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UNITED STATES
SECURITIES EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT May 28, 1999
Commission file number:
0-22923
INTERNATIONAL ISOTOPES INC.
(Exact name of registrant as specified in its charter)
Texas 74-2763837
(State of incorporation) (IRS Employer Identification Number)
3100 Jim Christal Rd 76207
Denton, Texas (Zip Code)
(Address of principal executive offices)
940-484-9492
(Registrant's telephone number, including area code)
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Item 5. Other Events - Issuance of Equity Securities.
AMENDED AND RESTATED REGISTRATION AND WARRANT AGREEMENT
On December 3, 1998, the Company entered into a Registration and Warrant
Agreement (the "Original Agreement"), providing for the issuance of warrants
("Warrants") to purchase an aggregate of 1,600,000 shares of Common Stock, $.01
par value, at an exercise price of $13.75 per share. As of April 23, 1999,
Warrants to purchase 960,000 shares of Common Stock were outstanding pursuant to
the Original Agreement.
On April 23, 1999, the Company entered into an Amended and Restated Registration
and Warrant Agreement whereby the Company reset the exercise price of the
existing Warrants and issued new Warrants such that holders of the existing
Warrants received 1.75 Warrants, exercisable at an exercise price of $10.00 per
share, in exchange for each Warrant originally purchased as part of the Original
Agreement. The Original Agreement was also amended to allow for the issuance of
up to 1,680,000 Warrants. Pursuant to the Amended and Restated Registration and
Warrant Agreement, Warrants to purchase 1,680,000 shares of Common Stock are
outstanding.
PRIVATE PLACEMENT OF COMMON STOCK AND WARRANTS
On April 23, 1999, the Company initiated a private placement of its common
stock, consisting of shares of Common Stock and three (3) year Warrants for the
purchase of additional shares of Common Stock. A total of 975,345 shares of
Common Stock (plus Warrants to purchase an additional 975,345 shares) were sold
as of May 26, 1999. The Company has reserved the right to accept additional
subscriptions pursuant to this private placement.
The securities were sold to Company management, directors, several existing
shareholders and other accredited investors.
The securities were offered at $9.10 per share, which included one (1) share of
Common Stock and a Warrant to purchase one (1) additional share of Common Stock
at $10.00 per share, and resulted in gross proceeds of $8,875,656. No
commissions were paid on securities sold by the Company.
The securities, including the underlying Warrants, were not registered with the
SEC in reliance upon the exemption from registration contained in Section 4(2)
of the 1933 Act and Rule 506 of Regulation D promulgated thereunder, as well as
similar exemptions contained in the securities laws, rules and regulations of
the applicable states.
The Warrants grant the holders the right to purchase, at any time from April 23,
1999 until 5:30 P.M., central time, on April 23, 2002, up to an aggregate of
975,345 shares of Common Stock at an exercise price of $10.00 per share.
A-2
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PRIVATE PLACEMENT OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND WARRANTS
On May 18, 1999, the Company sold 5,000 shares of its newly created Series A 5%
Convertible Redeemable Preferred Stock, $.01 par value per share, liquidating
value $1,000 per share, and Warrants to purchase 205,000 shares of the Company's
common stock, $.01 par value per share, at an aggregate price of $5,000,000. The
shares of preferred stock are non-voting and initially convertible into shares
of common stock based on a conversion price of $11.86 per share of common stock.
The number of shares issuable is calculated by dividing the conversion price
into the aggregate price of the preferred shares paid by the converting
shareholder. The conversion price is subject to adjustments quarterly beginning
in October 1999 to the average of a share of the Company's common stock for the
ten days preceding the date of adjustment. The conversion price can never go
below $7.00 or above $11.86.
The Warrants grant the holders the right to purchase, at any time from May 18,
1999 until 5:30 P.M., central time, on May 20, 2002, up to an aggregate of
205,000 shares of common stock at an exercise price of $11.86 per share.
The preferred stock was sold to two institutionally managed investment funds in
a transaction exempt from registration under Section 4(2) of the 1933 Act and
Regulation D promulgated thereunder.
The Company has agreed to register for resale on Form S-3 the common stock
issued in the above transactions and the common stock underlying the warrants
and the preferred stock.
Outstanding common stock, after the issuance of the shares attributable to the
private placement of common stock, initiated April 23, 1999, and with the
conversion of the preferred stock to common stock at the conversion price of
$11.86 per share, would be 8,908,555 shares.
Item 7. Financial Statements and Exhibits
(c) Exhibits
5.1 Amended and Restated Registration and Warrant Agreement
5.2 Subscription Agreement
5.3 Securities Purchase Agreement
A-3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
International Isotopes Inc.
(Registrant)
By: /s/ Joan Gillett
---------------------------------------
Joan Gillett, CPA
Chief Financial Officer
By: /s/ Ira Lon Morgan, Ph.D.
---------------------------------------
Ira Lon Morgan, Ph.D.
Chairman of the Board
Date: May 28, 1999
A-4
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
5.1 Amended and Restated Registration and Warrant Agreement
5.2 Subscription Agreement
5.3 Securities Purchase Agreement
</TABLE>
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EXHIBIT 5.1
INTERNATIONAL ISOTOPES INC.
