Exhibit 10.1
COMMON STOCK PURCHASE AGREEMENT
DATED JUNE 12, 2006
BY AND BETWEEN
LEXICON GENETICS INCORPORATED
AND
AZIMUTH OPPORTUNITY LTD.
TABLE OF CONTENTS
PAGE
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Article I PURCHASE AND SALE OF COMMON STOCK.............................. 1
Section 1.1 Purchase and Sale of Stock............................... 1
Section 1.2 Effective Date; Settlement Dates......................... 1
Section 1.3 The Shares............................................... 2
Section 1.4 Current Report; Prospectus Supplement.................... 2
Article II FIXED REQUEST TERMS; OPTIONAL AMOUNT.......................... 2
Section 2.1 Fixed Request Notice..................................... 2
Section 2.2 Fixed Requests........................................... 3
Section 2.3 Share Calculation........................................ 4
Section 2.4 Limitation of Fixed Requests............................. 4
Section 2.5 Reduction of Commitment.................................. 4
Section 2.6 Below Threshold Price.................................... 4
Section 2.7 Settlement............................................... 5
Section 2.8 Reduction of Pricing Period.............................. 5
Section 2.9 Optional Amount.......................................... 6
Section 2.10 Calculation of Optional Amount Shares.................... 6
Section 2.11 Exercise of Optional Amount.............................. 7
Section 2.12 Aggregate Limit.......................................... 7
Article III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR............... 7
Section 3.1 Organization and Standing of the Investor................ 7
Section 3.2 Authorization and Power.................................. 7
Section 3.3 No Conflicts............................................. 8
Section 3.4 Information.............................................. 8
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 8
Section 4.1 Organization, Good Standing and Power.................... 9
Section 4.2 Authorization, Enforcement............................... 9
Section 4.3 Capitalization........................................... 9
Section 4.4 Issuance of Shares....................................... 10
Section 4.5 No Conflicts............................................. 10
Section 4.6 Commission Documents, Financial Statements............... 10
Section 4.7 Subsidiaries............................................. 12
Section 4.8 No Material Adverse Effect............................... 12
Section 4.9 Indebtedness............................................. 12
Section 4.10 Title To Assets.......................................... 12
Section 4.11 Actions Pending.......................................... 12
Section 4.12 Compliance With Law...................................... 13
Section 4.13 Certain Fees............................................. 13
Section 4.14 Operation of Business.................................... 13
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Section 4.15 Environmental Compliance................................. 14
Section 4.16 Material Agreements...................................... 15
Section 4.17 Transactions With Affiliates............................. 15
Section 4.18 Securities Act; NASD Conduct Rules....................... 16
Section 4.19 Employees................................................ 17
Section 4.20 Use of Proceeds.......................................... 17
Section 4.21 Public Utility Holding Company Act and Investment Company
Act Status......................................................... 17
Section 4.22 ERISA.................................................... 17
Section 4.23 Taxes.................................................... 18
Section 4.24 Insurance................................................ 18
Section 4.25 Acknowledgement Regarding Investor's Purchase of Shares.. 18
Article V COVENANTS...................................................... 18
Section 5.1 Securities Compliance.................................... 18
Section 5.2 Registration and Listing................................. 19
Section 5.3 Compliance with Laws..................................... 19
Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt
Practices Act...................................................... 19
Section 5.5 Limitations on Holdings and Issuances.................... 20
Section 5.6 Other Agreements and Other Financings.................... 20
Section 5.7 Stop Orders.............................................. 21
Section 5.8 Amendments to the Registration Statement; Prospectus
Supplements; Free Writing Prospectuses............................. 21
Section 5.9 Prospectus Delivery...................................... 22
Section 5.10 Selling Restrictions..................................... 23
Section 5.11 Effective Registration Statement......................... 24
Section 5.12 Non-Public Information................................... 24
Section 5.13 Broker/Dealer............................................ 24
Section 5.14 Update of Disclosure Schedule............................ 24
Article VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES................................................ 24
Section 6.1 Opinion of Counsel and Certificate....................... 24
Section 6.2 Conditions Precedent to the Obligation of the Company.... 24
Section 6.3 Conditions Precedent to the Obligation of the Investor... 26
Article VII TERMINATION.................................................. 28
Section 7.1 Term, Termination by Mutual Consent...................... 28
Section 7.2 Other Termination........................................ 28
Section 7.3 Effect of Termination.................................... 29
Article VIII INDEMNIFICATION............................................. 29
Section 8.1 General Indemnity........................................ 29
Section 8.2 Indemnification Procedures............................... 31
Article IX MISCELLANEOUS................................................. 32
Section 9.1 Fees and Expenses........................................ 32
Section 9.2 Specific Enforcement, Consent to Jurisdiction, Waiver of
Jury Trial......................................................... 33
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Section 9.3 Entire Agreement; Amendment.............................. 33
Section 9.4 Notices.................................................. 33
Section 9.5 Waivers.................................................. 34
Section 9.6 Headings................................................. 35
Section 9.7 Successors and Assigns................................... 35
Section 9.8 Governing Law............................................ 35
Section 9.9 Survival................................................. 35
Section 9.10 Counterparts............................................. 35
Section 9.11 Publicity................................................ 35
Section 9.12 Severability............................................. 35
Section 9.13 Further Assurances....................................... 35
Annex A. Definitions
iii
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 12th
day of June 2006 (this "Agreement"), by and between Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the "Investor"), and Lexicon Genetics Incorporated, a corporation
organized and existing under the laws of the State of Delaware (the "Company").
RECITALS
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may issue and sell to the Investor and
the Investor shall thereupon purchase from the Company up to $75,000,000 worth
of newly issued shares of the Company's common stock, $0.001 par value ("Common
Stock"), subject, in all cases, to the Trading Market Limit;
WHEREAS, the offer and sale of the shares of Common Stock hereunder have
been registered by the Company in the Registration Statement, which has been
declared effective by order of the Commission under the Securities Act;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
SECTION 1.1 PURCHASE AND SALE OF STOCK. Upon the terms and subject to the
conditions of this Agreement, during the Investment Period the Company in its
discretion may issue and sell to the Investor up to $75,000,000 (the "Total
Commitment") worth of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock (subject in all cases to the Trading
Market Limit, the "Aggregate Limit"), by (i) the delivery to the Investor of not
more than 24 separate Fixed Request Notices (unless the Investor and the Company
mutually agree that a different number of Fixed Request Notices may be
delivered) as provided in Article II hereof and (ii) the exercise by the
Investor of Optional Amounts, which the Company may in its discretion grant to
the Investor and which may be exercised by the Investor, in whole or in part, as
provided in Article II hereof. The aggregate of all Fixed Request Amounts and
Optional Amount Dollar Amounts shall not exceed the Aggregate Limit.
SECTION 1.2 EFFECTIVE DATE; SETTLEMENT DATES. This Agreement shall become
effective and binding upon delivery of counterpart signature pages of this
Agreement executed by each of the parties hereto, and by delivery of an opinion
of counsel and a certificate of the Company as provided in Section 6.1 hereof,
to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New York
10166, at l0:00 a.m., New York time, on the Effective Date. In consideration of
and in express reliance upon the representations, warranties and covenants, and
otherwise upon the terms and subject to the conditions, of this Agreement, from
and after the Effective Date and during the Investment Period (i) the Company
shall issue and sell to the Investor, and the Investor agrees to purchase from
the Company, the Shares in respect of each Fixed Request and (ii) the Investor
may in its discretion elect to purchase Shares in respect of
each Optional Amount. The issuance and sale of Shares to the Investor pursuant
to any Fixed Request or Optional Amount shall occur on the applicable Settlement
Date in accordance with Sections 2.7 and 2.9 (or on such Trading Day in
accordance with Section 2.8, as applicable), provided in each case that all of
the conditions precedent thereto set forth in Article VI theretofore shall have
been fulfilled or (to the extent permitted by applicable law) waived.
SECTION 1.3 THE SHARES. The Company has duly authorized and reserved for
issuance, and covenants to continue to reserve for issuance, free of all
preemptive and other similar rights, at all times during the Investment Period,
the requisite aggregate number of authorized but unissued shares of its Common
Stock to timely effect the issuance, sale and delivery in full to the Investor
of all Shares to be issued in respect of all Fixed Requests and Optional Amounts
under this Agreement.
SECTION 1.4 CURRENT REPORT; PROSPECTUS SUPPLEMENT. Within four business
days after the Effective Date, the Company shall file with the Commission a
report on Form 8-K relating to the transactions contemplated by, and briefly
describing the material terms and conditions of, this Agreement and, to the
extent not included in a Prospectus Supplement, disclosing all information
relating to the transactions contemplated hereby required to be disclosed in the
Registration Statement and the Base Prospectus (but which permissibly has been
omitted therefrom in accordance with the Securities Act), including, without
limitation, information required to be disclosed in the section captioned "Plan
of Distribution" in the Base Prospectus (the "Current Report"). The Current
Report may include a copy of this Agreement as an exhibit. To the extent
applicable, the Current Report shall be incorporated by reference in the
Registration Statement in accordance with the provisions of Rule 430B under the
Securities Act. Prior to filing the Current Report with the Commission, the
Company shall provide the Investor a reasonable opportunity to comment on a
draft of such Current Report and shall give due consideration to such comments.
If required under the Securities Act, the Company shall file a final Base
Prospectus pursuant to Rule 424(b) under the Securities Act on or prior to the
first Fixed Request Exercise Date. Pursuant to Section 5.9 and subject to the
provisions of Section 5.8, on the first Trading Day immediately following the
end of each Pricing Period, the Company shall file with the Commission a
Prospectus Supplement disclosing the number of Shares to be issued and sold to
the Investor thereunder, the total purchase price therefor and the net proceeds
to be received by the Company therefrom and, to the extent required by the
Securities Act, identifying the Current Report.
ARTICLE II
FIXED REQUEST TERMS; OPTIONAL AMOUNT
Subject to the satisfaction of the conditions set forth in this Agreement,
the parties agree (unless otherwise mutually agreed upon by the parties in
writing) as follows:
SECTION 2.1 FIXED REQUEST NOTICE. Provided that prior written notice
thereof is given to the Investor not later than 4:30 p.m. (New York time) on the
Trading Day immediately preceding the Fixed Request Exercise Date, the Company
may, from time to time in its sole discretion, provide a notice to the Investor
of a Fixed Request before 9:30 a.m. (New York time)
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on the first Trading Day of the Pricing Period (the "Fixed Request Notice"),
substantially in the form attached hereto as Exhibit A. The Fixed Request Notice
shall specify the Fixed Amount Requested, establish the Threshold Price for such
Fixed Request, designate the first Trading Day of the Pricing Period and specify
the Optional Amount, if any, that the Company elects to grant to the Investor
during the Pricing Period and the applicable Threshold Price for such Optional
Amount (the "Optional Amount Threshold Price"). The Threshold Price and the
Optional Amount Threshold Price established by the Company in a Fixed Request
Notice may be the same or different, in the Company's sole discretion. Upon the
terms and subject to the conditions of this Agreement, the Investor is obligated
to accept each Fixed Request Notice prepared and delivered in accordance with
the provisions of this Agreement.
SECTION 2.2 FIXED REQUESTS. From time to time during the Investment Period,
the Company may in its sole discretion deliver to the Investor a Fixed Request
Notice for a specified Fixed Amount Requested, and the applicable discount price
(the "Discount Price") shall be determined, in accordance with the price
parameters as set forth below or such other parameters mutually agreed upon by
the Investor and the Company, and upon the terms and subject to the conditions
of this Agreement, the Investor shall purchase from the Company the Shares
subject to such Fixed Request Notice; provided, however, that the Company may
not deliver any single Fixed Request Notice for a Fixed Amount Requested in
excess of the lesser of: (i) the amount in the applicable Fixed Amount Requested
column below and (ii) 2.5% of the Market Capitalization:
Threshold Price Fixed Amount Requested Discount Price
- --------------- ---------------------- --------------
Equal to or greater than $10.00 Not to exceed $6,000,000 96.25% of the VWAP
Equal to or greater than $9.00 and less than $10.00 Not to exceed $5,500,000 96.00% of the VWAP
Equal to or greater than $8.00 and less than $9.00 Not to exceed $5,000,000 96.00% of the VWAP
Equal to or greater than $7.00 and less than $8.00 Not to exceed $4,500,000 95.75% of the VWAP
Equal to or greater than $6.00 and less than $7.00 Not to exceed $4,000,000 95.50% of the VWAP
Equal to or greater than $5.00 and less than $6.00 Not to exceed $3,500,000 95.00% of the VWAP
Equal to or greater than $4.00 and less than $5.00 Not to exceed $3,000,000 94.75% of the VWAP
Equal to or greater than $3.00 and less than $4.00 Not to exceed $2,500,000 94.50% of the VWAP
Anything to the contrary in this Agreement notwithstanding, at no time
shall the Investor be required to purchase more than $6,000,000 worth of Common
Stock in respect of any Pricing Period (not including Common Stock subject to
any Optional Amount). The date on which the Company delivers any Fixed Request
Notice in accordance with this Section 2.2 hereinafter shall be referred to as a
"Fixed Request Exercise Date".
