EXHIBIT 10.49
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SUBSCRIPTION AGREEMENT
DATED AS OF JULY 31, 2000
BY AND BETWEEN
STEMCELLS, INC.
AND
MILLENNIUM PARTNERS, L.P.
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COMMON STOCK, CALLABLE WARRANTS
AND
COMMON STOCK PURCHASE WARRANTS
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THIS SUBSCRIPTION AGREEMENT, dated as of July 31, 2000, by and
between STEMCELLS, INC., a Delaware corporation (the "Company"), with
headquarters located at 525 Del Rey Avenue, Suite C, Sunnyvale, CA 94086, and
Millennium Partners, L.P., a Cayman Islands limited partnership (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of Common Stock, $.01 par value (the
"Common Stock"), of the Company and in connection therewith the Company is to
issue to the Buyer warrants to purchase shares of Common Stock as provided in
this Agreement; and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to the Buyer, the number of shares (the "Common
Shares") of Common Stock set forth on the signature page of this Agreement at
the price per share and for the aggregate purchase price set forth on the
signature page of this Agreement (the "Purchase Price"). The Purchase Price
shall be payable in United States dollars. In connection with the purchase of
the Common Shares by the Buyer, the Company shall issue to the Buyer, at the
closing on the Closing Date (as defined herein), (1) Callable Warrants in the
form attached hereto as ANNEX I (the "Callable Warrants") to purchase the number
of shares of Common Stock set forth therein (subject to adjustment as provided
in the Callable Warrants) and (2) Common Stock Purchase Warrants, Class A, in
the form attached hereto as ANNEX II (the "Class A Warrants") to purchase the
number of shares of Common Stock set forth therein (subject to adjustment as
provided in the Class A Warrants). The Callable Warrants and the Class A
Warrants are referred to herein collectively as the "Warrants." The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." The Common Shares and the Warrant Shares are referred to
herein collectively as the "Shares." The Shares and the Warrants are referred to
herein collectively as the "Securities."
(b) THE CLOSING.
(1) TIMING. Subject to the fulfillment or waiver of the conditions set
forth in Section 6 hereof, the purchase and sale of the Common Shares and
Warrants shall take place at a closing
(the "CLOSING") on the date hereof or such other date as the Buyer and the
Company may agree upon at the offices of Kleinberg, Kaplan, Wolff & Cohen, P.C.
(2) FORM AND Timing OF PAYMENT. The Buyer shall pay the Purchase Price
for the Common Shares by delivering (A) 75% of the Purchase Price to the Company
on the Closing Date and (B) 25% of the Purchase Price to the Company on the date
on which the Registration Statement (as defined in the Registration Rights
Agreement) becomes effective (or such later date which is two (2) business days
after Buyer receives written notice of the date of such effectiveness). Upon
Closing, the Company shall deliver (A) instructions to its registrar and
transfer agent regarding the issuance of the certificates for all the Common
Shares and shall cause its registrar and transfer agent to deliver such
certificates to Buyer as soon as possible after Closing and (B) the Warrants,
registered in the corporate securities records of the Company and on the
certificates in the name of the Buyer or its nominee, to the Buyer (or
Kleinberg, Kaplan, Wolff & Cohen, P.C. on behalf of the Buyer).
(c) METHOD OF PAYMENT. Payment of the Purchase Price for the Common Shares shall
be made in U.S. Dollars by wire transfer of funds to an account designated by
the Company.
As used in this Agreement, the term "Business Day" means any day other
than a
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law to remain closed.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) ACCREDITED BUYER STATUS; SOPHISTICATED BUYER. The Buyer is
an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Buyer has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Common Shares, the
Warrants and Warrant Shares.
(b) INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company which have been requested and materials
relating to the offer and sale of the Common Shares, the Warrants and
Warrant Shares which have been requested by the Buyer. The Buyer 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 the Buyer or its advisors, if
any, or its representatives shall modify, amend or affect the Buyer's
right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer understands that its investment in the
Common Shares, the Warrants and Warrant Shares involves a high degree
of risk. The Buyer has sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision
with respect to its acquisition of the Common Shares, the Warrants and
Warrant Shares.
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(c) LEGENDS. The Company shall issue certificates for the
Common Shares, the Warrants and Warrant Shares to the Buyer without any
legend except as described herein. The Buyer covenants that, in
connection with any transfer of Shares by the Buyer pursuant to the
registration statement contemplated by the Registration Rights
Agreement, it will comply with the applicable prospectus delivery
requirements of the 1933 Act, provided that copies of a current
prospectus relating to such effective registration statement are or
have been supplied to the Buyer.
(d) AUTHORIZATION; ENFORCEMENT. Each of this Agreement and the
Registration Rights Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in
accordance with its terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating
to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. The Buyer has the requisite corporate power and
authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and each other
agreement entered into by the parties hereto in connection with the
transactions contemplated by this Agreement.
(e) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Buyer and
the consummation by the Buyer of the transactions contemplated hereby
and thereby will not result in a violation of the certificate of
incorporation, by-laws or other documents of organization of the Buyer.