AND
THE HOLDERS WHOSE SIGNATURES APPEAR
ON THE EXECUTION PAGES HEREOF
AMENDED AND RESTATED
REGISTRATION AND WARRANT AGREEMENT
Dated as of April 23, 1999
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AMENDED AND RESTATED REGISTRATION AND WARRANT AGREEMENT (this
"Agreement") dated as of April 23, 1999 between INTERNATIONAL ISOTOPES INC., a
Texas corporation (the "Company"), and the HOLDERS whose signatures appear on
the execution pages hereof (hereinafter referred to variously as a "Holder" or
the "Holders").
WITNESSETH:
WHEREAS, the Company and the Holders previously entered into a
Registration and Warrant Agreement dated as of December 3, 1998 (the "Original
Agreement"), providing for the issuance to the Holders of warrants ("Warrants")
to purchase up to an aggregate of 1,600,000 shares of Common Stock, $.01 par
value, of the Company; and
WHEREAS, the Holders have purchased Units of securities of the Company,
each Unit consisting of 16,000 shares of Common Stock and 16,000 Warrants to
purchase additional shares of Common Stock at an exercise price of $13.75 per
share, pursuant to a Private Placement Memorandum dated September 17, 1998 (the
"Private Placement Memorandum").
WHEREAS, the Company has determined to reset the exercise price of the
Holders' existing Warrants and to issue new Warrants to the Holders such that
each Holder who executes this Agreement will receive 1.75 Warrants, exercisable
at an exercise price of $10.00 per share, in exchange for each Warrant
originally purchased as part of the Units.
WHEREAS, pursuant to this Agreement the Company and the Holders desire
to amend and restate the "Original Agreement" to set forth the new terms of the
Warrants and to allow for the issuance of up to 1,680,000 Warrants.
NOW, THEREFORE, in consideration of the premises, the payment by the
Holder to the Company of the purchase price of the Units, the agreements herein
set forth and other good and valuable consideration, hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Holders are hereby granted the right to purchase, at any
time from December 3, 1998 until 5:30 P.M., central time, on November 30, 2001,
up to an aggregate of 1,680,000 shares of Common Stock (the "Shares") at an
initial exercise price (subject to adjustment as provided in Section 8 hereof)
of $10.00 per share of Common Stock subject to the terms and conditions of this
Agreement. Except as set forth herein, the Shares issuable upon exercise of the
Warrants are in all respects identical to the shares of Common Stock purchased
by the Holders pursuant to the Private Placement Memorandum.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant. The Warrants initially are exercisable at an
aggregate initial exercise price (subject to adjustment as provided in Section 8
hereof) per share of Common Stock set forth in Section 6 hereof payable by
certified or official bank check in Clearing House funds, subject to adjustment
as provided in Section 8 hereof. Upon surrender of a Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price (as hereinafter defined) for the shares of Common Stock
purchased at the Company's principal executive offices in Texas (presently
located at 3100 Jim Christian Road, Denton, Texas 76207-9987) the registered
Holder of a Warrant Certificate shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). Warrants may be exercised to purchase all
or part of the shares of Common Stock represented thereby. In the case of the
purchase of less than all the shares of Common Stock purchasable under any
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Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock and/or other securities,
properties or rights underlying such Warrants, shall be made forthwith (and in
any event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
underlying the Warrants (and/or other securities, property or rights issuable
upon the exercise of the Warrants) shall be executed on behalf of the Company by
the manual or facsimile signature of the then Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date of receipt thereof.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise provided
in Section 8 hereof, the initial exercise price of each Warrant shall be $10.00
per share of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The Company has
previously filed a Registration Statement on Form S-3 (the "Initial Registration
Statement") with the Securities and Exchange Commission (the "SEC") to register
pursuant to the Securities Act of 1933, as amended (i) the shares of Common
Stock purchased as part of the Units pursuant to the Private Placement
Memorandum and (ii) the shares of Common Stock issuable upon exercise of the
Warrants issued under the Original Agreement. This Registration Statement was
declared effective on February 10, 1999. The Company hereby covenants to file,
within 45 days of the date hereof, and have declared effective, within 90 days
of the date hereof, another Registration Statement (the "Supplemental
Registration Statement") with the Securities and Exchange Commission to register
the shares of Common Stock underlying the additional Warrants to be issued to
Holders hereunder. The Company further agrees and covenants promptly to file
post-effective amendments to each such Registration Statement as may be
necessary in order to maintain its effectiveness and otherwise to take such
action as may be necessary to maintain the effectiveness of each Registration
Statement for three years from its effectiveness. In the event that, for any
reason, whatsoever, the Company shall fail to maintain the effectiveness of the
Registration Statements, the certificates representing the Common Stock
purchased pursuant to the Private Placement Memorandum and Common Stock issuable
upon exercise of the Warrants shall bear the following or a similar legend:
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The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered or sold except pursuant to (i)
an effective registration statement under the Act, (ii) to the
extent applicable, Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities), or
(iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
7.2 Covenants of the Company With Respect to Registration. In
connection with the registration under Section 7.1 hereof, the Company covenants
and agrees as follows:
(a) The Company shall use its best efforts to file the
Supplemental Registration Statement within forty-five (45) days of the effective
date hereof, shall use its best efforts to have such registration statement
declared effective within ninety (90) days of the date hereof, shall furnish
each Holder desiring to sell Common Stock such number of prospectuses as shall
reasonably be requested, and shall maintain the effectiveness of the Initial
Registration Statement and the Supplemental Registration Statement until the
earlier of three (3) years from its effective date or the date upon which all
shares registered thereunder have been sold.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions),
fees and expenses in connection with all registration statements filed pursuant
to Section 7.1 hereof including, without limitation, the Company's legal and
accounting fees, printing expenses, blue sky fees and expenses.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Common Stock included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement.