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SECTION 2.3 SHARE CALCULATION. Subject to Section 2.6, the number of Shares
to be issued by the Company to the Investor pursuant to a Fixed Request shall
equal the aggregate sum of each quotient (calculated for each Trading Day during
the applicable Pricing Period for which the VWAP equals or exceeds the Threshold
Price) determined pursuant to the following equation (rounded to the nearest
whole Share):
N = (A x B)/C, where:
N = the number of Shares to be issued by the Company to the Investor in
respect of a Trading Day during the applicable Pricing Period for which the
VWAP equals or exceeds the Threshold Price,
A = 0.10 (the "Multiplier"); provided, however, that if the number of Trading
Days constituting a Pricing Period is decreased as set forth in Section 2.8
hereof, then the Multiplier correspondingly shall be increased to equal the
decimal equivalent (in 10-millionths) of a fraction, the numerator of which
is one and the denominator of which equals the number of Trading Days in
the Pricing Period as so decreased,
B = the Fixed Amount Requested, and
C = the applicable Discount Price.
SECTION 2.4 LIMITATION OF FIXED REQUESTS. The Company shall not make more
than one Fixed Request in each Pricing Period. Not less than five Trading Days
shall elapse between the end of one Pricing Period and the commencement of any
other Pricing Period during the Investment Period. There shall be permitted a
maximum of 24 Fixed Requests during the Investment Period. Each Fixed Request
automatically shall expire immediately following the last Trading Day of each
Pricing Period.
SECTION 2.5 REDUCTION OF COMMITMENT. On the last Trading Day of each
Pricing Period, the Investor's Total Commitment under this Agreement
automatically (and without the need for any amendment to this Agreement) shall
be reduced, on a dollar-for-dollar basis, by the total amount of the Fixed
Request Amount and the Optional Amount Dollar Amount, if any, for such Pricing
Period.
SECTION 2.6 BELOW THRESHOLD PRICE. If the VWAP on any Trading Day in a
Pricing Period is lower than the Threshold Price, then for each such Trading Day
the total amount of the Fixed Amount Requested shall be reduced, on a
dollar-for-dollar basis, by an amount equal to the product of (x) the Multiplier
and (y) the original Fixed Amount Requested, and no Shares shall be purchased or
sold with respect to such Trading Day, except as provided below. If trading in
the Common Stock on NASDAQ (or any national securities exchange on which the
Common Stock is then listed) is suspended for any reason for more than three
hours on any Trading Day, the Investor may at its option deem the price of the
Common Stock to be lower than the Threshold Price for such Trading Day and, for
each such Trading Day, the total amount of the Fixed Amount Requested shall be
reduced as provided in the immediately preceding sentence, and no Shares shall
be purchased or sold with respect to such Trading Day, except as provided below.
For each Trading Day during a Pricing Period on which the VWAP is (or is deemed
to be) lower than the Threshold Price, the Investor may in its sole discretion
elect to
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purchase such U.S. dollar amount of Shares equal to the amount by which the
Fixed Amount Requested has been reduced in accordance with this Section 2.6, at
the Threshold Price multiplied by the applicable percentage determined in
accordance with the price parameters set forth in Section 2.2. The Investor
shall inform the Company via facsimile transmission not later than 8:00 p.m.
(New York time) on the last Trading Day of such Pricing Period as to the number
of Shares, if any, the Investor elects to purchase as provided in this Section
2.6.
SECTION 2.7 SETTLEMENT. The payment for, against simultaneous delivery of,
Shares in respect of each Fixed Request shall be settled on the second Trading
Day next following the last Trading Day of each Pricing Period (the "Settlement
Date"). On each Settlement Date, the Company shall deliver the Shares purchased
by the Investor to the Investor or its designees via DTC's Deposit Withdrawal
Agent Commission (DWAC) system, against simultaneous payment therefor to the
Company's designated account by wire transfer of immediately available funds,
provided that if the Shares are received by the Investor later than 1:00 p.m.
(New York time), payment therefor shall be made with next day funds. As set
forth in Section 9.1(ii), a failure by the Company to deliver such Shares shall
result in the payment of liquidated damages by the Company to the Investor.
SECTION 2.8 REDUCTION OF PRICING PERIOD. If during a Pricing Period the
Company elects to reduce the number of Trading Days in such Pricing Period (and
thereby amend its previously delivered Fixed Request Notice), the Company shall
so notify the Investor before 9:00 a.m. (New York time) on any Trading Day
during a Pricing Period (a "Reduction Notice") and the last Trading Day of such
Pricing Period shall be the Trading Day immediately preceding the Trading Day on
which the Investor received such Reduction Notice; provided, however, that if
the Company delivers the Reduction Notice later than 9:00 a.m. (New York time)
on a Trading Day during a Pricing Period, then the last Trading Day of such
Pricing Period instead shall be the Trading Day on which the Investor received
such Reduction Notice.
Upon receipt of a Reduction Notice, the Investor (i) shall purchase the
Shares in respect of each Trading Day in such reduced Pricing Period for which
the VWAP equals or exceeds the Threshold Price in accordance with Section 2.3
hereof; (ii) may elect to purchase the Shares in respect of any Trading Day in
such reduced Pricing Period for which the VWAP is (or is deemed to be) lower
than the Threshold Price in accordance with Section 2.6 hereof; and (iii) may
elect to exercise all or any portion of an Optional Amount on any Trading Day
during such reduced Pricing Period in accordance with Sections 2.10 and 2.11
hereof.
In addition, upon receipt of a Reduction Notice, the Investor may elect to
purchase such U.S. dollar amount of additional Shares equal to the quotient
determined pursuant to the following equation:
D = A x 1/B x (B - C), where:
D = the U.S. dollar amount of additional Shares to be purchased,
A = the Fixed Amount Requested,
B = 10 or, for purposes of this Section 2.8, such lesser number of Trading
Days as the parties may mutually agree to, and
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C = the number of Trading Days in the reduced Pricing Period,
at a per Share price equal to (x) the Fixed Amount Requested attributable to the
reduced Pricing Period divided by (y) the number of Shares to be purchased
during such reduced Pricing Period pursuant to clause (i) of the immediately
preceding paragraph.
The Investor may also elect to exercise any portion of the applicable
Optional Amount which was unexercised during the reduced Pricing Period by
issuing an Optional Amount Notice to the Company not later than 10:00 a.m. (New
York time) on the first Trading Day next following the last Trading Day of the
reduced Pricing Period. The number of Shares to be issued upon exercise of such
Optional Amount shall be calculated pursuant to the equation set forth in
Section 2.10 hereof, except that "C" shall equal the greater of (i) the VWAP for
the Common Stock on the last Trading Day of the reduced Pricing Period or (ii)
the Optional Amount Threshold Price.
The payment for, against simultaneous delivery of, Shares to be purchased
and sold in accordance with this Section 2.8 shall be settled on the second
Trading Day next following the Trading Day on which the Investor receives a
Reduction Notice.
SECTION 2.9 OPTIONAL AMOUNT. With respect to any Pricing Period, the
Company may in its sole discretion grant to the Investor the right to exercise,
from time to time during the Pricing Period (but not more than once on any
Trading Day), all or any portion of an Optional Amount. The maximum Optional
Amount Dollar Amount and the Optional Amount Threshold Price shall be set forth
in the Fixed Request Notice. Each daily Optional Amount exercise shall be
aggregated during the Pricing Period and settled on the next Settlement Date.
The Optional Amount Threshold Price designated by the Company in its Fixed
Request Notice shall apply to each Optional Amount during the applicable Pricing
Period.
SECTION 2.10 CALCULATION OF OPTIONAL AMOUNT SHARES. The number of shares of
Common Stock to be issued in connection with the exercise of an Optional Amount
shall be the quotient determined pursuant to the following equation (rounded to
the nearest whole Share):
O = A/(B x C), where:
O = the number of shares of Common Stock to be issued in connection with such
Optional Amount exercise,
A = the Optional Amount Dollar Amount with respect to which the Investor has
delivered an Optional Amount Notice,
B = the applicable percentage determined in accordance with the price
parameters set forth in Section 2.2 (with the Optional Amount Threshold
Price serving as the Threshold Price for such purposes), and
C = the greater of (i) the VWAP for the Common Stock on the day the Investor
delivers the Optional Amount Notice or (ii) the Optional Amount Threshold
Price.
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SECTION 2.11 EXERCISE OF OPTIONAL AMOUNT. If granted by the Company to the
Investor with respect to a Pricing Period, all or any portion of the Optional
Amount may be exercised by the Investor on any Trading Day during the Pricing
Period, subject to the limitations set forth in Section 2.9. As a condition to
each exercise of an Optional Amount pursuant to this Section 2.11, the Investor
shall issue an Optional Amount Notice to the Company no later than 8:00 p.m.
(New York time) on the day of such Optional Amount exercise. If the Investor
does not exercise an Optional Amount in full by 8:00 p.m. (New York time) on the
last Trading Day of the applicable Pricing Period, such unexercised portion of
the Investor's Optional Amount with respect to that Pricing Period automatically
shall lapse and terminate.
SECTION 2.12 AGGREGATE LIMIT. Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Fixed Request
Notice or grant an Optional Amount to the extent that the sale of Shares
pursuant thereto and pursuant to all prior Fixed Request Notices or Optional
Amounts issued hereunder would cause the Company to sell or the Investor to
purchase Shares which in the aggregate are in excess of the Aggregate Limit. If
the Company issues a Fixed Request Notice or Optional Amount that otherwise
would permit the Investor to purchase shares of Common Stock which would cause
the aggregate purchases by Investor hereunder to exceed the Aggregate Limit,
such Fixed Request Notice or Optional Amount shall be void ab initio to the
extent of the amount by which the dollar value of shares or number of shares, as
the case may be, of Common Stock otherwise issuable pursuant to such Fixed
Request Notice or Optional Amount together with the dollar value of shares or
number of shares, as the case may be, of all other Common Stock purchased by the
Investor pursuant hereto would exceed the Aggregate Limit. The Company hereby
represents, warrants and covenants that neither it nor any of its Subsidiaries
(i) has effected any transaction or series of transactions, (ii) is a party to
any pending transaction or series of transactions or (iii) shall enter into any
contract, agreement, agreement-in-principle, arrangement or understanding with
respect to, or shall effect, any Other Financing which, in any of such cases,
may be integrated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company's stockholders is
required under any bylaw, listed securities maintenance standards or other rules
of the Trading Market; provided, however, that the Company shall be permitted to
take any action referred to in clause (iii) above if the Company has timely
provided the Investor with an Integration Notice as provided in Section 5.6(ii)
hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby makes the following representations and warranties to
the Company:
SECTION 3.1 ORGANIZATION AND STANDING OF THE INVESTOR. The Investor is an
international business company duly organized, validly existing and in good
standing under the laws of the British Virgin Islands.
SECTION 3.2 AUTHORIZATION AND POWER. The Investor has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to purchase the Shares in accordance with the terms hereof.
The execution, delivery and performance of this Agreement by the Investor and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further
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consent or authorization of the Investor, its Board of Directors or stockholders
is required. This Agreement has been duly executed and delivered by the
Investor. This Agreement constitutes a valid and binding obligation of the
Investor enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
SECTION 3.3 NO CONFLICTS. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated herein do not and shall not (i) result in a violation
of such Investor's charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party or is
bound, (iii) create or impose any lien, charge or encumbrance on any property of
the Investor under any agreement or any commitment to which the Investor is
party or under which the Investor is bound or under which any of its properties
or assets are bound, or (iv) result in a violation of any federal, state, local
or foreign statute, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to the Investor or by which any of its
properties or assets are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any material
respect. The Investor is not required under federal, state, local or foreign
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement or to purchase the Shares in accordance with the terms hereof.
SECTION 3.4 INFORMATION. The Company has furnished or made available to the
Investor and its advisors all materials relating to the business, financial
condition, management and operations of the Company and materials relating to
the offer and sale of the Shares which have been requested by the Investor. The
Investor and its advisors have been afforded the opportunity to ask questions of
representatives of the Company. The Investor 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 Shares. The Investor understands
that it (and not the Company) shall be responsible for its own tax liabilities
that may arise as a result of this investment or the transactions contemplated
by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
the Investor (which is hereby incorporated by reference in, and constitutes an
integral part of, this Agreement) (the "Disclosure Schedule"), the Company
hereby makes the following representations and warranties to the Investor:
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SECTION 4.1 ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
own, lease and operate its properties and assets and to conduct its business as
it is now being conducted. The Company and each such Subsidiary 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, except for any jurisdiction in
which the failure to be so qualified would not have a Material Adverse Effect.