(f) INVESTMENT REPRESENTATION. The Buyer is purchasing the
Common Shares and the Warrants for its own account and not with a view
to distribution in violation of any securities laws. The Buyer has been
advised and understands that neither the Common Shares, the Warrants
nor the Warrant Shares issuable upon exercise thereof have been
registered under the 1933 Act or under the "blue sky" laws of any
jurisdiction and may be resold only if registered pursuant to the
provisions of the 1933 Act or if an exemption from registration is
available, except under circumstances where neither such registration
nor such an exemption is required by law. The Buyer has been advised
and understands that the Company, in issuing the Common Shares and the
Warrant, is relying upon, among other things, the representations and
warranties of the Buyer contained in this Section 3 in concluding that
such issuance is a "private offering" and is exempt from the
registration provisions of the 1933 Act.
(g) RULE 144. The Buyer understands that there is no public
trading market for the Warrants and that none is expected to develop.
The Buyer understands that the Common Shares, the Warrants and the
Warrant Shares received upon conversion or exercise thereof must be
held indefinitely unless and until registered under the 1933 Act or an
exemption from registration is available. The Buyer is aware of the
provisions of Rule 144 promulgated under the 1933 Act.
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(h) RELIANCE BY THE COMPANY. The Buyer understands that the
Common Shares and the Warrants are being offered and sold in reliance
on a transactional exemption from the registration requirements of
Federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in
order to determine the applicability of such exemptions and the
suitability of the Buyer to acquire the Common Shares and the Warrants.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that, except as set forth in the schedules attached hereto:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good
standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as
now being conducted. The Company does not have any Subsidiary other
than StemCells California, Inc. (the "SUBSIDIARY"). The Subsidiary is
duly organized, and validly existing and in good standing under the
laws of its jurisdiction of formation. Except where specifically
indicated to the contrary, all references in this Agreement to
Subsidiary shall be deemed to refer to the Subsidiary of the Company.
The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not
have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect on the business, operations, properties, prospects or
financial condition of the Company and its Subsidiary, which is (either
alone or together with all other adverse effects) material to the
Company and its Subsidiary, taken as a whole, and any material adverse
effect on the transactions contemplated under this Agreement, the
Certificate and the Registration Rights Agreement, or any other
agreement or document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants
("TRANSACTION DOCUMENTS") and to issue the Common Shares and the
Warrants in accordance with the terms hereof, (ii) the execution and
delivery of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Common
Shares and the Warrants, have been duly authorized by all necessary
corporate action, and no further consent or authorization of the
Company or its
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Board of Directors (or any committee or subcommittee thereof) or
stockholders is required, (iii) this Agreement, the Registration Rights
Agreement and the Warrants have been duly executed and delivered by the
Company, (iv) this Agreement, the Registration Rights Agreement and the
Warrants constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except
(A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general
application, and (B) to the extent the indemnification provisions
contained in this Agreement and the Registration Rights Agreement may
be limited by applicable federal or state securities laws and (v) the
Common Shares, the Warrants, and the Warrant Shares issuable upon the
exercise thereof have been duly authorized and, upon issuance thereof
and payment therefor in accordance with the terms of this Agreement,
the Common Shares, the Warrants, and the Warrant Shares issuable upon
the exercise thereof will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and
encumbrances.
(c) CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 45,000,000 shares of
Common Stock, of which as of April 18, 2000, 19,510,409 shares were
issued and outstanding, as of the date hereof, 4,057,313 shares are
issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and committed pursuant to pending
acquisitions, and as of the date hereof, assuming a conversion price of
$4.00 for the Company's 6% Cumulative Convertible Preferred Stock,
approximately 456,563 shares are issuable pursuant to securities (other
than options and purchase plans referred to above), exercisable or
exchangeable for, or convertible into, shares of Common Stock, and
approximately 838,126 shares are reserved for issuance pursuant to such
securities and (ii) 1,000,000 shares of preferred stock, of which as of
the date hereof, (A) 2,626 shares are currently designated as 6%
Cumulative Convertible Preferred Stock, 1,500 shares of which are
issued and outstanding and (B) 450,000 shares are designated as Junior
Preferred Shares, none of which are issued or outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued,
fully paid and nonassessable. As of the date hereof, except as
disclosed in SCHEDULE 3(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) 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, any shares of capital stock of the Company or
its Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become
bound to issue additional shares of capital stock of the Company or its
Subsidiary or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company
or its Subsidiary, (iv) there are no agreements or arrangements under
which the Company or its
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Subsidiary is obligated to register the sale of any of their securities
under the Securities Act of 1933, as amended ("SECURITIES ACT" or "1933
Act") (except the Registration Rights Agreement and except as set forth
on SCHEDULE 3(c)), (v) there are no outstanding securities of the
Company or its Subsidiary which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become
bound to redeem a security of the Company or its Subsidiary, (vi) there
are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Common Shares
or the Warrants as described in this Agreement or the Warrants and
(vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement.
The Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on
the date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's
By-laws, as in effect on the date hereof (the "BY-LAWS").
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby and the
issuance of Common Shares, the Warrants, and the Warrant Shares
underlying the Warrants will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of
the Company or the By-laws; (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
to which the Company or its Subsidiary is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and
regulations and the rules and regulations of the Nasdaq National Market
(the "PRINCIPAL MARKET") or other principal securities exchange or
trading market on which the Common Stock is traded or listed)
applicable to the Company or its Subsidiary or by which any property or
asset of the Company or its Subsidiary is bound or affected. Neither
the Company nor its Subsidiary is in violation of any term of, or in
default under, (x) its certificate of incorporation, any certificate of
designations, preferences and rights of any outstanding series of
preferred stock or By-laws or their organizational charter or by-laws,
respectively, (y) any material contract, agreement, mortgage,
indebtedness, indenture, instrument, or (z) any judgment, decree or
order or any statute, rule or regulation applicable to the Company or
its Subsidiary, the non-compliance with which (in the cases of (y) and
(z)) would cause a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act or
state "blue sky" laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform
any of its obligations under, or contemplated by, the Transaction
Documents or the issuance of the Common Shares and the Warrants in
accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the
6
Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof, or in the
case of post-sale filings, will be made promptly after the date hereof.
