant Shares under the Securities Act or without
an exemption therefrom, will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
each Purchaser's obligations and agreement set forth in Section 2(g) hereof to
resell the Securities pursuant to an effective registration statement or under
an exemption from the registration requirements of applicable securities law.
(c) If any Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions
17
of counsel in comparable transactions, to the effect that the Securities have
been sold or transferred pursuant to an exemption from registration, or any
Purchaser provides the Company with an opinion of counsel, which opinion of
counsel shall be in form, substance and scope customary for opinions of counsel
in comparable transactions, to the effect that such Securities may be sold under
Rule 144(k), the Company shall permit the transfer and, in the case of the
Conversion Shares and Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by such Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to
each Purchaser hereunder is subject to the satisfaction, at or before the
Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Each Purchaser shall have executed such Purchaser's Execution Page
to this Agreement and the Registration Rights Agreement and delivered the same
to the Company.
(b) Each Purchaser shall have delivered such Purchaser's Purchase Price
for the Units being purchased at the Closing in accordance with Section 1(b)
above.
(c) The representations and warranties of each Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and such Purchaser shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Purchaser
at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE. The obligation
of each Purchaser hereunder to purchase the Units to be purchased by it at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that such conditions are for such
Purchaser's sole benefit and may be waived by such Purchaser at any time in such
Purchaser's sole discretion:
(a) The Company shall have executed this Agreement, the Warrants and the
Registration Rights Agreement, and delivered executed original copies of the
same to such Purchaser.
(b) The Certificate of Designation shall have been filed and accepted
for filing with the Secretary of State of the State of Delaware and a copy
thereof certified by the Secretary of State of Delaware shall have been
delivered to such Purchaser.
18
(c) The Company shall have delivered to such Purchaser duly executed
certificates and Warrant agreements (each in such denominations as such
Purchaser shall request) representing the Preferred Shares and Warrants being so
purchased by such Purchaser at the Closing in accordance with Section 1(b)
above.
(d) The Common Stock shall be authorized for quotation and listed on the
NNM and trading in the Common Stock (or the NNM generally) shall not have been
suspended by the SEC or the NNM.
(e) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. The Company shall have delivered for the benefit of the
Purchasers, a certificate, executed by the Chief Executive Officer of the
Company after reasonable investigation, dated as of the Closing Date to the
foregoing effect and as to such other matters as may reasonably be requested by
such Purchaser.
(f) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(g) Each Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit D
attached hereto.
(h) Each Purchaser shall have received a copy of resolutions, duly
adopted by the Board of Directors of the Company, which shall be in full force
and effect at the time of the Closing, authorizing the consummation by the
Company of the transactions contemplated hereby and by the Registration Rights
Agreement and the Warrant, certified as such by the Secretary or Assistant
Secretary of the Company.
(i) On or prior to the Closing Date, the Company shall have entered into
the following agreements with Pfizer Inc. (or one of its affiliates): (i) Master
Services Agreement, (ii) Non-Exclusive License Agreement and (iii) Stock
Purchase Agreement, and shall have consummated the transactions contemplated by
the Stock Purchase Agreement.
(j) On or prior to the Closing Date, the Company shall have entered into
the Exchange Agreement with all of the holders of the Company's outstanding
Series B Convertible Preferred Stock and certain of the Company's outstanding
Series A Convertible Preferred Stock (the "EXCHANGE AGREEMENT") and shall have
consummated the transactions contemplated thereby.
19
(k) On or prior to the Closing Date, the Company shall have obtained the
consent of the holders of the Company's outstanding Series A Convertible
Preferred Stock (other than those which are a party to the Exchange Agreement)
to all of the transactions contemplated hereby (including, without limitation, a
waiver of any participation, preemptive or similar rights in respect of the
issuance of the Securities pursuant hereto and pursuant to the Exchange
Agreement).
(l) On or prior to the Closing Date, the Company shall have obtained
waivers, in respect of a sufficient number of shares of Common Stock, from
certain of the Company's officers that hold options to purchase shares of Common
Stock, pursuant to which waivers such officers shall irrevocably waive of all
their respective rights to purchase shares of Common Stock pursuant to such
options unless and until the Authorized Stock Approval is obtained, such that,
after giving effect to such waivers, the Company will have a sufficient number
of shares of its Common Stock authorized, unissued and unreserved (other than
for conversion of the Preferred Shares) in order to provide for the full
conversion of all Preferred Shares and the full exercise of all Warrants issued
hereunder.