(e) The Holder(s) of the Common Stock to be sold pursuant to
the registration statements, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall be permitted to include Common Stock of
other shareholders of the Company in the registration statements filed pursuant
to Section 7.1 hereof.
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8. Adjustments to Exercise Price and Number of Securities.
8.1 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 Stock Dividends and Distributions. In case the Company shall pay a
dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately deceased. An adjustment made pursuant to this
Section 8.2 shall be made as of the record date for the subject stock dividend
or distribution.
8.3 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
shares of Common Stock issuable upon the exercise at the adjusted Exercise Price
of each Warrant shall be adjusted to the nearest full amount by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Articles of Incorporation of the Company as may be amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that the Company shall after the date hereof issue securities with
greater or superior voting rights than the shares of Common Stock outstanding as
of the date hereof, the Holder, at its option, may receive upon exercise of any
Warrant either shares of Common Stock or a like number of such securities with
greater or superior voting rights.
8.5 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
8.6 No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Common
Stock issuable upon the exercise of the Warrants;
(b) If the amount of said adjustment shall be less than two
cents (2(cent)) per share, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
two cents (2(cent)) per share.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of shares of Common Stock in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
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Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed and/or
quoted on NNM or Nasdaq.
12. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company.
13. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any Holders of
Warrant Certificates in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which the Company deems shall not adversely affect the interests of the
Holders of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of
business on November 30, 2001.
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17. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Texas and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company and the Holders hereby agree that any action, proceeding or
claim against it arising out of, or relating in any way to, this Agreement shall
be brought and enforced in the courts of the State of Texas or of the United
States of America for the Northern District of Texas, and irrevocably submits to
such jurisdiction, which jurisdiction shall be exclusive. The Company and the
Holders hereby irrevocably waive any objection to such exclusive jurisdiction or
inconvenient forum. Any such process or summons to be served upon any of the
company and the Holders (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by registered
or certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 3 hereof. Such mailing shall be deemed personal
service and shall be legal and binding upon the party so served in any action,
proceeding or claim. The Company and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
18. Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modifications or amendment is sought. This
Agreement supercedes and replaces the Original Agreement with respect to the
subject matter hereof as between the Company and any Holder executing this
Agreement.
19. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and any
registered Holder(s) of the Warrant Certificates or any legal or equitable
right, remedy or claim under this Agreement; and this Agreement shall be for the
sole benefit of the Company and the registered Holders of Warrant Certificates.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
INTERNATIONAL ISOTOPES INC.
By:
---------------------------------------
Name: Ira Lon Morgan, Ph.D.
Title: Chairman of the Board
By:
---------------------------------------
Name: Carl W. Seidel
Title: President and CEO
HOLDERS:
------------------------------------------
Name:
-------------------------------------
------------------------------------------
Name:
-------------------------------------
------------------------------------------
Name:
-------------------------------------
------------------------------------------
Name:
-------------------------------------
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EXHIBIT "A"
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE REGISTRATION AND WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., CENTRAL TIME, November 30, 2001
No. W- Warrants to Purchase
____ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that ________, or registered
assigns, is the registered holder of _______ Warrants to purchase initially, at
any time from November 30, 1998 until 5:30 p.m. New York time on November 30,
2001 ("Expiration Date"), up to __________ fully-paid and non-assessable shares
of common stock, $.01 par value ("Common Stock"), of INTERNATIONAL ISOTOPES
INC., a Texas corporation (the "Company"), at the initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of $10.00 per
share of Common Stock upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Amended and Restated Registration and
Warrant Agreement dated as of April 23, 1999 between the Company and the Holders
executing such agreement on the signature pages thereof (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of the
Company and by surrender of this Warrant Certificate.
No Warrant may be exercised after 5:30 p.m., central time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
<PAGE> 10
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any negotiation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of April 23, 1999
INTERNATIONAL ISOTOPES INC
By:
---------------------------------
Name: Ira Lon Morgan, Ph.D.
Title: Chairman of the Board
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[ ] ___________ Shares of Common Stock;
and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House Funds to the
order of International Isotopes Inc. in the amount of $______________,
all in accordance with the terms of Section 3 of the Amended and
Restated Registration and Warrant Agreement dated as of April 23, 1999
between International Isotopes Inc. and the Holders executing such
agreement. The undersigned requests that a certificate for such
securities be registered the name of __________________ whose address is
_______________ and that such Certificate be delivered to
_______________ whose address is _____________________.
Dated:
Signature________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
----------------------------------
(Insert Social Security or Other
Identifying Number of holder)
<PAGE> 11
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________ hereby sells, assigns and
transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______ Attorney, to transfer
the within Warrant Certificate on the books of the within-named Company, with
full power of substitution.