The Company complies with and is not in violation of the listing
requirements of the Principal Market as in effect on the date hereof in
all material respects and on each of the Closing Dates and is not aware
of any existing facts which provide a basis for delisting or suspension
of the Common Stock by the Principal Market.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
1998, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC DOCUMENTS"). As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of
the dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Neither the Company nor its
Subsidiary or any of their officers, directors, employees or agents
have provided the Buyer with any material, nonpublic information which
was not publicly disclosed prior to the date hereof.
(f) ABSENCE OF CERTAIN CHANGES. Except as set forth in the SEC
Documents identified on Schedule 3(f) hereto, since December 31, 1998
there has been no adverse change or adverse development in the
business, properties, assets, operations, financial condition,
prospects, liabilities or results of operations of the Company or its
Subsidiary which has had or, to the knowledge of the Company or its
Subsidiary, is reasonably likely to have a Material Adverse Effect. The
Company has not taken any steps, and does not currently expect to take
any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or its Subsidiary have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy
proceedings.
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(g) ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or its Subsidiary, threatened
against or affecting the Company, the Common Stock or any of the
Company's Subsidiary or any of the Company's or the Company's
Subsidiary's officers or directors in their capacities as such, which
individually and in the aggregate, respectively, would be reasonably
likely to result in liability to the Company in excess of $50,000 and
$100,000, respectively.
(h) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that the Buyer is not acting as financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by the Buyer or any of its
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is
merely incidental to the Buyer's purchase of the Common Shares. The
Company further represents to the Buyer that the Company's decision to
enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(i) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has
occurred or exists with respect to the Company or its Subsidiary or
their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the
Company under applicable securities laws in a registration statement
filed with the SEC relating to an issuance and sale by the Company of
its Common Stock and which has not been publicly disclosed.
(j) NO INSIDE INFORMATION. The Company has not provided and,
the Company shall not provide, the Buyer with any non-public
information, except to the extent that the Buyer exercises its right to
review a registration statement containing material non-public
information (after receiving written notice of the existence of such
content) and except in the case of the Buyer's exercising rights
pursuant to Section 4(i) below.
(k) NO SECURITIES ACT REGISTRATION. The sale and issuance of
the Common Shares and Warrants in accordance with terms of this
Agreement and the issuance of Warrant Shares upon exercise of the
Warrants are exempt from registration under the 1933 Act.
(l) EMPLOYEE RELATIONS. Neither the Company nor its Subsidiary
is involved in any labor dispute nor, to the knowledge of the Company
or its Subsidiary, is any such dispute threatened, the effect of which
would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor
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its Subsidiary is a party to a collective bargaining agreement. The
Company and its Subsidiary believe that relations between the Company
and its Subsidiary and their respective employees are good. No
executive officer (as defined in Rule 501(f) of the 1933 Act) whose
departure would be adverse to the Company has notified the Company that
such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiary own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted. None of the Company's trademarks, trade names, service
marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate
within two (2) years from the date of this Agreement except as would
not have a Material Adverse Effect. The Company and its Subsidiary do
not have any knowledge of any infringement by the Company or its
Subsidiary of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, or
of any such development of similar or identical trade secrets or
technical information by others, and no claim, action or proceeding has
been made or brought against, or to the Company's knowledge, is
threatened against, the Company or its Subsidiary regarding trademarks,
trade name rights, patents, patent rights, inventions, copyrights,
licenses, service names, service marks, service mark registrations,
trade secrets or other infringement. The Company and its Subsidiary
have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
(n) SHAREHOLDER APPROVAL RULE. The Company has not issued any
shares of Common Stock or shares of any series of preferred stock or
other securities convertible into, exchangeable for or otherwise
entitling the holder to acquire shares of Common Stock which are
subject to Rule 4460(i)(1)(D) of Nasdaq as in effect from time to time
or any successor, replacement or similar provision thereof or of any
other market on which the Common Stock is listed for trading (the
"Shareholder Approval Rule") and which would be integrated with the
sale of the Common Shares to the Buyer or the issuance of Warrant
Shares upon exercise of the Warrants for purposes of the Shareholder
Approval Rule.
(o) ENVIRONMENTAL LAWS. The Company and its Subsidiary (i) are
in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of
9
any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in
clauses (i), (ii) or (iii) above could have, individually or in the
aggregate, a Material Adverse Effect.
(p) TITLE. The Company and its Subsidiary have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiary, in each
case free and clear of all liens, encumbrances and defects except such
as are described in SCHEDULE 3(p) or in the SEC Documents listed in
SCHEDULE 3(p) or such as do not materially and adversely affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or its Subsidiary.
Any real property and facilities held under lease by the Company or its
Subsidiary are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiary.
(q) INSURANCE. The Company and its Subsidiary are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiary are engaged. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither
the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company and
its Subsidiary taken as a whole.