SECTION 4.2 AUTHORIZATION, ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. Except for
approvals of the Company's Board of Directors or a committee thereof as may be
required in connection with any issuance and sale of Shares to the Investor
hereunder (which approvals shall be obtained prior to the delivery of any Fixed
Request Notice), the execution, delivery and performance by the Company of this
Agreement and the consummation by it of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
SECTION 4.3 CAPITALIZATION. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the Effective Date are as set
forth in the 2005 Form 10-K. All of the outstanding shares of Common Stock have
been duly authorized and validly issued, and are fully paid and nonassessable.
Except as set forth in the Commission Documents, as of the Effective Date, no
shares of Common Stock were entitled to preemptive rights or registration rights
and there were no outstanding options, warrants, scrip, rights to subscribe to,
call or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, any shares of capital stock of the
Company. Except as set forth in the Commission Documents, as of the Effective
Date, there were no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
or exchangeable for any shares of capital stock of the Company. Except for
customary transfer restrictions contained in agreements entered into by the
Company to sell restricted securities or as set forth in the Commission
Documents, as of the Effective Date, the Company was not a party to, and it had
no knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of the Company. Except as set forth in the Commission
Documents, the offer and sale of all capital stock, convertible or exchangeable
securities, rights, warrants or options of the Company issued prior to the
Effective Date complied with all applicable federal and state securities laws,
and no stockholder has any right of rescission or damages or any "put" or
similar right with respect thereto which would have a Material Adverse Effect.
The Company has furnished or made available to the Investor true and correct
copies of the Company's Certificate of Incorporation as in effect on the
Effective Date (the "Charter"), and
9
the Company's Bylaws as in effect on the Effective Date (the "Bylaws"), and true
and correct copies (redacted as appropriate) of all executed resolutions of the
Company's Board of Directors (and committees thereof) relating to the capital
stock of the Company (and transactions in respect thereof) since December 31,
2004 (except with respect to issuances of shares of capital stock of the Company
to directors or employees of the Company as fees or compensation that were duly
approved by the Company's Board of Directors or a committee thereof).
SECTION 4.4 ISSUANCE OF SHARES. The Shares to be issued under this
Agreement have been or will be duly authorized by all necessary corporate action
and, when paid for or issued in accordance with the terms hereof, the Shares
shall be validly issued and outstanding, fully paid and nonassessable, and the
Investor shall be entitled to all rights accorded to a holder and beneficial
owner of Common Stock.
SECTION 4.5 NO CONFLICTS. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated herein do not and shall not (i) result in a violation
of any provision of the Company's Charter or Bylaws, (ii) conflict with,
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company or any of its Significant Subsidiaries is a
party or is bound (including, without limitation, any listing agreement with the
Trading Market), (iii) create or impose a lien, charge or encumbrance on any
property of the Company or any of its Significant Subsidiaries under any
agreement or any commitment to which the Company or any of its Significant
Subsidiaries is a party or under which the Company or any of its Significant
Subsidiaries is bound or under which any of their respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries are bound or affected, except, in the case of
clauses (ii), (iii) and (iv), for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, or to issue and
sell the Shares to the Investor in accordance with the terms hereof (other than
any filings which may be required to be made by the Company with the Commission
or the Trading Market subsequent to the Effective Date, including but not
limited to a Prospectus Supplement under Sections 1.4 and 5.9 of this Agreement,
and any registration statement, prospectus or prospectus supplement which has
been or may be filed pursuant to this Agreement).
SECTION 4.6 COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. (a) The Common
Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents, as of the Effective Date the
Company had timely filed (giving effect to permissible extensions in accordance
with Rule 12b-25 under the Exchange Act) all Commission Documents. The Company
has delivered or made available to the Investor true and complete copies of the
Commission Documents filed with the Commission prior to the Effective Date
(including, without limitation, the 2005 Form 10-K) and has delivered or made
10
available to the Investor true and complete copies of all of the Commission
Documents heretofore incorporated by reference in the Registration Statement and
the Prospectus. The Company has not provided to the Investor any information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement. As of its
date, each Commission Document filed with the Commission and incorporated by
reference in the Registration Statement and the Prospectus (including, without
limitation, the 2005 Form 10-K) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and other
federal, state and local laws, rules and regulations applicable to it, and, as
of its date, such Commission Document did not contain any untrue statement of a
material fact or omit 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. Each Commission Document to be filed
with the Commission after the Effective Date and incorporated by reference in
the Registration Statement, the Prospectus and any Prospectus Supplement
required to be filed pursuant to Sections 1.4 and 5.9 hereof during the
Investment Period (including, without limitation, the Current Report), when such
document becomes effective or is filed with the Commission, as the case may be,
shall comply in all material respects with the requirements of the Securities
Act or the Exchange Act, as applicable, and other federal, state and local laws,
rules and regulations applicable to it, and shall not contain any untrue
statement of a material fact or omit 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.
(b) The financial statements, together with the related notes and
schedules, of the Company included in the Commission Documents comply as to form
in all material respects with all applicable accounting requirements and the
published rules and regulations of the Commission and all other applicable rules
and regulations with respect thereto. Such financial statements, together with
the related notes and schedules, have been prepared in accordance with GAAP
applied on a consistent basis 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 financial condition of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(c) The Company has timely filed with the Commission and made
available to the Investor all certifications and statements required by (x) Rule
13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002 ("SOXA")) with respect to all
relevant Commission Documents. The Company is in compliance in all material
respects with the provisions of SOXA applicable to it as of the date hereof. The
Company maintains disclosure controls and procedures required by Rule 13a-15 or
Rule 15d-15 under the Exchange Act; such controls and procedures are effective
to ensure that all material information concerning the Company and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the timely and accurate preparation of the Company's Commission filings and
other public disclosure documents. As used in this Section 4.6(c), the term
"file"
11
shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the
Commission.
(d) Ernst & Young LLP, who have expressed their opinions on the
audited financial statements and related schedules included or incorporated by
reference in the Registration Statement and the Base Prospectus is, with respect
to the Company, an independent registered public accounting firm as required by
the rules of the Public Company Accounting Oversight Board.
SECTION 4.7 SUBSIDIARIES. The 2005 Form 10-K sets forth each Subsidiary of
the Company as of the Effective Date, showing its jurisdiction of incorporation
or organization, and the Company does not have any other Subsidiaries as of the
Effective Date.
SECTION 4.8 NO MATERIAL ADVERSE EFFECT. Since December 31, 2005, the
Company has not experienced or suffered any Material Adverse Effect, and, to the
best knowledge of the Company, there exists no current state of facts, condition
or event which would have a Material Adverse Effect, except (i) as disclosed in
any Commission Documents filed since December 31, 2005 or (ii) continued losses
from operations.
SECTION 4.9 INDEBTEDNESS. The Company's Quarterly Report on Form 10-Q for
its fiscal quarter ended March 31, 2006 sets forth, as of March 31, 2006, all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments through such date.
For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $10,000,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements, indemnities and other contingent obligations in
respect of Indebtedness of others in excess of $10,000,000, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $10,000,000 due under
leases required to be capitalized in accordance with GAAP. There is no existing
or continuing default or event of default in respect of any Indebtedness of the
Company or any of its Subsidiaries.
SECTION 4.10 TITLE TO ASSETS. Each of the Company and its Subsidiaries has
good and marketable title to all of their respective real and personal property
reflected in the Commission Documents, free of mortgages, pledges, charges,
liens, security interests or other encumbrances, except for those indicated in
the Commission Documents or those that would not have a Material Adverse Effect.
All real property leases of the Company are valid and subsisting and in full
force and effect in all material respects.
SECTION 4.11 ACTIONS PENDING. There is no action, suit, claim,
investigation or proceeding pending, or to the knowledge of the Company
threatened, against the Company or any Subsidiary which questions the validity
of this Agreement or the transactions contemplated hereby or any action taken or
to be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents, there is no action, suit, claim, investigation or proceeding pending,
or to the knowledge of the Company threatened, against or involving the Company,
any Subsidiary
12
or any of their respective properties or assets, or involving any officers or
directors of the Company or any of its Subsidiaries, including, without
limitation, any securities class action lawsuit or stockholder derivative
lawsuit, in each case which, if determined adversely to the Company, its
Subsidiary or any officer or director of the Company or its Subsidiaries, would
have a Material Adverse Effect.
SECTION 4.12 COMPLIANCE WITH LAW. The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect.
SECTION 4.13 CERTAIN FEES. Except for the placement fee payable by the
Company to Reedland Capital Partners, an Institutional Division of the Financial
West Group, Member NASD/SIPC, no brokers, finders or financial advisory fees or
commissions shall be payable by the Company or any Subsidiary with respect to
the transactions contemplated by this Agreement.
SECTION 4.14 OPERATION OF BUSINESS. (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies, including, without limitation, the United
States Food and Drug Administration ("FDA"), necessary to conduct the business
now operated by it, except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect. The Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and all applicable FDA rules and
regulations, guidelines and policies, and all applicable rules and regulations,
guidelines and policies of any governmental authority exercising authority
comparable to that of the FDA (including any non-governmental authority whose
approval or authorization is required under foreign law comparable to that
administered by the FDA), except where the failure to so comply, individually or
in the aggregate, would not have a Material Adverse Effect. All of the
Governmental Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect, individually or in the aggregate, would
not have a Material Adverse Effect. Except as set forth in the 2005 Form 10-K,
neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such Governmental
Licenses or relating to a potential violation of, or failure to comply with, any
FDA rules and regulations, guidelines or policies which, if the subject of any
unfavorable decision, ruling or finding, individually or in the aggregate, would
have a Material Adverse Effect. Except as set forth in the 2005 Form 10-K, the
Company has not received any correspondence or notice from the FDA which would
constitute a Material Adverse Effect and neither the Company nor any of its
Subsidiaries knows of any basis therefor. This Section 4.14 does not relate to
environmental matters, such items being the subject of Section 4.15.
(b) The Company or one or more of its Subsidiaries owns or possesses
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems
13
or procedures), trademarks, service marks, trade names, trade dress, logos,
copyrights and other intellectual property, including, without limitation, all
of the intellectual property described in the Commission Documents as being
owned or licensed by the Company (collectively, "Intellectual Property"),
necessary to carry on the business now operated by it. Except as set forth in
the 2005 Form 10-K, there are no actions, suits or judicial proceedings pending,
or to the Company's knowledge threatened, relating to patents or proprietary
information to which the Company or any of its Subsidiaries is a party or of
which any property of the Company or any of its Subsidiaries is subject, and
neither the Company nor any of its Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which could render any Intellectual Property invalid or inadequate
to protect the interest of the Company and its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or
finding) or invalidity or inadequacy, individually or in the aggregate, would
have a Material Adverse Effect.
(c) All clinical trials conducted by the Company or any of its
Subsidiaries or in which the Company or any of its Subsidiaries has participated
that are described in the Commission Documents, or the results of which are
referred to in the Commission Documents, if any, are the only clinical trials
currently being conducted by or on behalf of the Company and its Subsidiaries.
All pre-clinical and clinical trials conducted, supervised or monitored by the
Company or any of its Subsidiaries have been conducted in compliance with all
applicable federal, state, local and foreign laws, and the regulations and
requirements of any applicable governmental entity, including, but not limited
to, FDA good clinical practice and good laboratory practice requirements, as
applicable. Neither the Company nor any of its Subsidiaries has received any
notices or correspondence from the FDA or any other governmental agency
requiring the termination, suspension or modification of any pre-clinical or
clinical trials conducted by, or on behalf of, the Company or any of its
Subsidiaries or in which the Company or any of its Subsidiaries has participated
that are described in the Commission Documents, if any, or the results of which
are referred to in the Commission Documents. All pre-clinical and clinical
trials previously conducted by or on behalf of the Company or any of its
Subsidiaries while conducted by or on behalf of the Company or any of its
Subsidiaries, were conducted in compliance with all applicable federal, state,
local and foreign laws, and the regulations and requirements of any applicable
governmental entity, including, but not limited to, FDA good clinical practice
and good laboratory practice requirements, as applicable.