Dated:
Signature__________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
------------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE> 1
EXHIBIT 5.2
SUBSCRIPTION AGREEMENT
International Isotopes Inc.
3100 Jim Christal Road
Denton, Texas 76207
Gentlemen:
The undersigned (the "Subscriber") requests the opportunity to
subscribe for the number of Units, each consisting of one (1) share of the
common stock, $.01 par value per share (the "Stock") and one (1) warrant to
purchase an additional share of Stock at an exercise price of $10.00 per share
("Warrants"), of International Isotopes Inc., a Texas corporation (the
"Corporation"), set forth on the signature page hereto, at a purchase price of
$9.10 per Unit. The undersigned previously participated in the Corporation's
private placement pursuant to the Private Placement Memorandum dated September
17, 1998 (the "1998 Private Placement").
The Subscriber hereby acknowledges that the Subscriber has had full and
complete access to all information regarding the Corporation and has had the
opportunity to review documents provided by the Corporation regarding the
proposed purchase of Units including but not limited to (i) the Company's annual
report on Form 10K for the fiscal year ended December 31, 1998, (ii) a draft of
the Company's Proxy Statement for the 1999 annual meeting, as filed with the
Securities and Exchange Commission on April 30, 1999 and (iii) the Offer Letter
from the Company dated May 1, 1999 (together the "Offering Materials"). The
Subscriber also has had the opportunity to ask questions of the Corporation's
officers or directors, and to receive information satisfactory to the Subscriber
in response to such questions and inquiries.
1. Subscription. The Subscriber hereby irrevocably tenders this
subscription (the "Subscription") for the Units and agrees to make a payment in
the amount set forth on the signature page hereto within 30 days of the
Corporation's acceptance of this Subscription. The Subscriber hereby confirms
the information contained in the Subscriber's Investor Suitability Questionnaire
provided by the Subscriber to the Corporation in connection with the 1998
Private Placement.
It is understood and agreed that the Corporation shall have the right,
in its sole and absolute discretion, to accept or reject this Subscription, in
whole or in part, and that this Subscription shall be deemed to be accepted by
the Corporation only when this Subscription Agreement is signed by the
Corporation. In the event this Subscription is not accepted by the Corporation,
the Subscriber will not be requested to submit payment for the Units subscribed.
The Subscriber understands that this Subscription constitutes an absolute
obligation.
2. Representations and Warranties of the Subscriber. The Subscriber
understands that the Units will be offered and sold in reliance upon certain
exemptions from the securities registration provisions of the Securities Act of
1933, as amended (the "1933 Act"). As a condition to purchasing the Units, and
for the purposes of the above-mentioned exemptions and/or qualifications to the
extent applicable, and knowing that the Corporation will rely upon the
statements made herein for such exemptions, and in determining the suitability
of the investment for the Subscriber, the Subscriber hereby represents and
warrants to the Corporation as follows:
(a) The offering of the Units was made only through direct, personal
contact between the undersigned and a representative of the Corporation;
PAGE 1
<PAGE> 2
(b) The Subscriber understands that the Corporation will rely on the
accuracy and completeness of the information set forth herein and in the
Investor Suitability Questionnaire in complying with its obligations under
applicable state and federal securities statutes and regulations;
(c) The Subscriber has been advised that the Units have not been
registered with the Securities and Exchange Commission under the 1933 Act or
with any state securities regulatory agency and understands that the Units are
being offered in reliance upon certain exemptions from registration under
applicable state and federal securities statutes;
(d) The Subscriber has such knowledge and experience in financial and
business matters that the Subscriber is capable of evaluating the merits and
risks of an investment in the Corporation and the suitability of the Units
subscribed for as an investment, and has had the opportunity to consult with an
attorney, an accountant, and/or a personal advisor with respect to the
investment in the Units;
(e) The Units for which the Subscriber hereby subscribes will be
acquired for the Subscriber's own account for investment and not with the view
toward resale or redistribution; also, the Subscriber is not buying its Units as
a nominee for any other person, and the Subscriber does not presently have any
reason to anticipate any change in circumstances or other particular occasion or
event which would cause the Subscriber to sell the Units subscribed for;
(f) The Subscriber warrants that no representations or warranties have
been made to him by the Corporation as to the tax consequences of this
investment, or as to any profits, losses, cash flow, projected return, or
investment outcome which may be received or sustained as a result of this
investment;
(g) The Subscriber acknowledges that any financial projections prepared
by the Corporation and any other forward looking information are based upon
management=s beliefs as of the date hereof, that they are subject to certain
risks, uncertainties, and assumptions, that actual results could deviate
materially from those projected, and that the Corporation does not undertake any
duty to update such information;
(h) The Subscriber is able to bear the economic risk of the investment
in the Units subscribed for and has sufficient net worth to sustain a loss of
the Subscriber's entire investment in the Corporation without material economic
hardship if such a loss should occur;
(i) The Subscriber acknowledges that the Corporation has made available