(r) REGULATORY PERMITS. The Company and its Subsidiary possess
all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities, necessary
to conduct their respective businesses, and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
(s) INTERNAL ACCOUNTING CONTROLS. The Company and its
Subsidiary maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets
is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
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(t) FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf
of the Company or any Subsidiary has, in the course of acting for, or
on behalf of, the Company, directly or indirectly used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; directly or
indirectly 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, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government or party official or employee.
(u) TAX STATUS. The Company and its Subsidiary has made or
filed all United States federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which
it is subject and (i) has paid all taxes and other governmental
assessments and charges, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and (ii) 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
claimed to be due by the taxing authority of any jurisdiction, and the
Company is not aware of any basis for any such claim.
(v) CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents filed on EDGAR at least thirty (30) Trading Days prior to the
date hereof and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third
parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors or employees of the Company is
presently a party to any transaction with the Company or its Subsidiary
(other than for services as employees, consultants, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(w) DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Common Shares issuable upon exercise of the Warrants
purchased pursuant to this Agreement will increase in certain
circumstances. The Company further acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents,
its obligation to issue Common Shares upon exercise of the Warrants
purchased pursuant to this Agreement, is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other shareholders of the Company.
11
(x) APPLICATION OF TAKEOVER PROTECTIONS. There are no
anti-takeover provisions contained in the Company's Certificate of
Incorporation or otherwise which will be triggered as a result of the
transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Common Shares and the Buyer's
ownership of the Common Shares.
(y) RIGHTS PLAN. The Company confirms that no provision of the
Company's rights plan will, under any present or future circumstances,
delay, prevent or interfere with the performance of any of the
Company's obligations under the Transaction Documents and such plan
will not be "triggered" by such performance.
(z) OBLIGATIONS ABSOLUTE. Each of the Company and the Buyer
agrees that, subject only to the conditions, qualifications and
exceptions (if any) specifically set forth in the Transaction
Documents, its obligations under the Transaction Documents are
unconditional and absolute. Except to the extent (if any) specifically
set forth in the Transaction Documents, each party's obligations
thereunder are not subject to any right of set off, counterclaim, delay
or reduction.
(aa) ISSUANCE OF COMMON SHARES. The Common Shares are duly
authorized and reserved for issuance and, upon exercise of the Warrants
in accordance with the terms thereof, such Common Shares will be
validly issued, fully paid and non-assessable, free and clear of any
and all liens, claims and encumbrances, and entitled to be traded on
the Principal Market or the New York Stock Exchange or the American
Stock Exchange, or the Nasdaq small cap market (collectively with the
Principal Market, the "APPROVED MARKETS"), and the holders of such
Common Shares shall be entitled to all rights and preferences accorded
to a holder of Common Stock. As of the date of this Agreement, the
outstanding shares of Common Stock are currently listed on the
Principal Market.
(bb) MODEX. The Company owns approximately 126,193 shares of
the common stock of Modex Therapeutics, Ltd.
(cc) BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's
fees or similar payments by the Buyer relating to this Agreement or the
transactions contemplated hereby.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Company and the Buyer acknowledge and
agree that (A) the Shares and the Warrants have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in the
Registration Rights Agreement with respect to the resale of the Shares, the
Shares have not been and are not being registered for resale under the 1933 Act,
and the Securities may not be transferred unless (i) subsequently registered for
resale thereunder or (ii) the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect
12
that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration (unless waived) and (B) any
resale of the Securities made in reliance on Rule 144 promulgated under the 1933
Act ("Rule 144") may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any such resale of Securities under
circumstances in which the seller, or the person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder.
(b) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees that the
Warrants shall bear a restrictive legend in substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(2) The Buyer further acknowledges and agrees that until such time
as the Shares have been registered for resale under the 1933 Act as contemplated
by the Registration Rights Agreement, the certificates for the Shares may bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(3) Once the Registration Statement required to be filed by the
Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for all
Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days (as defined herein) after surrender of such certificates by
the Buyer and (2) the Company shall not place any restrictive legend on
certificates for Warrant Shares or impose any stop-transfer restriction thereon.
As used in this Agreement, "Trading Day" means a day on whichever of (x) the
national securities exchange, (y) Nasdaq or (z) the Nasdaq SmallCap Market (if
at the time such market constitutes the principal securities market for the
Common Stock) is open for general trading.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement in the form attached hereto as ANNEX III
on or before the Closing Date.
(d) FORM D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Buyer promptly
13
after such filing. The Buyer agrees to cooperate with the Company in connection
with such filing and, upon request of the Company, to provide all information
relating to the Buyer reasonably required for such filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the
Closing Date, the Company shall, if required, file a notification for listing of
additional shares with the Nasdaq relating to the Shares and shall provide
evidence of such filing to the Buyer. So long as the Buyer beneficially owns any
of the Shares or the Warrants, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act; provided, however, that if the
Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act.
(f) USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of the Federal Reserve System
("margin stock"). The proceeds of sale of the Shares will be used for general
working capital purposes and in the operation of the Company's business. None of
such proceeds will be used, directly or indirectly (1) to make any loan to or
investment in any other person (other than financing the Company's subsidiaries
in the ordinary course of business or in connection with an acquisition of
another corporation or business or assets of another corporation or business) or
(2) for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
stock that is currently a margin stock or for any other purpose which might
constitute the transactions contemplated by this Agreement a "purpose credit"
within the meaning of such Regulation G. Neither the Company nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement or the transactions contemplated hereby to violate Regulation G,
Regulation T or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the 1934 Act, in each case as in effect now or as
the same may hereafter be in effect.