SECTION 4.15 ENVIRONMENTAL COMPLIANCE. Except as disclosed in the
Commission Documents, the Company and each of its Subsidiaries have obtained all
material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations the failure of which to obtain does not or would
not have a Material Adverse Effect. "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture,
14
processing, distribution, use, treatment, storage, disposal, transport or
handling of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, material or wastes, whether solid, liquid or gaseous in
nature. Except for such instances as would not, individually or in the
aggregate, have a Material Adverse Effect, to the best of the Company's
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its Subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Effective Date or that could reasonably be expected
to give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
SECTION 4.16 MATERIAL AGREEMENTS. Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary of the Company is a party to
any written or oral contract, instrument, agreement commitment, obligation, plan
or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to an annual report on Form 10-K (collectively,
"Material Agreements"). The Company and each of its Subsidiaries have performed
in all material respects all the obligations required to be performed by them
under the Material Agreements, have received no notice of default or an event of
default by the Company or any of its Subsidiaries thereunder and are not aware
of any basis for the assertion thereof, and neither the Company or any of its
Subsidiaries nor, to the best knowledge of the Company, any other contracting
party thereto are in default under any Material Agreement now in effect, the
result of which would have a Material Adverse Effect. Each of the Material
Contracts is in full force and effect, and constitutes a legal, valid and
binding obligation enforceable in accordance with its terms against the Company
and/or any of its Subsidiaries and, to the best knowledge of the Company, each
other contracting party thereto, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
SECTION 4.17 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts, service arrangements or other continuing
transactions exceeding $120,000 between (a) the Company or any Subsidiary, on
the one hand, and (b) any person or entity who would be covered by Item 404(a)
of Regulation S-K, on the other hand. Except as disclosed in the Commission
Documents, there are no outstanding amounts payable to or receivable from, or
advances by the Company or any of its Subsidiaries to, and neither the Company
nor any of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than 5% of the outstanding shares of Common Stock, or
any director, employee or affiliate of the Company or any of its Subsidiaries,
other than (i) reimbursement for reasonable expenses incurred on behalf of the
Company or any of its Subsidiaries or (ii) as part of the normal and customary
terms of such persons' employment or service as a director with the Company or
any of its Subsidiaries.
15
SECTION 4.18 SECURITIES ACT; NASD CONDUCT RULES. The Company has complied
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares hereunder.
(i) The Company has prepared and filed with the Commission in
accordance with the provisions of the Securities Act the Registration Statement,
including the Base Prospectus, relating to the Shares. The Registration
Statement was declared effective by order of the Commission on February 4, 2005.
As of the date hereof, no stop order suspending the effectiveness of the
Registration Statement has been issued by the Commission or is continuing in
effect under the Securities Act and no proceedings therefor are pending before
or, to the Company's knowledge, threatened by the Commission. No order
preventing or suspending the use of the Prospectus or any Permitted Free Writing
Prospectus has been issued by the Commission.
(ii) The Company meets the requirements for the use of Form S-3 under
the Securities Act. The Registration Statement in the form in which it became
effective and the Base Prospectus complied in all material respects with the
provisions of the Securities Act and did not at any such time contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in the light of the circumstances under which they were made) not
misleading; provided that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the Base
Prospectus made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein. The Registration Statement, at the Effective Date,
meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act.
(iii) In accordance with Rule 2710(b)(7)(C)(i) of the Conduct Rules of
the National Association of Securities Dealers, Inc., the Shares have been
registered with the Commission on Form S-3 under the Securities Act pursuant to
the standards for Form S-3 in effect prior to October 21, 1992 and are being
offered pursuant to Rule 415 promulgated under the Securities Act.
(iv) Each Prospectus Supplement required to be filed pursuant to
Sections 1.4 and 5.9 hereof, when filed with the Commission under Rule 424(b)
under the Securities Act, shall comply in all material respects with the
provisions of the Securities Act and shall not at such time contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading, except that this
representation and warranty does not apply to statements in or omissions from
any Prospectus Supplement made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein.
(v) At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Securities Act) relating
to the Shares, the Company was not and is not an Ineligible Issuer (as defined
in Rule 405 under the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 that it is not necessary
that the Company
16
be considered an Ineligible Issuer. Each Permitted Free Writing Prospectus (a)
does not and shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, and (b) does not and shall not include any information that
conflicts with the information contained in the Registration Statement,
including any document incorporated therein and any Prospectus Supplement deemed
to be a part thereof that has not been superseded or modified. The immediately
preceding sentence does not apply to statements in or omissions from any
Permitted Free Writing Prospectus made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein.
(vi) The Company has not distributed and, prior to the completion of
the distribution of the Shares, shall not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Base Prospectus as supplemented by any Prospectus Supplement or a
Permitted Free Writing Prospectus.
SECTION 4.19 EMPLOYEES. As of the Effective Date, neither the Company nor
any Subsidiary of the Company has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth in the Commission
Documents. As of the Effective Date, except as disclosed in the Registration
Statement or the Commission Documents, no officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
SECTION 4.20 USE OF PROCEEDS. The proceeds from the sale of the Shares
shall be used by the Company and its Subsidiaries as set forth in the Base
Prospectus and any Prospectus Supplement filed pursuant to Sections 1.4 and 5.9.
SECTION 4.21 PUBLIC UTILITY HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT
STATUS. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of the consummation of the
transactions contemplated by this Agreement and the application of the proceeds
from the sale of the Shares as set forth in the Base Prospectus and any
Prospectus Supplement shall not be, an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.22 ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect. No
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) or "accumulated funding deficiency" (as defined in Section 203 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA has occurred
with respect to any Plan which has had or would have a Material Adverse Effect,
and the execution and delivery of this Agreement and the issuance and sale of
the Shares hereunder shall not result in any of the foregoing events. Each Plan
is in compliance in all material respects with applicable law, including ERISA
and the Code; the Company has not incurred and does not
17
expect to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any Plan; and each Plan for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualifications. As used in this Section 4.22, the term "Plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of ERISA) which is or
has been established or maintained, or to which contributions are or have been
made, by the Company or any Subsidiary or by any trade or business, whether or
not incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
SECTION 4.23 TAXES. The Company (i) has filed all necessary federal, state
and foreign income and franchise tax returns or has duly requested extensions
thereof, except for those the failure of which to file would not have a Material
Adverse Effect, (ii) has paid all federal, state, local and foreign taxes due
and payable for which it is liable, except to the extent that any such taxes are
being contested in good faith and by appropriate proceedings and except for such
taxes the failure of which to pay would not have a Material Adverse Effect, and
(iii) does not have any tax deficiency or claims outstanding or assessed or, to
the best of the Company's knowledge, proposed against it which would have a
Material Adverse Effect.
SECTION 4.24 INSURANCE. The Company carries, or is covered by, insurance in
such amounts and covering such risks as is adequate for the conduct of its and
its Subsidiaries' businesses and the value of their respective properties and as
is customary for companies engaged in similar businesses in similar industries.
SECTION 4.25 ACKNOWLEDGEMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor's purchase of the
Shares.
ARTICLE V
COVENANTS
The Company covenants with the Investor, and the Investor covenants with
the Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:
SECTION 5.1 SECURITIES COMPLIANCE. The Company shall notify the Commission
and the Trading Market, as applicable, in accordance with their respective rules
and regulations, of the transactions contemplated by this Agreement, and shall
take all necessary action, undertake all proceedings and obtain all
registrations, permits, consents and approvals for the legal and valid issuance
of the Shares to the Investor in accordance with the terms of this Agreement.
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SECTION 5.2 REGISTRATION AND LISTING. The Company shall take all action
necessary to cause the Common Stock to continue to be registered as a class of
securities under Sections 12(b) or 12(g) of the Exchange Act, shall comply with
its reporting and filing obligations under the Exchange Act, and shall not take
any action or file any document (whether or not permitted by the Securities Act)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act or Securities Act,
except as permitted herein. The Company shall take all action necessary to
continue the listing and trading of its Common Stock and the listing of the
Shares purchased by Investor hereunder on the Trading Market, and shall comply
with the Company's reporting, filing and other obligations under the bylaws,
listed securities maintenance standards and other rules of the Trading Market.
SECTION 5.3 COMPLIANCE WITH LAWS.
(i) The Company shall comply, and cause each Subsidiary to comply, (a)
with all laws, rules, regulations and orders applicable to the business and
operations of the Company and its Subsidiaries except as would not have a
Material Adverse Effect and (b) with all applicable provisions of the Securities
Act, the Exchange Act and the listing standards of the Trading Market. Without
limiting the generality of the foregoing, neither the Company nor any of its
officers, directors or affiliates has taken or will take, directly or
indirectly, any action designed or intended to stabilize or manipulate the price
of any security of the Company, or which caused or resulted in, or which would
in the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(ii) The Investor shall comply with all laws, rules, regulations and
orders applicable to the performance by it of its obligations under this
Agreement and its investment in the Shares, except as would not, individually or
in the aggregate, prohibit or otherwise interfere with the ability of the
Investor to enter into and perform its obligations under this Agreement in any
material respect. Without limiting the foregoing, the Investor shall comply with
all applicable provisions of the Securities Act and the Exchange Act.
SECTION 5.4 KEEPING OF RECORDS AND BOOKS OF ACCOUNT; FOREIGN CORRUPT
PRACTICES ACT.
(i) The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made. The
Company shall maintain a system of internal accounting controls which are
sufficient to provide reasonable assurance that (a) transactions are executed
with management's authorization; (b) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of the Company and
to maintain accountability for the Company's consolidated assets; (c) access to
the Company's assets is permitted only in accordance with management's
authorization; and (d) the reporting of the Company's assets is compared with
existing assets at regular intervals.
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(ii) Neither the Company, nor any of its Subsidiaries, nor to the
knowledge of the Company, any of their respective directors, officers, agents,
employees or any other persons acting on their behalf shall, in connection with
the operation of their respective businesses, (a) use any corporate funds for
unlawful contributions, payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (b) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (c) violate or
operate in noncompliance with any export restrictions, anti-boycott regulations,
embargo regulations or other applicable domestic or foreign laws and
regulations.
(iii) From time to time from and after the period beginning a
reasonable period of time prior to each Fixed Request Exercise Date through and
including the applicable Settlement Date, the Company shall make available for
inspection and review by the Investor, customary documentation allowing the
Investor and/or its appointed counsel or advisors to conduct due diligence.
SECTION 5.5 LIMITATIONS ON HOLDINGS AND ISSUANCES. At no time during the
term of this Agreement shall the Investor directly or indirectly own more than
9.9% of the then issued and outstanding shares of Common Stock. The Company
shall not be obligated to issue and the Investor shall not be obligated to
purchase any shares of Common Stock which would result in the issuance under
this Agreement to the Investor at any time of Shares which, when aggregated with
all other shares of Common Stock then owned beneficially by the Investor, would
result in the beneficial ownership by the Investor of more than 9.9% of the then
issued and outstanding shares of the Common Stock.
SECTION 5.6 OTHER AGREEMENTS AND OTHER FINANCINGS.
(i) The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction in or of which the
terms thereof would restrict, materially delay, conflict with or impair the
right of the Company or any Subsidiary to perform their obligations under this
Agreement.
(ii) The Company shall notify the Investor, within 48 hours, if it
enters into any agreement, plan, arrangement or transaction with a third party,
the principal purpose of which is to obtain during a Pricing Period an Other
Financing not constituting an Acceptable Financing (an "Other Financing
Notice"); provided, however, that the Company shall provide the Investor with
five Trading Days' prior written notice (an "Integration Notice") if it intends
to enter into any agreement, plan, arrangement or transaction with a third
party, the principal purpose of which is to obtain an Other Financing which may
be integrated with the transactions contemplated by this Agreement for purposes
of determining whether approval of the Company's stockholders is required under
any bylaw, listed securities maintenance standards or other rules of the Trading
Market. For purposes of this Section 5.6(ii), any press release issued by, or
Commission Document filed by, the Company shall constitute sufficient notice,
provided that it is issued or filed, as the case may be, within the time
requirements set forth in the first sentence of this Section 5.6(ii) for an
Other Financing Notice or an Integration Notice, as applicable. During any
Pricing Period in which the Company is required to provide notice pursuant to
the first sentence of this Section 5.6(ii), the Investor shall (i) have the
option to
20
purchase the Shares subject to the Fixed Request at (x) the price therefor in
accordance with the terms of this Agreement or (y) the third party's price in
connection with the Other Financing, net of such third party's discount and
fees, or (ii) the Investor may elect to not purchase any Shares subject to the
Fixed Request for that Pricing Period. An "Other Financing" shall mean (x) the
issuance of Common Stock or securities convertible into or exchangeable for
Common Stock at a net discount (after all fees, discounts and commissions
associated with the transaction) to the then Current Market Price of the Common
Stock; (y) the implementation by the Company of any mechanism in respect of any
securities convertible into or exchangeable for Common Stock for the reset of
the purchase price of the Common Stock to below the then Current Market Price of
the Common Stock (including, without limitation, any antidilution or similar
adjustment provisions in respect of any Company securities); or (z) the issuance
of options, warrants or similar rights of subscription in each case not
constituting an Acceptable Financing. "Acceptable Financing" shall mean the
issuance by the Company of shares of Common Stock or securities convertible into
or exchangeable for Common Stock in connection with awards under the Company's
benefit and equity plans and arrangements and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof, shares of Common Stock
issuable upon the conversion or exchange of equity awards or convertible or
exchangeable securities outstanding as of the Effective Date, shares of Common
Stock and/or warrants or similar rights to subscribe for the purchase of shares
of Common Stock in connection with technology sharing, licensing, research and
joint development agreements (or amendments thereto) with third parties, and the
issuance of shares of Common Stock upon the exercise thereof, and warrants or
similar rights to subscribe for the purchase of shares of Common Stock issued in
connection with equipment financings and/or real property leases (or amendments
thereto) and the issuance of shares of Common Stock upon the exercise thereof.