to the Subscriber or other personal advisors the opportunity to obtain
additional information to verify the accuracy of the information provided by the
Corporation and to evaluate the risks and merits of this investment;
(j) The Subscriber acknowledges that all information made available to
the Subscriber or the Subscriber=s personal advisors in connection with an
investment in the Units is and shall remain confidential in all respects and may
not be reproduced, distributed, or used for any other purpose without the
consent of the Corporation;
(k) The Subscriber has had an opportunity to ask questions of and
receive satisfactory answers from the Corporation or any person or persons
acting on the Corporation's behalf, concerning the terms and conditions of this
investment, and all such questions have been answered to the full satisfaction
of the Subscriber;
(l) The Subscriber, if an individual, represents that he/she/it is a
bona fide resident and domiciliary, not a transient or temporary resident, of
the state set forth on the signature page hereto. If the Subscriber is a
corporation, trust, or other entity, it represents that it was incorporated or
organized under the laws of the state(s) shown on the signature page hereof; and
if the Subscriber is a partnership, it represents that all of its general
partners are bona fide residents and domiciliaries, not transients or temporary
residents, of the state(s) shown on the signature page hereof; and if the
undersigned is a corporation, trust, partnership, or other entity, it represents
that it was not organized for the specific purpose of acquiring the Units;
PAGE 2
<PAGE> 3
(m) The Subscriber acknowledges and agrees that the Subscriber is not
entitled to cancel, terminate, or revoke this Subscription or any agreements the
Subscriber delivers hereunder;
(n) The funds to be tendered for the purchase of the Units subscribed
for will not represent funds borrowed by the Subscriber from any person or
lending institution except to the extent that the Subscriber has a source of
repaying such funds other than from the sale of the Units. The Units will not
have been, and will not be, pledged or otherwise hypothecated for any such
borrowing;
(o) The Subscriber and the persons executing on behalf of the
Subscriber have all requisite power and authority to enter into this
Subscription Agreement and to perform all of the obligations required to be
performed by the Subscriber as a purchaser of the Units;
(p) The certificate(s) evidencing the Stock and the Warrants will bear
legends referring to the restrictions on transferability as a result of the
applicability of federal and state securities laws to any transfer thereof.
(q) An investment in the Corporation involves certain risks, including
but not limited to those described in the Offering Materials and the Subscriber
has taken full cognizance of and understands all of the risks related to the
purchase of the Units;
(r) The Subscriber, if an individual, represents that either: his/her
individual net worth or joint net worth with his/her spouse, if any, exceeds
$1,000,000 or he/she had an individual income in excess of $200,000 in each of
the two most recent years or joint income with his/her spouse, if any, in excess
of $300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year;
(s) The Subscriber, if other that an individual, represents that it
meets the definition of an accredited investor,@ as such term is defined in Rule
501 of Regulation D, promulgated under the 1933 Act; and
(t) All information supplied by the Subscriber in the Investor
Suitability Questionnaire is true and correct as of the date hereof, and if the
Subscriber discovers on any subsequent date that such information was not true
and correct when submitted to the Corporation, the Subscriber will immediately
notify the Corporation of such inaccuracy.
3. Indemnification and Release. The Subscriber acknowledges the meaning
and legal consequences of the representations, warranties, and covenants made
herein and that the Corporation and/or its agents have relied upon such
representations, warranties, and covenants in determining the Subscriber's
qualification and suitability to purchase the Units. The Subscriber hereby
agrees to indemnify, defend, and hold harmless the Corporation and its officers,
directors, employees, agents, representatives, and controlling persons, from and
against any and all losses, claims, damages, liabilities, expenses (including
attorneys' fees and disbursements), judgments, or amounts paid in settlement of
actions arising out of or resulting from (a) the untruth of any representation
herein (or in the Investor Suitability Questionnaire) or the breach of any
Subscriber warranty or covenant herein (or in the Investor Suitability
Questionnaire), and (b) violation by the Corporation and its officers,
directors, employees, agents, representatives and controlling persons of any
federal securities act or state securities act by reason of a breach of any
warranty, representation, covenant, or agreement made by the Subscriber in
connection with the purchase of the Units.
4. Survival. All representations, warranties, and covenants contained
in this Subscription Agreement and the indemnification recited above, shall
survive:
(a) the acceptance of the Subscription Agreement by the Corporation;
(b) changes in the transactions, documents, and instruments described
herein which are not material or which are to the benefit of the Subscriber; and
PAGE 3
<PAGE> 4
(c) the death, disability, termination, or dissolution of the
Subscriber or any partner thereof.
The obligation of the Corporation to sell the Units specified herein to the
Subscriber is subject to the condition that the representations and warranties
of the Subscriber contained herein and in the Investor Suitability Questionnaire
shall be true and correct on and as of the acceptance of this Subscription
Agreement in all respects with the same effect as through such representations
and warranties have been made on and as of that date.