(g) BLUE SKY LAWS. The Company shall take such action as shall be
necessary to qualify, or to obtain an exemption for, the Common Shares for sale
to the Buyer and the Warrants for issuance to the Buyer pursuant to this
Agreement and the Warrant Shares for issuance to the Buyer upon exercise of the
Warrants under such of the securities or "blue sky" laws of jurisdictions as
shall be applicable to the sale of the Common Shares and the issuance of the
Warrants pursuant to this Agreement and the issuance to the Buyer of Warrant
Shares upon exercise of the Warrants. The Company shall furnish copies of all
filings, applications, orders and grants or confirmations of exemptions relating
to such securities or "blue sky" laws.
(h) EXPENSES. The parties shall each bear their own expenses in
connection with this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby; provided, however, that the
Company shall pay or reimburse the Buyer for all reasonable expenses (including,
without limitation, legal fees and expenses of counsel to the
14
Buyer and the Buyer's due diligence expenses) not in excess of $25,000 incurred
by the Buyer in connection with this Agreement and the transactions contemplated
hereby. In addition, the Company or the Buyer, as the case may be, shall pay on
demand all expenses incurred by the other party, including reasonable attorneys'
fees and expenses, as a consequence of, or in connection with any default or
breach of any of the defaulting or breaching party's obligations set forth in
any of such agreements or instruments and the enforcement of any right of,
including the collection of any payments due, the other party under any of such
agreements or instruments, including any action or proceeding relating to such
enforcement, or any order, injunction or other process seeking to restrain a
party from paying any amount due the other party, in which the other party
prevails, provided that such reimbursable legal fees and expenses do not exceed,
in each instance, 35% of the amount sought in good faith to be recovered.
(i) CERTAIN ISSUANCES OF SECURITIES. Unless the Company obtains the
approval of its stockholders as required by the Shareholder Approval Rule or a
waiver thereof from Nasdaq, the Company will not issue any shares of Common
Stock or shares of any series of preferred stock or other securities convertible
into, exchangeable for, or otherwise entitling the holder to acquire, shares of
Common Stock which would be subject to the requirements of the Shareholder
Approval Rule and which would be integrated with the sale of the Common Shares
and issuance of the Warrants to the Buyer or the issuance of Warrant Shares upon
exercise of the Warrants for purposes of the Shareholder Approval Rule.
During the period from the date of this Agreement through December 31,
2000, the Company shall not, without the prior written consent of the Buyer
(which may be withheld in its sole discretion) file any registration statement
for any securities of the Company (or securities underlying convertible,
exchangeable or exercisable securities) other than (A) pursuant to the
Registration Rights Agreement, (B) with respect to a bona fide secondary public
offering of newly issued shares of Common Stock, (C) with respect to Approved
Transactions or (D) in connection with any financing transaction in which shares
of Common Stock are issued or are issuable upon exercise or conversion of
securities issued in such transaction and the effective purchase price per share
of such Common Stock at the time of consummation of such transaction is greater
than the price per share set forth on the signature page hereto (as
appropriately adjusted to for any stock splits, recapitalizations or similar
events to allow for a meaningful comparison). As used herein, "Approved
Transaction" means (i) a bona fide issuance pursuant to a compensation or
similar arrangement with employees, officers, directors, or consultants, (ii) a
bank financing or (iii) as part of a transaction involving a strategic alliance,
acquisition of stock or assets, merger, collaboration, joint venture,
partnership or other similar arrangement of the Company with another
corporation, partnership or other business entity (A) which is engaged in a
business similar, complementary or related to the business of the Company or (B)
pursuant to which the Company issues securities with the primary purpose to
directly or indirectly acquire, license or otherwise become entitled to use
technology relevant to or useful in the Company's business, so long as in each
case of this clause (iii) the Board of Directors of the Company by resolution
duly adopted duly approves such transaction in accordance with its duties under
applicable law.
During the period from the date of execution and delivery of this
Agreement until the earlier of (a) the date (after Closing) on which the Buyer
no longer holds any Common Shares acquired hereunder or (b) the last Adjustment
Date (as defined in the Class A Warrants).
15
Date (the "Co-Investment Period"), Millennium Partners, L.P. ("Millennium")
shall have a right to participate in all capital raising transactions as set
forth in this Section 4(i). Millennium shall have the right to co-invest, on the
same terms as the other investors in such transactions, in any future offerings
of the Company's securities issued in capital raising transactions (other than
securities issued in connection with strategic investments, bank financings and
compensation or similar arrangements with employees, officers, directors and
consultants), for up to 100% of the principal amount of such offerings.
During the Co-Investment Period, the Company shall give written notice
to Millennium (subject to the "Right to Decline Review" as defined in the
Registration Rights Agreement) upon the closing of a private sale of securities
either (A) issued at a discount to market value, (B) having variable conversion
or exercise price features or (C) similar to the Class A Warrants (a "PRIVATE
FINANCING TRANSACTION"), in each case excluding any Approved Transactions,
Millennium shall have ten (10) business days from receipt of such notice to
deliver a written notice to the Company that it elects to exercise its right to
co-invest in such Financing Transaction, which notice shall indicate the
percentage (up to 100%) of the Financing Transaction with respect to which
Millennium is co-investing. In the event that any of the consideration to be
issued to the Company in a Financing Transaction consists of consideration other
than cash, Millennium shall have the right to provide the cash equivalent as
determined in good faith by the Board of Directors of the Company. This right of
co-invest shall continue even if the Buyer elects not to co-invest in one or
more Financing Transactions.