SECTION 5.7 STOP ORDERS. The Company shall advise the Investor immediately
and shall confirm such advice in writing: (i) of the Company's receipt of notice
of any request by the Commission for amendment of or a supplement to the
Registration Statement, the Prospectus, any Permitted Free Writing Prospectus or
for any additional information with respect thereto; (ii) of the Company's
receipt of notice of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) of the Company becoming
aware of the happening of any event, which makes any statement of a material
fact made in the Prospectus or any Permitted Free Writing Prospectus untrue or
which requires the making of any additions to or changes to the statements then
made in the Prospectus or any Permitted Free Writing Prospectus in order to
state a material fact required by the Securities Act to be stated therein or
necessary in order to make the statements then made therein, in light of the
circumstances under which they were made, not misleading, or of the necessity to
amend the Registration Statement or supplement the Prospectus or any Permitted
Free Writing Prospectus to comply with the Securities Act or any other law. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company shall use commercially
reasonable efforts to obtain the withdrawal of such order at the earliest
possible time.
SECTION 5.8 AMENDMENTS TO THE REGISTRATION STATEMENT; PROSPECTUS
SUPPLEMENTS; FREE WRITING PROSPECTUSES.
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(i) Except as provided in this Agreement and other than periodic
reports required to be filed pursuant to the Exchange Act, the Company shall not
file with the Commission any amendment to the Registration Statement that
relates to the Investor, the Agreement or the transactions contemplated hereby
or file with the Commission any Prospectus Supplement that relates to the
Investor, this Agreement or the transactions contemplated hereby with respect to
which (a) the Investor shall not previously have been advised, (b) the Company
shall not have given due consideration to any comments thereon received from the
Investor or its counsel, or (c) the Investor shall reasonably object after being
so advised, unless it is necessary to amend the Registration Statement or make
any supplement to the Prospectus to comply with the Securities Act or any other
applicable law or regulation (including the rules and regulations of any Trading
Market), in which case the Company shall immediately so inform the Investor, the
Investor shall be provided with a reasonable opportunity to review any
disclosure relating to the Investor and the Company shall expeditiously furnish
to the Investor an electronic copy thereof. In addition, for so long as, in the
reasonable opinion of counsel for the Investor, the Prospectus is required to be
delivered in connection with any purchase of Shares by the Investor, the Company
shall not file any Prospectus Supplement with respect to the Shares without
delivering or making available a copy of such Prospectus Supplement, together
with the Base Prospectus, to the Investor promptly.
(ii) The Company agrees that, unless it obtains the prior written
consent of the Investor, it has not made and will not make an offer relating to
the Shares that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a Free Writing Prospectus required to be filed by the
Company or the Investor with the Commission or retained by the Company or the
Investor under Rule 433 under the Securities Act. The Investor agrees that,
unless it obtains the prior written consent of the Company, it has not made and
will not make an offer relating to the Shares that would constitute a Free
Writing Prospectus required to be filed by the Company with the Commission or
retained by the Company under Rule 433 under the Securities Act. Any such Issuer
Free Writing Prospectus or other Free Writing Prospectus consented to by the
Investor or the Company is referred to in this Agreement as a "Permitted Free
Writing Prospectus." The Company agrees that (x) it has treated and will treat,
as the case may be, each Permitted Free Writing Prospectus as an Issuer Free
Writing Prospectus and (y) it has complied and will comply, as the case may be,
with the requirements of Rules 164 and 433 under the Securities Act applicable
to any Permitted Free Writing Prospectus, including in respect of timely filing
with the Commission, legending and record keeping.
SECTION 5.9 PROSPECTUS DELIVERY. The Company shall file with the Commission
a Prospectus Supplement on the first Trading Day immediately following the end
of each Pricing Period. The Company shall provide the Investor a reasonable
opportunity to comment on a draft of each such Prospectus Supplement and any
Issuer Free Writing Prospectus (and shall give due consideration to all such
comments) and, subject to the provisions of Section 5.8 hereof, shall deliver or
make available to the Investor, without charge, an electronic copy of each form
of Prospectus Supplement, together with the Base Prospectus, and any Permitted
Free Writing Prospectus on each Settlement Date. The Company consents to the use
of the Prospectus (and of any Prospectus Supplement thereto) in accordance with
the provisions of the Securities Act and with the securities or "blue sky" laws
of the jurisdictions in which the Shares may be sold by the Investor, in
connection with the offering and sale of the Shares and for such period of time
thereafter as the Prospectus is required by the Securities Act to be delivered
in connection with
22
sales of the Shares. If during such period of time any event shall occur that in
the judgment of the Company and its counsel is required to be set forth in the
Prospectus or any Permitted Free Writing Prospectus or should be set forth
therein in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus or any Permitted Free Writing Prospectus
to comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file with the
Commission an appropriate Prospectus Supplement to the Prospectus (or supplement
to the Permitted Free Writing Prospectus) and shall expeditiously furnish or
make available to the Investor an electronic copy thereof.
SECTION 5.10 SELLING RESTRICTIONS.
(i) The Investor covenants that from and after the date hereof through
and including the 90th day next following the termination of this Agreement (the
"Restricted Period"), neither the Investor nor any of its affiliates (within the
meaning of the Exchange Act) nor any entity managed by the Investor shall,
directly or indirectly, sell any securities of the Company, except the Shares
that it owns or has the right to purchase as provided in a Fixed Request Notice.
During the Restricted Period, neither the Investor or any of its affiliates nor
any entity managed by the Investor shall sell any shares of Common Stock of the
Company it does not "own" or have the unconditional right to receive (within the
meaning of Rule 200 of Regulation SHO promulgated by the Commission under the
Exchange Act), including Shares in any account of the Investor or in any account
directly or indirectly managed by the Investor or any of its affiliates or any
entity managed by the Investor. Without limiting the generality of the
foregoing, prior to and during the Restricted Period, neither the Investor nor
any of its affiliates nor any entity managed by the Investor or any of its
affiliates shall enter into a short position with respect to shares of Common
Stock of the Company, including in any account of the Investor's or in any
account directly or indirectly managed by the Investor or any of its Affiliates
or any entity managed by the Investor, except that the Investor may sell Shares
that it is obligated to purchase under a pending Fixed Request Notice but has
not yet taken possession of so long as the Investor (or the Broker-Dealer, as
applicable) covers any such sales with the Shares purchased pursuant to such
Fixed Request Notice; provided, however, that the Investor (or the
Broker-Dealer, as applicable) shall not be required to cover any such sales with
the Shares purchased pursuant to such Fixed Request Notice if the Company fails
to deliver such Shares to the Investor on the applicable Settlement Date upon
the terms and subject to the provisions of this Agreement. Prior to and during
the Restricted Period, the Investor shall not grant any option to purchase or
acquire any right to dispose or otherwise dispose for value of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for, or warrants to purchase, any shares of Common Stock, or enter into any
swap, hedge or other agreement that transfers, in whole or in part, the economic
risk of ownership of the Common Stock, except for such sales expressly permitted
by this Section 5.10(i).
(ii) In addition to the foregoing, in connection with any sale of the
Company's securities (including any sale permitted by paragraph (i) above), the
Investor shall comply in all respects with all applicable laws, rules,
regulations and orders, including, without limitation, the requirements of the
Securities Act and the Exchange Act.
23
SECTION 5.11 EFFECTIVE REGISTRATION STATEMENT. During the Investment
Period, the Company shall use its best efforts to maintain the continuous
effectiveness of the Registration Statement under the Securities Act.
SECTION 5.12 NON-PUBLIC INFORMATION. Neither the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Investor, unless a simultaneous public announcement
thereof is made by the Company in the manner contemplated by Regulation FD.
SECTION 5.13 BROKER/DEALER. The Investor shall use one or more
broker-dealers to effectuate all sales, if any, of the Shares that it may
purchase from the Company pursuant to this Agreement which (or whom) shall be
unaffiliated with the Investor and not then currently engaged or used by the
Company (collectively, the "Broker-Dealer"). The Investor will provide the
Company with all information regarding the Broker-Dealer reasonably requested by
the Company. The Investor shall be solely responsible for all fees and
commissions of the Broker-Dealer.
SECTION 5.14 UPDATE OF DISCLOSURE SCHEDULE. During the Investment Period,
the Company shall from time to time update the Disclosure Schedule as may be
required to satisfy the condition set forth in Section 6.3(i). For purposes of
this Section 5.14, any disclosure made in a schedule to the Compliance
Certificate shall be deemed to be an update of the Disclosure Schedule.
Notwithstanding anything in this Agreement to the contrary, no update to the
Disclosure Schedule pursuant to this Section 5.14 shall cure any breach of a
representation or warranty of the Company contained in this Agreement and shall
not affect any of the Investor's remedies with respect thereto.
ARTICLE VI
OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES
SECTION 6.1 OPINION OF COUNSEL AND CERTIFICATE. Simultaneously with the
execution and delivery of this Agreement, the Investor has received and relied
upon (i) an opinion of in-house counsel to the Company, dated the Effective
Date, in the form of Exhibit C hereto, and (ii) a certificate from the Company,
dated the Effective Date, in the form of Exhibit D hereto.
SECTION 6.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY. The
obligation hereunder of the Company to issue and sell the Shares to the Investor
under any Fixed Request Notice or Optional Amount is subject to the satisfaction
or (to the extent permitted by applicable law) waiver of each of the conditions
set forth below. These conditions are for the Company's sole benefit and (to the
extent permitted by applicable law) may be waived by the Company at any time in
its sole discretion.
(i) ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor contained in this Agreement (i)
that are not qualified by "materiality" shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates,
24
except to the extent such representations and warranties are as of another date,
in which case, such representations and warranties shall be true and correct in
all material respects as of such other date and (ii) that are qualified by
"materiality" shall have been true and correct when made and shall be true and
correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct as of
such other date.
(ii) REGISTRATION STATEMENT. The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Shares registered under the Registration Statement which are in an amount not
less than the maximum dollar amount worth of Shares issuable pursuant to all
Fixed Request Notices and Optional Amounts during the Investment Period. The
Current Report shall have been filed with the Commission, as required pursuant
to Section 1.4, and all Prospectus Supplements shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the
sale of the Shares prior to each Settlement Date, as applicable. Any other
material required to be filed by the Company or any other offering participant
pursuant to Rule 433(d) under the Securities Act shall have been filed with the
Commission within the applicable time periods prescribed for such filings by
Rule 433 under the Securities Act.
(iii) PERFORMANCE BY THE INVESTOR. The Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date.
(iv) NO INJUNCTION. No statute, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by this Agreement.
(v) NO SUSPENSION, ETC. Trading in the Common Stock shall not have
been suspended by the Commission or the Trading Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the applicable Fixed Request Exercise
Date and applicable Settlement Date), and, at any time prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date, none of the events
described in clauses (i), (ii) and (iii) of Section 5.7 shall have occurred,
trading in securities generally as reported on the Trading Market shall not have
been suspended or limited, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Company, makes it impracticable or inadvisable to
issue the Shares.
(vi) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and
25
no inquiry or investigation by any governmental authority shall have been
commenced or threatened, against the Company or any Subsidiary, or any of the
officers, directors or affiliates of the Company or any Subsidiary, seeking to
restrain, prevent or change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
(vii) AGGREGATE LIMIT. The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12 and 5.5 hereof.
SECTION 6.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTOR. The
obligation hereunder of the Investor to accept a Fixed Request or Optional
Amount grant and to acquire and pay for the Shares is subject to the
satisfaction or (to the extent permitted by applicable law) waiver, at or before
each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor's sole benefit
and (to the extent permitted by applicable law) may be waived by the Investor at
any time in its sole discretion.
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement (i)
that are not qualified by "materiality" or "Material Adverse Effect" shall have
been true and correct in all material respects when made and shall be true and
correct in all material respects as of the applicable Fixed Request Exercise
Date and the applicable Settlement Date with the same force and effect as if
made on such dates, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties shall be
true and correct in all material respects as of such other date and (ii) that
are qualified by "materiality" or "Material Adverse Effect" shall have been true
and correct when made and shall be true and correct as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.
(ii) REGISTRATION STATEMENT. The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Shares registered under the Registration Statement which are in an amount not
less than the maximum dollar amount worth of Shares issuable pursuant to all
Fixed Request Notices and Optional Amounts during the Investment Period. The
Current Report shall have been filed with the Commission, as required pursuant
to Section 1.4, and all Prospectus Supplements shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the
sale of the Shares prior to each Settlement Date, as applicable, and an
electronic copy of each such Prospectus Supplement together with the Base
Prospectus shall have been delivered or made available to the Investor in
accordance with Section 5.9 hereof. Any other material required to be filed by
the Company or any other offering participant pursuant to Rule 433(d) under the
Securities Act shall have been filed with the Commission within the applicable
time periods prescribed for such filings by Rule 433 under the Securities Act.