(m) The Company shall have timely filed (within applicable extension
periods) with the SEC its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002.
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and the
Purchasers irrevocably consent to the jurisdiction of the United States federal
courts and the state courts located in the State of Delaware in any suit or
proceeding based on or arising under this Agreement and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company irrevocably waives the defense of an inconvenient forum to
the maintenance of such suit or proceeding. The Company further agrees that
service of process upon the Company mailed by first class mail shall be deemed
in every respect effective service of process upon the Company in any such suit
or proceeding. Nothing herein shall affect the right of any Purchaser to serve
process in any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
Execution Page shall not affect the validity or enforceability of this
Agreement.
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(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the Purchasers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each
Purchaser.
(f) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally, by responsible overnight carrier or
by confirmed facsimile, and shall be effective five (5) days after being placed
in the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by responsible overnight carrier or confirmed facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
ViroLogic, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Attn: Chief Executive Officer
with a copy simultaneously transmitted by like means to
(which transmittal shall not constitute notice hereunder):
Xxxxxx Godward LLP
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
If to any Purchaser, to such address set forth under such Purchaser's
name on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein,
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neither the Company nor any Purchaser shall assign this Agreement or any rights
or obligations hereunder. Notwithstanding the foregoing, any Purchaser may
assign its rights hereunder to any of its "affiliates," as that term is defined
under the Exchange Act, without the consent of the Company or to any other
person or entity with the consent of the Company, which consent shall not be
unreasonably withheld. This provision shall not limit a Purchaser's right to
transfer the Securities pursuant to the terms of the Certificate of Designation,
the Warrants and this Agreement or to assign such Purchaser's rights hereunder
or thereunder to any such transferee. In addition, and notwithstanding anything
to the contrary contained in this Agreement, the Registration Rights Agreement
or the Warrants, the Securities may be pledged and all rights of any Purchaser
under this Agreement or any other agreement or document related to the
transactions contemplated hereby may be assigned, without further consent of the
Company, to a bona fide pledgee in connection with such Purchaser's margin or
brokerage account.
(h) Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person; provided that Section 4(f) may be enforced by SDS Capital.
(i) Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof shall
survive the Closing notwithstanding any due diligence investigation conducted by
or on behalf of any Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies any Purchaser may have under applicable U.S. federal or state
securities laws.
(j) Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC or NASD filings
with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release and filing prior to its release and shall
be provided with a copy thereof).
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have occurred
on or before November 22, 2002, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
(m) Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Certificate
of Designation, the Warrants and the Registration Rights Agreement. As such, the
language used herein and therein shall be
22
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(n) Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that each
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
(o) Additional Acknowledgement. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, the Certificate of Designation, the Registration Rights Agreement and
the Warrants, that it has independently determined to enter into the
transactions contemplated hereby and thereby, that it is not relying on any
advice from or evaluation by any other Purchaser, and that it is not acting in
concert with any other Purchaser in making its purchase of securities hereunder.
The Purchasers and, to its knowledge, the Company agree that the Purchasers have
not taken any actions that would deem such Purchasers to be members of a "group"
for purposes of Section 13(d) of the Exchange Act.
(p) Indemnification by Company.
(i) From and after the Closing, the Company shall hold harmless
and indemnify each of the Purchasers from and against, and shall compensate and
reimburse each of the Purchasers for, any damages which are directly or
indirectly suffered or incurred by any of the Purchasers or to which any of the
Purchasers may otherwise become subject (regardless of whether or not such
damages relate to any third-party claim) and which arise from or as a result of,
or are directly or indirectly connected with any inaccuracy in or breach of any
of the Company's representations, warranties or covenants set forth herein.
(ii) In the event of the assertion or commencement by any person
of any claim or legal proceeding with respect to which any Purchaser may have
indemnification rights pursuant to Section 8(p)(i), such Purchaser shall
promptly notify the Company thereof in writing, but the failure to so notify the
Company will not limit any Purchaser's rights to indemnification hereunder,
except to the extent the Company demonstrates that the defense of such action is
prejudiced by the failure to so give such notice.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
VIROLOGIC, INC.
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------
Title: Chairman & CEO
------------------------------
PURCHASER:
[PURCHASER]
By:
-------------------------------------
Name:
Title:
RESIDENCE:
ADDRESS:
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units:
Purchase Price ($10,000 per Unit):
24