In addition, and without limiting the foregoing, the Buyer shall also
have the right during the Co-Investment Period, with respect to one Private
Financing Transaction (excluding an Approved Transaction) to prohibit one
potential investor in such Private Financing Transaction from participating
therein so long as the Buyer (or another investor designated or arranged by the
Buyer and reasonably acceptable to the Company), replaces the investment in the
Company that would have been made by such prohibited investor. Until such right
is exercised, the Company shall give the Buyer at least five (5) business days'
notice prior to the closing of any Private Financing Transaction.
(j) CERTAIN TRADING RESTRICTIONS. The Buyer agrees that on the Closing
Date, the Buyer will have no short position in the Common Stock. The Buyer
agrees that on and after the Closing Date until the Buyer no longer holds any
Securities, the Buyer will not engage in any short sales or other hedging
transactions (including swaps, options or derivative securities) relating to the
Shares; unless at the time of any such transaction the Company is then in breach
of its obligations to have the Buyer's Securities duly registered under the
Registration Rights Agreement; and PROVIDED, HOWEVER, the Buyer may engage in
such short sales and/or hedging activity provided that (i) the Buyer's short
position does not exceed the number of Warrant Shares then issuable upon
exercise of the Callable Warrants, (ii) no such short sales shall be at a per
share price below $3.9375 (as such figure shall be appropriately adjusted for
any stock splits, recapitalizations or similar events), and (iii) the aggregate
amount of such short sales made on any one day shall not exceed 5% of the total
trading volume on such day.
(k) COMMERCIALLY REASONABLE EFFORTS. Each of the parties shall use
commercially reasonable efforts timely to satisfy each of the conditions to the
other party's
16
obligations to sell and purchase the Common Shares set forth in Section 7 or 8,
as the case may be, of this Agreement on or before the Closing Date.
5. OPTION TO PURCHASE ADDITIONAL SECURITIES.
(a) At the option of Millennium, Millennium may purchase additional
shares of Common Stock (the "OPTION SHARES") for a purchase price per share
equal to 110% of the average of the closing bid prices for the Company's Common
Stock (as reported on Nasdaq or other market on which the Common Stock is
principally traded) over the five (5) Trading Days immediately preceding the
date of the Option Notice (defined below) (which purchase price per share shall
not in any case be less than the price per share set forth on the signature page
hereto (subject to appropriate adjustment for stock splits, recapitalizations
and similar events) for an aggregate purchase price of up to Three Million U.S.
Dollars ($3,000,000).
(b) This option may be exercised in whole or in part, at any time and
from time to time commencing on the Closing Date until the first anniversary of
the Closing Date. Upon delivery of a notice by Millennium exercising its option
hereunder ("Option Notice"), the Company shall be obligated to sell, issue and
deliver to Millennium, and Millennium shall be obligated to purchase, the Option
Shares specified in the option exercise notice, subject to the terms of this
Section 5(b). Closing of any such purchase and sale (each an "Option Closing")
shall take place in the same manner as the Closing. At the Option Closing, the
Company shall deliver certificates evidencing the Option Shares being purchased
against the payment of the purchase price therefor, which Option Closing shall
occur within three (3) Trading Days of delivery of the Option Notice by Buyer.
The Option Shares and the holders thereof shall be subject to the terms,
conditions and obligations applicable to the Common Shares under this Agreement
and the Registration Rights Agreement.
(c) In addition to issuing to Millennium the Option Shares, at each
Option Closing the Company shall also issue to Millennium a number of Callable
Warrants and Class A Warrants such that the number of each of such Warrants
bears the same proportion to the number of Option Shares issued at the Option
Closing as the Callable Warrants and Class A Warrants issued hereunder on the
Closing Date bear to the number of Common Shares issued hereunder on the Closing
Date; provided that the Callable Warrants shall have an initial exercise price
(subject to adjustment as provided therein) equal to 120% of the average of the
closing bid prices of the Common Stock (as reported on Nasdaq or other market on
which the Common Stock is principally traded) for the five (5) Trading Days
immediately preceding the date of the Option Notice for such Option Closing
(which initial exercise price shall not in any case be less than the initial
exercise price of the Callable Warrant issued on the Closing Date (subject to
appropriate adjustment for any stock splits, recapitalizations or similar
events). All Option Shares and shares of Common Stock underlying any Callable
Warrants and Class A Warrants issued at an Option Closing shall have the same
registration rights, and shall be subject to the same terms, conditions and
obligations, as provided in the Registration Rights Agreement, and upon each
Option Closing the Company shall enter into a new or supplemental registration
rights agreement covering all such securities in the same form as the
Registration Rights Agreement. All Option Shares and shares of Common Stock
underlying any Callable Warrants and Class A Warrants
17
issued at an Option Closing, and the holders thereof, shall have the same
rights, and shall be subject to the same terms, conditions and obligations, as
provided in this Agreement and each such holder shall be deemed to be a Buyer
for all purposes hereunder. At each Option Closing, the Company shall execute
and deliver all documents reasonably requested by Millennium, including without
limitation, to the extent so requested, a new subscription agreement in the same
form as this Agreement and the documents referred to in Sections 8(c), 8(d) and
8(e) below with reference to such Option Closing instead of the Closing
hereunder. The Company shall at all times during the period that this option is
exercisable have duly reserved a sufficient number of shares of Common Stock to
satisfy in full the option hereunder at such time.