26
(iii) NO SUSPENSION. Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the applicable Fixed Request Exercise Date and applicable
Settlement Date), and, at any time prior to the applicable Fixed Request
Exercise Date and applicable Settlement Date, none of the events described in
clauses (i), (ii) and (iii) of Section 5.7 shall have occurred, trading in
securities generally as reported on the Trading Market shall not have been
suspended or limited, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Investor, makes it impracticable or inadvisable to
purchase the Shares.
(iv) PERFORMANCE OF THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date and shall have delivered to the Investor on
the applicable Settlement Date the Compliance Certificate substantially in the
form attached hereto as Exhibit E.
(v) NO INJUNCTION. No statute, rule, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by this Agreement.
(vi) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(vii) AGGREGATE LIMIT. The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12 and 5.5 hereof.
(viii) SHARES AUTHORIZED. The Shares issuable pursuant to such Fixed
Request Notice or Optional Amount shall have been duly authorized by all
necessary corporate action of the Company.
(ix) NOTIFICATION OF LISTING OF SHARES. The Company shall have
submitted to the Trading Market a notification form of listing of additional
shares related to the Shares issuable pursuant to such Fixed Request or Optional
Amount in accordance with the bylaws, listed securities maintenance standards
and other rules of the Trading Market.
(x) OPINIONS OF COUNSEL; BRING-DOWN. Subsequent to the filing of the
Current Report pursuant to Section 1.4 and prior to the first Fixed Request
Exercise Date, the
27
Investor shall have received an opinion from in-house counsel to the Company in
the form of Exhibit F hereto. On each Settlement Date, the Investor shall have
received an opinion "bring down" from in-house counsel to the Company in the
form of Exhibit G hereto.
(xi) PAYMENT OF INVESTOR'S COUNSEL FEES; DUE DILIGENCE EXPENSES. On
the Effective Date, the Company shall have paid by wire transfer of immediately
available funds to an account designated by the Investor's counsel, the fees and
expenses of the Investor's counsel in accordance with the proviso to the first
sentence of Section 9.1(i) of this Agreement. On the 30th day of the third month
in each calendar quarter during the Investment Period, the Company shall have
paid by wire transfer of immediately available funds (a) to an account
designated by the Investor, the due diligence expenses incurred by the Investor
and (b) to an account designated by the Investor's counsel, the fees and
expenses of the Investor's counsel incurred by the Investor in connection with
ongoing legal due diligence of the Company and related matters, in each case, in
the amount set forth in and in accordance with the provisions of the second
sentence of Section 9.1(i) of this Agreement.
ARTICLE VII
TERMINATION
SECTION 7.1 TERM, TERMINATION BY MUTUAL CONSENT. Unless earlier terminated
as provided hereunder, this Agreement shall terminate automatically on the
earliest of (i) the first day of the month next following the 18-month
anniversary of the Effective Date (the "Investment Period"), (ii) the date that
the entire dollar amount of Shares registered under the Registration Statement
have been issued and sold and (iii) the date the Investor shall have purchased
the Total Commitment of shares of Common Stock (subject in all cases to the
Trading Market Limit). The Company may terminate this Agreement effective upon
three Trading Days' prior written notice to the Investor under Section 9.4;
provided, however, that such termination shall not occur during a Pricing Period
or prior to a Settlement Date. This Agreement may be terminated at any time by
the mutual written consent of the parties, effective as of the date of such
mutual written consent unless otherwise provided in such written consent, it
being hereby acknowledged and agreed that the Investor may not consent to such
termination during a Pricing Period or prior to a Settlement Date in the event
the Investor has instructed the Broker-Dealer to effect an open-market sale of
Shares which are subject to a pending Fixed Request Notice but which have not
yet been physically delivered by the Company (and/or credited by book-entry) to
the Investor in accordance with the terms and subject to the conditions of this
Agreement.
SECTION 7.2 OTHER TERMINATION. If the Company provides the Investor with an
Other Financing Notice (other than in respect of (i) an underwritten public
offering, (ii) an offering of Common Stock (but not of securities convertible
into or exchangeable for Common Stock) registered under the Securities Act other
than an underwritten public offering, or (iii) an Acceptable Financing) or an
Integration Notice, the Investor shall have the right to terminate this
Agreement within the subsequent 30-day period (the "Event Period"), effective
upon one Trading Day's prior written notice delivered to the Company in
accordance with Section 9.4 at any time during the Event Period. The Company
shall notify the Investor and the Investor shall have the right to terminate
this Agreement at any time if: (A) an event constituting a Material Adverse
Effect has occurred or an event has occurred which would result in the
occurrence of a Material Adverse Effect; (B) a Material Change in Ownership has
occurred; or (C) a default or
28
event of default has occurred and is continuing under the terms of any
agreement, contract, note or other instrument to which the Company or any of its
Subsidiaries is a party with respect to any indebtedness representing more than
10% of the Company's consolidated assets, in any such case, upon one Trading
Day's prior written notice delivered to the Company in accordance with Section
9.4 hereof.
SECTION 7.3 EFFECT OF TERMINATION. In the event of termination by the
Company or the Investor, written notice thereof shall forthwith be given to the
other party as provided in Section 9.4 and the transactions contemplated by this
Agreement shall be terminated without further action by either party. If this
Agreement is terminated as provided in Section 7.1 or 7.2 herein, this Agreement
shall become void and of no further force and effect, except as provided in
Section 9.9 hereof. Nothing in this Section 7.3 shall be deemed to release the
Company or the Investor from any liability for any breach under this Agreement,
or to impair the rights of the Company and the Investor to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 GENERAL INDEMNITY.
(i) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless the Investor, the Broker-Dealer, each affiliate, employee,
representative and advisor of and to the Investor and the Broker-Dealer, and
each person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys'
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) any violation of law (including United States
federal securities laws) in connection with the transactions contemplated by
this Agreement by the Company or any of its Subsidiaries, affiliates, officers,
directors or employees, (ii) any untrue statement or alleged untrue statement of
a material fact contained, or incorporated by reference, in the Registration
Statement or any amendment thereto or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of a
material fact contained, or incorporated by reference, in the Prospectus, any
Issuer Free Writing Prospectus, or in any amendment thereof or supplement
thereto, or in any "issuer information" (as defined in Rule 433 under the
Securities Act) of the Company, which "issuer information" is required to be, or
is, filed with the Commission or otherwise contained in any Free Writing
Prospectus, or any amendment or supplement thereto, or any omission or alleged
omission to state therein, or in any document incorporated by reference therein,
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (A) the Company shall not be liable
under this Section 8.1(i) to the extent that a court of competent jurisdiction
shall have determined by a final judgment (from which no further appeals are
available) that such loss, claim, damage, liability or expense
29
resulting directly and solely from any such acts or failures to act, undertaken
or omitted to be taken by the Investor or such person through its bad faith or
willful misconduct, (B) the foregoing indemnity shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the extent,
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by the Investor expressly for use
in the Current Report or any Prospectus Supplement or Permitted Free Writing
Prospectus, or any amendment thereof or supplement thereto, and (C) with respect
to the Prospectus, the foregoing indemnity shall not inure to the benefit of the
Investor or any such person from whom the person asserting any loss, claim,
damage, liability or expense purchased Common Stock, if copies of all Prospectus
Supplements required to be filed pursuant to Section 1.4 and 5.9, together with
the Base Prospectus, were timely delivered or made available to the Investor
pursuant hereto and a copy of the Base Prospectus, together with a Prospectus
Supplement (as applicable), was not sent or given by or on behalf of the
Investor or any such person to such person, if required by law to have been
delivered, at or prior to the written confirmation of the sale of the Common
Stock to such person, and if delivery of the Base Prospectus, together with a
Prospectus Supplement (as applicable), would have cured the defect giving rise
to such loss, claim, damage, liability or expense.
The Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.
(ii) INDEMNIFICATION BY THE INVESTOR. The Investor shall indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against all losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys fees) to which the Company and each such
other person may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon (i) any violation of law (including
United States federal securities laws) in connection with the transactions
contemplated by this Agreement by the Investor or any of its affiliates,
officers, directors or employees, or (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Current Report or any Prospectus
Supplement or Permitted Free Writing Prospectus, or in any amendment thereof or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, in each case, to the extent, but only to the extent, the untrue
statement, alleged untrue statement, omission or alleged omission was made in
reliance upon, and in conformity with, written information furnished by the
Investor to the Company expressly for inclusion in the Current Report or such
Prospectus Supplement or Permitted Free Writing Prospectus, or any amendment
thereof or supplement thereto.
The Investor shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for all legal and other costs and
expenses reasonably incurred by
30
the Company or such indemnified persons in investigating, defending against, or
preparing to defend against any such claim, action, suit or proceeding with
respect to which it is entitled to indemnification.
SECTION 8.2 INDEMNIFICATION PROCEDURES. Promptly after a person receives
notice of a claim or the commencement of an action for which the person intends
to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that failure to notify the indemnifying party
will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice.
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to it. After an
indemnifying party notifies an indemnified party that the indemnifying party
wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred
by the indemnified party in connection with the defense against the claim,
action, suit or proceeding except that if, in the opinion of counsel to the
indemnifying party, one or more of the indemnified parties should be separately
represented in connection with a claim, action, suit or proceeding, the
indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in all
reasonable respects with the indemnifying party in the defense of any action or
claim as to which indemnification is sought. No indemnifying party will be
liable for any settlement of any action effected without its prior written
consent. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested (by written notice provided in accordance with
Section 9.4) an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel, such indemnifying party agrees that it shall be liable
for any settlement of the nature contemplated hereby effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received written notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which such
indemnified party is entitled to indemnification thereunder, each indemnifying
party shall, in lieu of indemnifying the indemnified party, contribute to the
amount paid or payable by the indemnified party as a result of such loss or
liability, (i) in the proportion which is appropriate to reflect the relative
benefits received by the indemnifying party, on the one hand, and by the
indemnified party, on the other hand, from the sale of Shares
31
which is the subject of the claim, action, suit or proceeding which resulted in
the loss or liability or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above, but also the
relative fault of the indemnifying party, on the one hand, and the indemnified
party, on the other hand, with respect to the statements or omissions which are
the subject of the claim, action, suit or proceeding that resulted in the loss
or liability, as well as any other relevant equitable considerations.
The remedies provided for in Section 8.1 and this Section 8.2 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Person at law or in equity.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 FEES AND EXPENSES.
(i) Each party shall bear its own fees and expenses related to the
transactions contemplated by this Agreement; provided, however, that the Company
shall pay, on the Effective Date, by wire transfer of immediately available
funds to an account designated by the Investor's counsel, all reasonable
attorneys' fees and expenses (exclusive of disbursements and out-of-pocket
expenses) incurred by the Investor, up to $35,000, in connection with the
preparation, negotiation, execution and delivery of this Agreement, legal due
diligence of the Company and review of the Registration Statement, the Base
Prospectus, the Current Report and any Permitted Free Writing Prospectus. In
addition, the Company shall pay, on the 30th day of the third month in each
calendar quarter during the Investment Period, $12,500, representing (x) the due
diligence expenses incurred by the Investor during the Investment Period and (y)
the attorneys' fees and expenses incurred by the Investor in connection with
ongoing legal due diligence of the Company, any amendments, modifications or
waivers of this Agreement and review of Prospectus Supplements, Permitted Free
Writing Prospectuses, opinion "bring downs" and all other related documents to
be delivered by the Company and its counsel in connection with a Fixed Request
Exercise Date and the applicable Settlement Date. The Company shall pay all U.S.
federal, state and local stamp and other similar transfer and other taxes and
duties levied in connection with issuance of the Shares pursuant hereto.
(ii) If the Company issues a Fixed Request Notice and fails to deliver
the Shares to the Investor on the applicable Settlement Date and such failure
continues for 10 Trading Days, the Company shall pay the Investor, in cash (or,
at the option of the Investor, in shares of Common Stock which have not been
registered under the Securities Act), as liquidated damages for such failure and
not as a penalty, an amount equal to 2.0% of the payment required to be paid by
the Investor on such Settlement Date (i.e., the sum of the Fixed Amount
Requested and the Optional Amount Dollar Amount) for the initial 30 days
following such Settlement Date until the Shares have been delivered, and an
additional 2.0% for each additional 30-day period thereafter until the Shares
have been delivered, which amount shall be prorated for such periods less than
thirty 30 days.
32
SECTION 9.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION, WAIVER OF JURY
TRIAL. (i) The Company and the Investor acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that either party shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement by the other party and to enforce specifically the terms and
provisions hereof this being in addition to any other remedy to which either
party may be entitled by law or equity.
(i) Each of the Company and the Investor (a) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement, and (b)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Investor consents to process being served in any such suit, action or
proceeding by mailing a copy thereof 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 in this
Section 9.2 shall affect or limit any right to serve process in any other manner
permitted by law.