5. Limitation on Transfer of Interests. The Subscriber acknowledges
that the Subscriber is aware that there are substantial restrictions on the
transferability of the Units. Since the Units will not be registered under the
1933 Act or any applicable state securities laws, the Units may not be, and the
Subscriber agrees that it shall not be, sold unless the Subscriber complies with
the terms of the restrictive legend on the Stock and Warrants. The Subscriber
also acknowledges that the Subscriber shall be responsible for compliance with
all conditions on transfer imposed by any blue sky or securities law
administrator and for any expenses incurred by the Corporation for legal or
accounting services in connection with reviewing such a proposed transfer.
6. Registration of Stock. The Subscriber is subscribing for the Units
subject to the Company's promise to use its best efforts to file a Registration
Statement with the SEC within 45 days, and to have such Registration Statement
declared effective within 90 days, of the purchase of the Units, registering the
Stock and the shares underlying the Warrants for resale by the Subscriber.
7. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, if to the Subscriber, at the address
set forth below, and if to the Corporation, at 3100 Jim Christal Road, Denton,
TX 76207, Attn: Ira Lon Morgan and Carl Seidel.
(b) This Subscription Agreement shall be construed in accordance with
and governed by the laws of the State of Texas.
(c) This Subscription Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
(d) This Subscription Agreement and the representations and warranties
contained herein shall be binding upon the heirs, executors, legal
representatives, administrators, successors, and assigns of the Subscriber.
(e) The recitals are incorporated in and made a part of this
Subscription. Titles of articles, paragraphs, and subparagraphs are used for
convenience only and are not a part of the text. All terms used in any one
number or gender shall be construed to include any other number or gender as the
context may require.
PAGE 4
<PAGE> 5
IN WITNESS WHEREOF, the Subscriber has executed this Subscription
Agreement on the date set forth below.
Number of Units Subscribed for:
---------------------
Total Purchase Price for Units:
---------------------
Title to the Stock and Warrants will be held as follows (check one):
Sole Ownership
-----
Husband and wife, as community property
-----
Married person, as separate property
-----
Joint tenant, with right of survivorship
-----
Tenants in common
-----
INDIVIDUAL INVESTORS
- ---------------------------------------
Signature of Subscriber Signature of spouse or Co-Owner,
if applicable
- ---------------------------------------
Printed Name of Subscriber Printed Name of spouse
or Co-Owner, if applicable
- ---------------------------------------
Date Date
PAGE 5
<PAGE> 6
ENTITY INVESTORS
Printed name of person or entity
By:
Signature of authorized representative
Printed Name of Authorized
Representative:
Title of Authorized
Representative:
Date:
ACCEPTANCE:
International Isotopes Inc.
By:
Carl Seidel, President
Date:
---------------------------
<PAGE> 1
Exhibit 5.3
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
INTERNATIONAL ISOTOPES INC.
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of May 18, 1999
================================================================================
<PAGE> 2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of May 18, 1999 among International Isotopes Inc., a Texas corporation (the
"Company"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "Purchaser" and, collectively, the
"Purchasers.")
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 5,000 shares of the Company's
Series A 5% Convertible Redeemable Preferred Stock, par value $.01 per share,
liquidation value $1,000 per share (the "Preferred Stock"), at an aggregate
purchase price of $5,000,000 issued pursuant to a Certificate of Designation of
Preferences and Rights ("Certificate of Designation") in the form of Exhibit A
annexed hereto, and a stock purchase warrant or warrants (each, a "Warrant"), in
the form of Exhibit B annexed hereto, to purchase an aggregate amount of 205,000
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock");
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
WHEREAS, at each of the Second Closing and Third Closing (as
defined in Sections 1.2(b) and 1.2(c)), the parties hereto shall execute and
deliver a Registration Rights Agreement substantially in the form of Exhibit C
attached hereto pursuant to which the Company shall agree to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
<PAGE> 3
PURCHASE AND SALE
PURCHASE AND SALE.
On the First Closing Date (as defined below), subject to the terms and
conditions set forth herein, the Company shall issue and sell to each Purchaser
and each Purchaser, severally and not jointly, shall purchase from the Company
the number of shares of Preferred Stock as set forth on Schedule I and a Warrant
or Warrants exercisable for the amount of Common Stock, par value $0.01 per
share ("Common Stock"), as set forth on Schedule I for such Purchaser. The
aggregate purchase price of the shares of Preferred Stock purchased by the
Purchasers shall be $5,000,000, the aggregate number of shares Preferred Stock
purchased by the Purchasers shall be 5,000, and the aggregate number of Common
Stock for which the Warrant or Warrants will be exercisable shall be 205,000
shares of Common Stock.
On the Second Closing Date (as defined below), subject to the terms and
conditions set forth herein, the Company shall issue and sell to the Purchasers
(1) an additional 5,000 shares of Preferred Stock at an aggregate purchase price
of $5,000,000 and (2) an additional Warrant exercisable for an aggregate amount
of 205,000 shares of Common Stock. On the Third Closing Date (as defined below),
subject to the terms and conditions set forth herein, the Company shall issue
and sell to the Purchasers (1) an additional 8,000 shares of Preferred Stock for
an aggregate purchase price of $8,000,000 and (2) an additional Warrant for an
aggregate 350,000 shares of Common Stock.