(d) (i) Notwithstanding anything to the contrary contained herein, the
number of Option Shares that may be acquired by the Buyer shall not exceed a
number that, when added to the total number of shares of Common Stock deemed
beneficially owned by the Buyer (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the Buyer's
right to convert, exercise or purchase similar to the limitation set forth
herein), together with all shares of Common Stock deemed beneficially owned
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitation set forth herein) by the Buyer's "affiliates"
(as defined in Rule 144 of the Securities Act) ("Aggregation Parties"), that
would be aggregated for purposes of determining whether a group under Section
13(d) of the Securities Exchange Act of 1934, as amended, exists would exceed
9.99% of the total issued and outstanding shares of the Common Stock (the
"Restricted Ownership Percentage"). The Buyer shall have the right (w) at any
time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (x) (subject to waiver) at any time
and from time to time, to increase its Restricted Ownership Percentage
immediately in the event of the announcement as pending or planned, of a merger
or consolidation of the Company, a sale of all or substantially all of the
assets of the Company or the acquisition by any third party (and/or such party's
Aggregation Parties) of at least 51% of the Company's outstanding Common Stock.
(ii) The Buyer covenants at all times on each day (each such day being
referred to as a "Covenant Day") as follows: during the balance of such Covenant
Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and
the succeeding 61 days being referred to as the "Covenant Period") the Buyer
will not acquire shares of Common Stock pursuant to any right (including
exercise of this option) existing at the commencement of the Covenant Period to
the extent the number of shares so acquired by the Buyer and its Aggregation
Parties (ignoring all dispositions) would exceed:
(x) the Restricted Ownership Percentage of the
total number of shares of Common Stock
outstanding at the commencement of the
Covenant Period; MINUS
(y) the number of share of Common Stock owned
by the Buyer and its Aggregation Parties
at the commencement of the Covenant
Period.
A new and independent covenant will be deemed to be given by the Buyer
as of each moment of each Covenant Day. No covenant will terminate, diminish or
modify any other covenant. The Buyer agrees to comply with each such covenant.
18
The Company's obligation to issue shares of Common Stock which would
exceed such limits shall be suspended to the extent necessary until such time,
if any, as shares of Common Stock may be issued in compliance with such
restrictions.
(iii) Notwithstanding anything contained herein, unless shareholder
approval is obtained in accordance with the Shareholder Approval Rule, or the
Common Stock is no longer listed or quoted on a market subject to the
Shareholder Approval Rule or an equivalent rule, the Company shall not issue
shares of Common Stock hereunder to the extent that the total number of shares
of Common Stock issued to the Buyer under this Agreement (including the
Warrants) would exceed 3,902,081 (as such number shall be appropriately adjusted
for any stock splits, recapitalizations or similar events).
6. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set forth in
Sections 7 and 8, the date and time of the issuance and sale of the Common
Shares and the issuance of the Warrants shall be 12:00 noon, New York City time,
on the Closing Date.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL - AND ISSUE.
The Buyer understands that the Company's obligation to sell the Common
Shares and issue the Warrants to the Buyer pursuant to this Agreement is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Company of good funds for payment of
75% of the Purchase Price for the Common Shares in accordance with Section 1(b)
hereof; and
(c) The accuracy in all material respects on the Closing Date of the
representations and warranties of the Buyer contained in this Agreement as if
made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date, and receipt by the Company of a
certificate, dated the Closing Date, of a duly authorized signatory of the Buyer
confirming such matters and such other matters as the Company may reasonably
request.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Common Shares and acquire the Warrants on the Closing Date is conditioned upon
the satisfaction of the following conditions precedent on or before the Closing
Date (any or all of which may be waived by the Buyer in its sole discretion):
19
(a) The receipt and acceptance by the Buyer of this Agreement as
evidenced by execution of this Agreement by the Buyer and delivery of an
executed counterpart of this Agreement to the Company or its legal counsel;
(b) Delivery by the Company to the Buyer (or its counsel) of the
certificates for the Common Shares, the Callable Warrants and the Class A
Warrants in accordance with this Agreement;
(c) The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date, and receipt by the Buyer of a
certificate, dated the Closing Date, of the Chief Executive Officer of the
Company confirming such matters and such other matters as the Buyer may
reasonably request;
(d) The receipt by the Buyer of a certificate, dated the Closing Date,
of the Secretary of the Company certifying (1) the Certificate of Incorporation,
as amended, and By-Laws of the Company as in effect on the Closing Date and (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby;
(e) Receipt by the Buyer on the Closing Date of an opinion of Ropes &
Gray, dated the Closing Date, in such form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX IV attached hereto.
(f) From the date hereof to the Closing Date, trading in the Company's
Common Stock shall not have been suspended by the SEC and trading in securities
generally as reported by Nasdaq shall not have been suspended or limited, and
the Common Stock shall be listed on Nasdaq.
(g) 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 which prohibits the
consummation of any of the transactions contemplated by this Agreement, the
Warrants or the Registration Rights Agreement. The NASD shall not have objected
or indicated that it may object to the consummation of any of the transactions
contemplated by this Agreement.
(h) The Company and the Buyer shall have executed and delivered the
Registration Rights Agreement.
(i) The Company shall have delivered to the Buyer such other documents
relating to the transactions contemplated by this Agreement as the Buyer or its
counsel may reasonably request.