(iii)Each of the Company and the Investor hereby waives to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or the transactions contemplated hereby or
disputes relating hereto. Each of the Company and the Investor (a) certifies
that no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (b) acknowledges that it
and the other parties hereto have been induced to enter into this Agreement by,
among other things, the mutual waivers and certifications in this Section 9.2.
SECTION 9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the
exhibits referred to herein and the Disclosure Schedule, represents the entire
agreement of the parties with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by either party
relative to subject matter hereof not expressly set forth herein. No provision
of this Agreement may be amended other than by a written instrument signed by
both parties hereto. The Disclosure Schedule and all exhibits to this Agreement
are hereby incorporated by reference in, and made a part of, this Agreement as
if set forth in full herein.
SECTION 9.4 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile (with facsimile
machine confirmation of delivery received) at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier
33
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The address for such communications
shall be:
If to the Company: Lexicon Genetics Incorporated
8800 Technology Forest Place
The Woodlands, Texas 77381
Telephone Number: (281) 863-3000
Fax: (281) 863-8010
Attention: Julia P. Gregory
Jeffrey L. Wade, Esq.
With copies to: Vinson & Elkins LLP
First City Tower
1001 Fannin Street, Suite 2300
Houston, Texas 77002
Telephone Number: (713) 758-2222
Fax: (713) 758-2346
Attention: David P. Oelman, Esq.
If to the Investor: Azimuth Opportunity Ltd.
c/o Hedge Fund Services (BVI) Ltd.
P.O. Box 761, James Frett Building
Wickham's Cay 1, Road Town
Tortola, British Virgin Islands
Telephone Number: (284) 494-6046 x232
Fax: (284) 494-6898
Attention: Michael Kane
With copies to: Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Telephone Number: (212) 801-9200
Fax: (212) 801-6400
Attention: Clifford E. Neimeth, Esq.
Anthony J. Marsico, Esq.
Either party hereto may from time to time change its address for notices by
giving at least 10 days advance written notice of such changed address to the
other party hereto.
SECTION 9.5 WAIVERS. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. No provision of this Agreement may be waived other
than in a written instrument signed by the party against whom enforcement of
such waiver is sought.
34
SECTION 9.6 HEADINGS. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The Investor may not assign this
Agreement to any person without the prior consent of the Company, in the
Company's sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. The assignment by a
party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement.
SECTION 9.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal procedural and substantive laws of the
State of New York, without giving effect to the choice of law provisions of such
state.
SECTION 9.9 SURVIVAL. The representations and warranties of the Company and
the Investor contained in Articles III and IV and the covenants contained in
Article V shall survive the execution and delivery hereof until the termination
of this Agreement, and the agreements and covenants set forth in Article VIII of
this Agreement shall survive the execution and delivery hereof.
SECTION 9.10 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which taken together shall constitute one and the same original and
binding instrument and shall become effective when all counterparts have been
signed by each party and delivered to the other parties hereto, it being
understood that all parties hereto need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party using such
means of delivery shall cause four additional executed signature pages to be
physically delivered to the other parties within five days of the execution and
delivery hereof.
SECTION 9.11 PUBLICITY. On or after the Effective Date, the Company may
issue a press release or otherwise make a public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement (including, without limitation, by filing a copy of
this Agreement with the Commission); provided, however, that prior to issuing
any such press release, or making any such public statement or announcement, the
Company shall consult with the Investor on the form and substance of such press
release or other disclosure.
SECTION 9.12 SEVERABILITY. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
SECTION 9.13 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of the Investor or the Company, each of the Company and the
Investor shall execute and
35
deliver such instrument, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
LEXICON GENETICS INCORPORATED:
By: /s/ Arthur T. Sands
------------------------------------
Name: Arthur T. Sands, M.D., Ph.D.
----------------------------------
Title: President and Chief Executive
---------------------------------
Officer
---------------------------------
AZIMUTH OPPORTUNITY LTD.:
By: /s/ Deirdre M. McCoy
------------------------------------
Name: Deirdre M. McCoy
----------------------------------
Title: Corporate Secretary
---------------------------------
36
ANNEX A TO THE
COMMON STOCK PURCHASE AGREEMENT
DEFINITIONS
(a) "Acceptable Financing" shall have the meaning assigned to such term in
Section 5.6(ii) hereof.
(b) "Aggregate Limit" shall have the meaning assigned to such term in
Section 1.1 hereof.
(c) "Base Prospectus" shall mean the Company's prospectus, dated January
21, 2005, included in the Registration Statement.
(d) "Broker-Dealer" shall have the meaning assigned to such term in Section
5.13 hereof.
(e) "Bylaws" shall have the meaning assigned to such term in Section 4.3
hereof.
(f) "Charter" shall have the meaning assigned to such term in Section 4.3
hereof.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Commission" shall mean the Securities and Exchange Commission or any
successor entity.
(i) "Commission Documents" shall mean (1) all reports, schedules,
registrations, forms, statements, information and other documents filed by the
Company with the Commission pursuant to the reporting requirements of the
Exchange Act, including all material filed pursuant to Section 13(a) or 15(d) of
the Exchange Act, which have been filed by the Company since January 1, 2006 and
which hereafter shall be filed by the Company during the Investment Period,
including, without limitation, the Current Report and the Form 10-K filed by the
Company for its fiscal year ended December 31, 2005 (the "2005 Form 10-K"), (2)
the Registration Statement, as the same may be amended from time to time, the
Prospectus and each Prospectus Supplement, and each Permitted Free Writing
Prospectus and (3) all information contained in such filings and all documents
and disclosures that have been and heretofore shall be incorporated by reference
therein.
(j) "Common Stock" shall have the meaning assigned to such term in the
Recitals.
(k) "Current Market Price" means, with respect to any particular
measurement date, the closing price of a share of Common Stock as reported on
the Trading Market for the Trading Day immediately preceding such measurement
date.
(l) "Current Report" shall have the meaning assigned to such term in
Section 1.4 hereof.
(m) "Discount Price" shall have the meaning assigned to such term in
Section 2.2 hereof.
(n) "Effective Date" shall mean June 12, 2006.
(o) "Environmental Laws" shall have the meaning assigned to such term in
Section 4.15 hereof.
(p) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(q) "Event Period" shall have the meaning assigned to such term in Section
7.2 hereof.
(r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
(s) "FDA" shall have the meaning assigned to such term in Section 4.14(a)
hereof.
(t) "Fixed Amount Requested" shall mean the amount of a Fixed Request
requested by the Company in a Fixed Request Notice delivered pursuant to Section
2.1 hereof.
(u) "Fixed Request" means the transactions contemplated under Sections 2.1
through 2.8 of this Agreement.
(v) "Fixed Request Amount" means the actual amount of proceeds received by
the Company pursuant to a Fixed Request under this Agreement.
(w) "Fixed Request Exercise Date" shall have the meaning assigned to such
term in Section 2.2 hereof.
(x) "Fixed Request Notice" shall have the meaning assigned to such term in
Section 2.1 hereof.
(y) "Free Writing Prospectus" shall mean a "free writing prospectus" as
defined in Rule 405 promulgated under the Securities Act.
(z) "GAAP" shall mean generally accepted accounting principles in the
United States of America as applied by the Company.
(aa) "Governmental Licenses" shall have the meaning assigned to such term
in Section 4.14(a) hereof.
(bb) "Indebtedness" shall have the meaning assigned to such term in Section
4.9 hereof.
(cc) "Integration Notice" shall have the meaning assigned to such term in
Section 5.6(ii) hereof.
(dd) "Intellectual Property" shall have the meaning assigned to such term
in Section 4.14(b) hereof.
(ee) "Investment Period" shall have the meaning assigned to such term in
Section 7.1 hereof.
(ff) "Issuer Free Writing Prospectus" shall mean an "issuer free writing
prospectus" as defined in Rule 433 promulgated under the Securities Act.
(gg) "Market Capitalization" shall be calculated on the Trading Day
preceding the applicable Pricing Period and shall be the product of (x) the
number of shares of Common Stock outstanding and (y) the closing bid price of
the Common Stock, both as determined by Bloomberg Financial LP using the DES and
HP functions.
(hh) "Material Adverse Effect" shall mean any condition, occurrence, state
of facts or event having, or insofar as reasonably can be foreseen would likely
have, any effect on the business, operations, properties or condition (financial
or otherwise) of the Company that is material and adverse to the Company and its
Subsidiaries, taken as a whole, and/or any condition, occurrence, state of facts
or event that would prohibit or otherwise materially interfere with or delay the
ability of the Company to perform any of its obligations under this Agreement.
(ii) "Material Agreements" shall have the meaning assigned to such term in
Section 4.16 hereof.
(jj) "Material Change in Ownership" shall mean the occurrence of any one or
more of the following: (i) the acquisition by any person, including any
syndicate or group deemed to be a "person" under Section 13(d)(3) of the
Exchange Act, of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of
shares of capital stock or other securities of the Company entitling such person
to exercise, upon an event of default or default or otherwise, 50% or more of
the total voting power of all series and classes of capital stock and other
securities of the Company entitled to vote generally in the election of
directors, other than any such acquisition by the Company, any Subsidiary of the
Company or any employee benefit plan of the Company; (ii) any consolidation or
merger of the Company with or into any other person, any merger of another
person into the Company, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of the properties and assets of the
Company to another person, other than (a) any such transaction (x) that does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of the Company and (y) pursuant to which
holders of capital stock of the Company immediately prior to such transaction
have the entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock of the Company entitled to
vote generally in the election of directors of the continuing or surviving
person immediately after such transaction or (b) any merger which is effected
solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock
solely into shares of common stock of the surviving entity; (iii) during any
consecutive two-year period, individuals who at the beginning of that two-year
period constituted the Board of Directors (together with any new directors whose
election to the Board of Directors, or whose nomination for election by the
stockholders of the Company, was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose elections or nominations for election were previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office;
or (iv) the Company is liquidated or dissolved or a resolution is passed by the
Company's stockholders approving a plan of liquidation or dissolution of the
Company. Beneficial ownership shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" shall include
any syndicate or group which would be deemed to be a "person" under Section
13(d)(3) of the Exchange Act.
(kk) "Multiplier" shall have the meaning assigned to such term in Section
2.3 hereof.
(ll) "NASDAQ" means the NASDAQ National Market or any successor thereto.
(mm) "Optional Amount" means the transactions contemplated under Sections
2.9 through 2.11 of this Agreement.
(nn) "Optional Amount Dollar Amount" shall mean the actual amount of
proceeds received by the Company pursuant to the exercise of an Optional Amount
under this Agreement.
(oo) "Optional Amount Notice" shall mean a notice sent to the Company with
regard to the Investor's election to exercise all or any portion of an Optional
Amount, as provided in Section 2.11 hereof and substantially in the form
attached hereto as Exhibit B.
(pp) "Optional Amount Threshold Price" shall have the meaning assigned to
such term in Section 2.1 hereof.
(qq) "Other Financing" shall have the meaning assigned to such term in
Section 5.6(ii) hereof.
(rr) "Other Financing Notice" shall have the meaning assigned to such term
in Section 5.6(ii) hereof.
(ss) "Permitted Free Writing Prospectus" shall have the meaning assigned to
such term in Section 5.8(ii) hereof.
(tt) "Plan" shall have the meaning assigned to such term in Section 4.22
hereof.
(uu) "Pricing Period shall mean a period of 10 consecutive Trading Days
commencing on the day of delivery of a Fixed Request Notice (or, if the Fixed
Request Notice is delivered after 9:30 a.m. (New York time), on the next Trading
Day), or such other period mutually agreed upon by the Investor and the Company.
(vv) "Prospectus" shall mean the Base Prospectus, together with any final
prospectus filed with the Commission pursuant to Rule 424(b), as supplemented by
any Prospectus Supplement.
(ww) "Prospectus Supplement" shall mean any prospectus supplement to the
Base Prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act.
(xx) "Reduction Notice" shall have the meaning assigned to such term in
Section 2.8 hereof.
(yy) "Registration Statement" shall mean the registration statement on Form
S-3, Commission File Number 333-122214, filed by the Company with the Commission
under the Securities Act for the registration of the Shares, as such
Registration Statement may be amended and supplemented from time to time.
(zz) "Restricted Period" shall have the meaning assigned to such term in
Section 5.10 hereof.
(aaa) "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
(bbb) "Settlement Date" shall have the meaning assigned to such term in
Section 2.7 hereof.
(ccc) "Shares" shall mean shares of Common Stock issuable to the Investor
upon exercise of a Fixed Request and shares of Common Stock issuable to the
Investor upon exercise of an Optional Amount.
(ddd) "Significant Subsidiary" means any Subsidiary of the Company that
would constitute a Significant Subsidiary of the Company within the meaning of
Rule 1-02 of Regulation S-X of the Commission.
(eee) "SOXA" shall have the meaning assigned to such term in Section 4.6(c)
hereof.
(fff) "Subsidiary" shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.
(ggg) "Total Commitment" shall have the meaning assigned to such term in
Section 1.1 hereof.