CLOSINGS.
The First Closing. The closing of the purchase and sale of the initial 5,000
Shares of Preferred Stock at an aggregate purchase price of $5,000,000 and
Warrants for an aggregate of 205,000 shares of Common Stock (the "First
Closing") shall take place at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, or by transmission by
facsimile and overnight courier, immediately following the execution hereof or
such later date or different location as the parties shall agree, but not prior
to the date that the conditions set forth in Section 4.1 have been satisfied or
waived by the appropriate party (the "First Closing Date"). At the First
Closing:
(a) Each Purchaser shall deliver, as directed by the Company, its portion
of the purchase price as set forth next to its name on Schedule I in
United States dollars in immediately available funds to an account or
accounts designated in writing by the Company;
(b) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on Schedule
I, registered in the name of such Purchaser, each in form
satisfactory to the Purchaser and issued pursuant to the Certificate
of Designation with a Conversion Price (as defined therein) equal to
$11.86;
(c) The Company shall deliver a Warrant(s), in the form of Exhibit B
hereto and with the Exercise Price (as defined therein) equal to
$11.86 representing the number of shares of Common Stock as set forth
next to
2
<PAGE> 4
such Purchaser's name on the Schedule I, registered in the name of
such Purchaser; and
(d) The parties shall execute and deliver each of the documents referred
to in Section 4.1.
Second Closing. Subject to the terms and conditions set forth in Section 4.2 and
elsewhere in this Agreement, the closing and sale of an additional 5,000 shares
of Preferred Stock for an aggregate purchase price of $5,000,000 and Warrants
for an aggregate of 205,000 shares of Common Stock shall take place on October
15, 1999 in the same manner as the First Closing (the "Second Closing Date");
provided that in no case shall the Second Closing take place unless and until
the conditions listed in Section 4.2 have been satisfied or waived by the
appropriate party. At the Second Closing:
(e) Each Purchaser shall deliver, as directed by the Company, its portion
of the purchase price as set forth next to its name on a schedule
similar to Schedule I (the "Second Closing Schedule"), to be
delivered to the Company by the Purchasers two days before the Second
Closing Date, in United States dollars in immediately available funds
to an account or accounts designated in writing by the Company;
(f) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the
Second Closing Schedule, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser and issued pursuant to the
Certificate of Designation with a Conversion Price equal to $11.86;
(g) The Company shall deliver a Warrant(s), in the form of Exhibit B
hereto and with the Exercise Price equal to $11.86 representing the
number of shares of Common Stock as set forth next to such
Purchaser's name on the Second Closing Schedule, registered in the
name of such Purchaser; and
(h) The parties shall execute and deliver each of the documents referred
to in Section 4.2.
Third Closing. Subject to the terms and conditions set forth in Section 4.3 and
elsewhere in this Agreement, the Purchasers shall have the right (the
"Purchasers Call Option") at any time within a two-year period commencing on the
First Closing Date to deliver a written notice to the Company (a "Purchasers
Call Option Notice") requiring the Company to issue and sell on the same terms
and conditions and at the same purchase price as at the First Closing (1) an
additional principal amount of 8,000 shares of Preferred Stock at an aggregate
purchase price of $8,000,000 and (2) an additional Warrant for an aggregate
amount of up to 350,000 shares of the Common Stock. The closing of the purchase
and sale of the additional shares of Preferred Stock and Warrant(s) (such
closing or the closing under the Company Put Option Notice (defined below), the
"Third Closing") under the Purchasers Call Option Notice shall take place in the
same manner as the First Closing, within two (2) business days of the date after
delivery of the Purchasers Call Option Notice (such date or the date of the
Third Closing under the Company
3
<PAGE> 5
Put Option Notice, the "Third Closing Date"); provided that in no case shall the
Third Closing take place unless and until the conditions listed in Section 4.3
have been satisfied or waived by the appropriate party and provided further
that, if the Company has filed a registration statement under the Securities Act
relating to an Underwritten Offering (as defined in the Registration Rights
Agreement) and if the Company, after consultation with the managing
underwriter(s) or underwriter(s), should reasonably determine that the Third
Closing would materially adversely affect the offering contemplated in such
registration statement, then the Third Closing shall be delayed until thirty
(30) days after the closing of such offering or until after the cancellation of
such offering. At the Third Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its portion
of the purchase price as set forth next to its name on a schedule
similar to Schedule I (the "Third Closing Schedule"), to be attached
to the Purchasers Call Option Notice, in United States dollars in
immediately available funds to an account or accounts designated in
writing by the Company;
(j) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the
Third Closing Schedule, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser and issued pursuant to the
Certificate of Designation, except that Section 4.2(b) thereof shall
be omitted, with a Conversion Price equal to $11.86 .
(k) The Company shall deliver a Warrant(s), in the form of Exhibit B
hereto representing the Warrant(s) with an Exercise Price (as defined
therein) equal to 110% of the Average Price on the Third Closing Date
being purchased by each Purchaser as set forth next to such
Purchaser's name on the Third Closing Schedule, registered in the
name of such Purchaser; and
(l) The parties shall execute and deliver each of the documents referred
to in Section 4.3.