20
9. MISCELLANEOUS.
(a) GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(b) COUNTERPARTS. This Agreement may be executed in counterparts and by
the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party. Although this Agreement is dated as of the date first set
forth above, the actual date of execution and delivery of this Agreement by each
party is the date set forth below such party's signature on the signature page
hereof. Any reference in this Agreement or in any of the documents executed and
delivered by the parties hereto in connection herewith to (1) the date of
execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement or the date of execution and delivery of this
Agreement by the Buyer and the Company shall be deemed a reference to the later
of the dates set forth below the signatures of the parties on the signature page
hereof.
(c) HEADINGS, ETC. The headings, captions and footers 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) AMENDMENTS. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
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(f) WAIVERS. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission with answer back confirmation) or by
courier and shall be effective upon receipt, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
transmission number (408) 731-8674, with a copy to Ropes & Gray, One
International Place, Boston, Massachusetts, 02110, Attention: Geoffrey B. Davis,
Esq., (facsimile number (617) 951-7050), or, in the case of the Buyer, at its
address or telephone line facsimile transmission number shown on the signature
page of this Agreement, with a copy to Kleinberg, Kaplan, Wolff & Cohen, P.C.,
551 Fifth Avenue, New York, New York 10176, Attn: Martin D. Sklar, Esq.
(facsimile number (212) 986-8866) or such other address or telephone line
facsimile transmission number as a party shall have provided by notice to the
other party in accordance with this provision.
(h) ASSIGNMENT. Prior to the Closing Date, the Buyer may not assign its
rights and obligations under this Agreement. Any transfer of the Shares or the
Warrants by the Buyer after the Closing Date shall be made in accordance with
Section 4. After the Closing Date, the Buyer shall have the right to assign its
rights and obligations under this Agreement in connection with any transfer of
the Securities upon execution by any transferee of an instrument reasonably
satisfactory to the Company pursuant to which the transferee agrees with the
Company to be bound as a Buyer by the terms and conditions of this Agreement.
(i) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of and
payment for the Common Shares and shall remain in full force and effect
regardless of any investigation made by or on behalf of them or any person
controlling or advising any of them.
(j) ENTIRE AGREEMENT. This Agreement and its Schedules and Annexes set
forth the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, with respect thereto.
(k) TERMINATION. Either party shall have the right to terminate this
Agreement by giving notice to the other party at any time at or prior to the
Closing Date if:
(i) the other party shall have failed, refused, or been unable
at or prior to the date of such termination of this Agreement to
perform any of its obligations hereunder the performance of which was
due at the time of termination;
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(ii) any other condition of the terminating party's
obligations hereunder is not fulfilled at the time such condition was
to be fulfilled; or
(iii) the closing shall not have occurred on a Closing Date on
or before August 3, 2000, other than solely by reason of a breach of
this Agreement by the terminating party.
Any such termination shall be effective upon the giving of notice thereof by the
terminating party. Upon such termination, neither party shall have any further
obligation to the other party hereunder; provided, however, that nothing herein
shall relieve a breaching party of any liability it may have to the other party
as a result of such breach.
(l) FURTHER ASSURANCES. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer
shall have the right to approve before issuance any press releases 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 Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(n) CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(o) INDEMNIFICATION. In consideration of the Buyer's execution and
delivery of the this Agreement and the Registration Rights Agreement and
acquiring the Common Shares hereunder and in addition to all of the Company's
other obligations under this Agreement or the transaction documents contemplated
hereby, the Company shall defend, protect, indemnify and hold harmless the Buyer
and all of its partners, officers, directors, employees, members and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or the other transaction documents contemplated hereby
or any other certificate or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the other transaction documents contemplated herein or any other
certificate or document contemplated hereby or thereby, (c) any cause of action,
suit or claim brought or made against such Indemnitee
23
by a third party and arising out of or resulting from (i) the execution,
delivery, performance, breach by the Company or enforcement of this Agreement or
the other transaction documents contemplated hereby or any other certificate,
instrument or document contemplated hereby or thereby, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Shares or (iii) the status of the Buyer or
holder of the Shares or Warrants as an investor in the Company and (d) the
enforcement of this Section. Notwithstanding the foregoing, Indemnified
Liabilities shall not include any liability of any Indemnitee arising solely out
of such Indemnitee's gross negligence, willful misconduct or fraudulent
action(s). To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
section shall be the same as those set forth in the Registration Rights
Agreement, including, without limitation, those procedures with respect to the
settlement of claims and Company's right to assume the defense of claims.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
and the Company by their respective officers or other representatives thereunto
duly authorized on the respective dates set forth below.
NUMBER OF SHARES: 923,521
PRICE PER SHARE: $4.33125
AGGREGATE PURCHASE PRICE: $4,000,000.00
MILLENNIUM PARTNERS, LP
By:
------------------------------
Name:
Title:
Date: As of July 31, 2000
Address: 666 Fifth Avenue
New York, New York 10103
Facsimile: (212) 841-6302
STEMCELLS, INC.
By:
------------------------------
Name:
Title:
Date: As of July 31, 2000
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SCHEDULES
Disclosure Schedule
ANNEXES
Annex I Form of Callable Warrant
Annex II Form of Common Stock Purchase Warrant, Class A
Annex III Form of Registration Rights Agreement
Annex IV Form of Opinion of Counsel to Be Delivered on Closing Date
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