(hhh) "Threshold Price" is the lowest price at which the Company may sell
Shares during the applicable Pricing Period as set forth in a Fixed Request
Notice (not taking into account the applicable percentage discount during such
Pricing Period determined in accordance with Section 2.2); provided, however,
that at no time shall the Threshold Price be lower than $3.00 per share unless
the Company and the Investor mutually shall agree.
(iii) "Trading Day" shall mean a trading day on the NASDAQ.
(jjj) "Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange or the NASDAQ National
Market.
(kkk) "Trading Market Limit" means that number of shares which is one less
than 20.0% of the issued and outstanding shares of the Company's Common Stock as
of the Effective Date.
(lll) "VWAP" shall mean the daily volume weighted average price (based on a
Trading Day from 9:30 p.m. to 4:00 p.m. (New York time)) of the Company on the
NASDAQ as reported by Bloomberg Financial L.P. using the AQR function.
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF FIXED REQUEST NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of June
12, 2006, (the "Purchase Agreement") between Lexicon Genetics Incorporated, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), and Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands. Capitalized terms
used and not otherwise defined herein shall have the meanings given such terms
in the Purchase Agreement.
In accordance with and pursuant to Section 2.1 of the Purchase Agreement,
the Company hereby issues this Fixed Request Notice to exercise a Fixed Request
for the Fixed Request Amount indicated below.
Fixed Amount Requested: ______________________________
Optional Amount Dollar Amount: ______________________________
Pricing Period start date: ______________________________
Pricing Period end date: ______________________________
Settlement Date: ______________________________
Fixed Request Threshold Price: ______________________________
Optional Amount Threshold Price: ______________________________
Dollar Amount and Number of Shares of
Common Stock Currently Unissued under the
Registration Statement; ______________________________
Dollar Amount and Number of Shares of
Common Stock Currently Available under the
Aggregate Limit: ______________________________
Dated: By:
------------------------------ ------------------------------------
Name
-----------------------------------
Title:
---------------------------------
Address:
-------------------------------
Facsimile No.
--------------------------
AGREED AND ACCEPTED
By:
---------------------------------
Name
--------------------------------
Title:
------------------------------
EXHIBIT B TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF OPTIONAL AMOUNT NOTICE
To: _________________________________
Fax#: _______________________________
Reference is made to the Common Stock Purchase Agreement dated as of June
12, 2006 (the "Purchase Agreement") between Lexicon Genetics Incorporated, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), and Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands (the "Investor").
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 2.1 of the Purchase Agreement,
the Investor hereby issues this Optional Amount Notice to exercise an Optional
Amount for the Optional Amount Dollar Amount indicated below.
Optional Amount Dollar Amount Exercised _________________________________
Number of Shares to be purchased _________________________________
VWAP on the date hereof: _________________________________
Discount Price: _________________________________
Settlement Date: _________________________________
Threshold Price: _________________________________
Dated: By:
------------------------------ ------------------------------------
Name
-----------------------------------
Title:
---------------------------------
Address:
-------------------------------
Facsimile No.
--------------------------
EXHIBIT C TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF IN-HOUSE COUNSEL
[Company Letterhead]
1. The execution, delivery and performance of the Purchase Agreement by the
Company and the consummation by it of the transactions contemplated thereby have
been duly and validly authorized by all necessary corporate action of the
Company and no further consent or authorization of the Company or its Board of
Directors is required. The Purchase Agreement has been duly executed and
delivered by the Company and the Purchase Agreement constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
EXHIBIT D TO THE
COMMON STOCK PURCHASE AGREEMENT
CERTIFICATE OF THE COMPANY
CLOSING CERTIFICATE
_________ 200_
The undersigned, the [___________] of Lexicon Genetics Incorporated, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), delivers this certificate in connection with the Common Stock
Purchase Agreement, dated as of June 12, 2006 (the "Agreement"), by and between
the Company and Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands (the "Investor"), and
hereby certifies on the date hereof that (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):
1. Attached hereto as EXHIBIT A is a true, complete and correct copy of the
Certificate of Incorporation of the Company as filed with the Secretary of State
of the State of Delaware. The Certificate of Incorporation of the Company has
not been further amended or restated, and no document with respect to any
amendment to the Certificate of Incorporation of the Company has been filed in
the office of the Secretary of State of the State of Delaware since the date
shown on the face of the state certification relating to the Company's
Certificate of Incorporation, which is in full force and effect on the date
hereof, and no action has been taken by the Company in contemplation of any such
amendment or the dissolution, merger or consolidation of the Company.
2. Attached hereto as EXHIBIT B is a true and complete copy of the Bylaws
of the Company, as amended and restated through, and as in full force and effect
on, the date hereof, and no proposal for any amendment, repeal or other
modification to the Bylaws of the Company has been taken or is currently pending
before the Board of Directors or stockholders of the Company.
3. The Board of Directors of the Company has approved the transactions
contemplated by the Agreement; said approval has not been amended, rescinded or
modified and remains in full force and effect as of the date hereof.
4. Each person who, as an officer of the Company, or as attorney-in-fact of
an officer of the Company, signed (i) the Agreement and (ii) any other document
delivered prior hereto or on the date hereof in connection with the transactions
contemplated by the Agreement, was duly elected, qualified and acting as such
officer or duly appointed and acting as such attorney-in-fact, and the signature
of each such person appearing on any such document is his genuine signature.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
By:
------------------------------------
Title:
---------------------------------
EXHIBIT E TO THE
COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of Lexicon
Genetics Incorporated (the "Company") pursuant to the Fixed Request Notice,
dated [_____________], delivered by the Company to Azimuth Opportunity Ltd. (the
"Investor") pursuant to Article II of the Common Stock Purchase Agreement, dated
June 12, 2006, by and between the Company and the Investor (the "Agreement"),
the undersigned hereby certifies as follows:
1. The undersigned is the duly elected [_____________] of the Company.
2. Except as set forth in the attached Schedule, the representations and
warranties of the Company set forth in Article IV of the Agreement (i) that are
not qualified by "materiality" or "Material Adverse Effect" are true and correct
in all material respects as of [insert Fixed Request Exercise Date] and as of
the date hereof with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties are true and correct in all
material respects as of such other date and (ii) that are qualified by
"materiality" or "Material Adverse Effect" are true and correct as of [insert
Fixed Request Exercise Date] and as of the date hereof with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties are true and correct as of such other date.
3. The Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the Agreement
to be performed, satisfied or complied with by the Company at or prior to
[insert Fixed Request Exercise Date] and the date hereof.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this [___] day of
[___________], 200[_].
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT F TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION FROM IN-HOUSE COUNSEL
[Company Letterhead]
1. The Company is a corporation under the general corporation law of the State
of Delaware with corporate power and authority to own its properties and to
conduct its business as described in the Registration Statement and the
Prospectus. The Company is validly existing and in good standing as a
corporation under the laws of the State of Delaware and is qualified to do
business and in good standing as a foreign corporation in every
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except for any jurisdiction
in which the failure to be so qualified would not have a Material Adverse
Effect. Each of the Company's subsidiaries is validly existing and in good
standing in the jurisdiction of its incorporation or organization and is
duly qualified to do business and in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes
such qualification necessary, except for any jurisdiction in which the
failure to be so qualified would not have a Material Adverse Effect.
2. The issuance and sale of the Shares by the Company to you pursuant to the
Purchase Agreement, assuming such issuance and sale occurred on the date
hereof, do not: (i) violate the Company's Governing Documents; (ii) violate
the general corporation law of the State of Delaware, or any federal or
Texas statute, rule or regulation applicable to the Company; (iii) require
any consents, approvals, or authorizations to be obtained by the Company,
or any registrations, declarations or filings to be made by the Company, in
each case, under the general corporation law of the State of Delaware or
any federal or Texas statute, rule or regulation applicable to the Company
that have not been obtained or made.
3. The issuance and sale of the Shares by the Company to you pursuant to the
Purchase Agreement will not, as of the date hereof: (i) 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 material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party; (ii) create or impose a lien, charge
or encumbrance on any property of the Company under any agreement or any
commitment to which the Company or any Significant Subsidiary is a party or
by which the Company or any Significant Subsidiary is bound or by which any
of its respective properties or assets are bound; or (iii) to my knowledge,
result in a violation of any federal or state order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries are bound or
affected; except, in all cases, for such conflicts, defaults, terminations,
amendments, acceleration,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect.
4. There is no action, suit, claim, investigation or proceeding pending or, to
my knowledge, threatened against the Company or any Subsidiary which
questions the validity of the Purchase Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or
thereto. Except as set forth in the Commission Documents, there is no
action, suit, claim, investigation or proceeding pending or, to my
knowledge, threatened, against or involving the Company, any Subsidiary or
any of their respective properties or assets and which, if determined
adversely to the Company or its Subsidiary, would have a Material Adverse
Effect.
5. The Registration Statement has become effective under the Act. Based solely
on a telephonic confirmation by a member of the Staff of the Commission on
[__________], 2006, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no proceedings
therefor have been initiated by the Commission. Any required filing of the
Prospectus and a Prospectus Supplement pursuant to Rule 424 under the Act
has been made in accordance with Rule 424 under the Act. Any other material
required to be filed by the Company pursuant to Rule 433(d) under the Act
has been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Act.
6. The Registration Statement, as of the date it was declared effective, and
the Prospectus and each Prospectus Supplement, as of the date it was filed
with the Commission, complied as to form in all material respects with the
requirements for registration statements on Form S-3 under the Act; it
being understood, however, that for purposes of the opinion contained in
this paragraph 6, I express no opinion with respect to Regulation S-T or
the financial statements, the notes and schedules thereto, or other
financial data or exhibits included in or incorporated by reference in or
omitted from the Registration Statement, the Prospectus or any Prospectus
Supplement. For purposes of this paragraph, I have assumed that the
statements made in the Registration Statement, the Prospectus and each
Prospectus Supplement are correct and complete.
7. When the terms (including the sales price and number of Shares) of the
issuance of the Shares are determined by resolution of the Company's Board
of Directors, or a duly authorized committee thereof, in accordance with
the Purchase Agreement, and upon receipt of payment for the Shares in the
manner contemplated by the Purchase Agreement in legal consideration of not
less than the aggregate par value for such Shares, and upon execution,
issuance and delivery of certificates representing the Shares (and notation
of such issuance in the stock transfer records of the Company) and assuming
the Company completes all other actions and proceedings required on its
part to be taken prior to the issuance and delivery of the Shares pursuant
to the Purchase Agreement, the Shares will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights arising
under the Company's Governing Documents or the general corporation law of
the State of Delaware.
8. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Nothing has come to my attention that causes me to believe that the
Registration Statement, at the time it became effective, or the Commission
Documents incorporated by reference therein, as of the date of their respective
filing, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus and each Prospectus Supplement
(including the Commission Documents incorporated by reference therein), and each
Issuer Free Writing Prospectus, in each case as of the date it was filed with
the Commission, contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being understood
that for purposes of this paragraph I express no belief with respect to the
financial statements, the notes and schedules thereto, other financial data, or
exhibits included in, incorporated by reference in, or omitted from, the
Registration Statement, the Prospectus, any Prospectus Supplement or any Issuer
Free Writing Prospectus.
EXHIBIT G TO THE
COMMON STOCK PURCHASE AGREEMENT
BRING-DOWN LETTER FROM IN-HOUSE COUNSEL
[Company Letterhead]
1. The Registration Statement has become effective under the Act. Based solely
on a telephonic confirmation by a member of the Staff of the Commission on
[_____] [___], 200[_], no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no proceedings
therefor have been initiated by the Commission. Any required filing of the
Prospectus and a Prospectus Supplement pursuant to Rule 424 under the Act
has been made in accordance with Rule 424 under the Act. Any other material
required to be filed by the Company pursuant to Rule 433(d) under the Act
has been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Act.
2. No facts have come to my attention that cause me to believe that any of the
opinions expressed in paragraphs 2, 3, 4, 6 and 7 of my opinion letter to
you dated [_______], 2006, or any of the statements made in the
[penultimate paragraph - i.e., 10b-5 negative assurances paragraph] of such
letter, are not true and correct as of the date hereof.
DISCLOSURE SCHEDULE
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF JUNE 12, 2006
BETWEEN LEXICON GENETICS INCORPORATED AND AZIMUTH OPPORTUNITY LTD.
This disclosure schedule is made and given pursuant to Article IV of the
Common Stock Purchase Agreement, dated as of June 12, 2006 (the "Agreement"), by
and between Lexicon Genetics Incorporated, a Delaware corporation (the
"Company"), and Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands. Unless the context
otherwise requires, all capitalized terms are used herein as defined in the
Agreement. The numbers below correspond to the section numbers of
representations and warranties in the Agreement most directly modified by the
below exceptions.
Section 4.3
Please see attached report detailing shares of Common Stock and stock options
outstanding as of the Effective Date.
Section 4.7
Lexicon Celtic Limited, organized under the laws of Scotland.