Company Put Option. Subject to the terms and conditions in Section 4.3 and
elsewhere in this Agreement, after exercise by the Company of the Optional
Redemption of the shares of Preferred Stock (as defined in Section 8.1 of the
Certificate of Designation) and the Optional Redemption of the Warrants (as
defined in Section 7 of the Warrants) or the conversion of all the shares of
Preferred Stock and the exercise of all the Warrants issued at both of the First
Closing and the Second Closing, the Company shall have the one time right (the
"Company Put Option") at any time within the two-year period commencing on the
First Closing to deliver a written notice to the Purchasers (a "Company Put
Option Notice") requiring the Purchasers to exercise the Purchasers Call Option.
If the Company determines to exercise the Company Put Option, it shall notify
the Purchasers 10 business days prior to the exercise of such right and of the
amount of Preferred Stock the Company intends to issue at the Third Closing. If
the Company does not issue 8,000 shares of Preferred Stock, the aggregate number
of shares of Common Stock issuable upon the exercise of the Warrants shall be
reduced proportionately The Third Closing under this Company Put Option Notice
shall take place on such date indicated in the Company Put Option
4
<PAGE> 6
Notice but no earlier than 10 business days after the Purchasers' receipt of the
Company Put Option Notice; provided that in no case shall the Third Closing take
place unless and until the conditions listed in Section 4.3 have been satisfied
or waived by the appropriate party. Five business days after receipt of the
Company Put Option Notice, the Purchasers shall deliver to the Company a Third
Closing Schedule, indicating (1) the number of shares of Preferred Stock that
each Purchaser shall purchase and (2) the number of shares of Common Stock for
which each Warrant, to be bought by Purchasers at the Third Closing, may be
exercised. At the Third Closing under the Company Put Option Notice:
(m) Each Purchaser shall deliver, as directed by the Company, its portion
of the purchase price as set forth next to its name on the Third
Closing Schedule, in United States dollars in immediately available
funds to an account or accounts designated in writing by the Company;
(n) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the
Third Closing Schedule, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser and issued pursuant to the
Certificate of Designation, except that Section 4.2(b) thereof shall
be omitted, with a Conversion Price equal to $11.86;
(o) The Company shall deliver a Warrant(s), in the form of Exhibit B
hereto representing the Warrant(s) with an Exercise Price (as defined
therein) equal to 110% of the Average Price on the Third Closing Date
being purchased by each Purchaser as set forth next to such
Purchaser's name on the Third Closing Schedule, registered in the
name of such Purchaser; and
(p) The parties shall execute and deliver each of the documents referred
to in Section 4.3.
Purchasers' Damages. In addition to any other rights available to the
Purchasers, if the Company fails to deliver to each Purchaser the shares of
Preferred Stock and Warrants required to be delivered at the Second or Third
Closing, the Company shall pay each such Purchaser, upon the Purchaser's demand,
an amount calculated according to the formula below as liquidated damages by
cash or wire transfer in immediately available funds to the account of such
Purchaser, or as otherwise directed by such Purchaser:
[(MP-CP) x CSPS] + [(MP-EP) x CSW]
where MP is the Per Share Market Price (as defined in the Registration Rights
Agreement) on the applicable Closing Date; where CSPS is the number shares of
Common Stock into which the shares of Preferred Stock that should have been
delivered at the applicable Closing could have been converted;
where CSW is the number of shares of Common Stock for which the Warrants that
should have been delivered at the applicable Closing could have been exercised;
where CP is the Conversion Price (as defined in the Certificate of Designation)
of the shares of Preferred Stock; and
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<PAGE> 7
where EP is the Exercise Price (as defined in the Warrants) of the Warrants.
f. Company Damages. In the event that any Purchaser shall fail
to purchase the shares of Preferred Stock and Warrant that it is required to
purchase at the Second or Third Closing, then, as partial relief for the damages
to the Company by reason of any delay in or failure of such purchase (which
remedy shall not be exclusive of any other remedies available at law or in
equity), such Purchaser shall pay to the Company an amount in cash equal to the
aggregate purchase price of the shares of Preferred Stock such Purchaser
purchased at the First Closing multiplied by two hundredths (.020) times the sum
of: (i) number of months (prorated for partial months) after the applicable
Closing and prior to the date such Purchaser purchases the shares of Preferred
Stock and Warrant required to be purchased at the applicable Closing
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. THE COMPANY HEREBY
MAKES THE FOLLOWING REPRESENTATIONS AND WARRANTIES TO EACH OF THE PURCHASERS:
Organization and Qualification. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas, with
the requisite corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Except as set forth
on Schedule 2.1(a), the Company has no subsidiaries (collectively, the
"Subsidiaries"). Each of the Subsidiaries (which for purposes of this Agreement
means any entity in which the Company, directly or indirectly, owns the majority
of such entity's capital stock or holds an equivalent equity or similar
interest) is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or in
the aggregate, (x) adversely affect the legality, validity or enforceability of
any of this Agreement or the Transaction Documents (as defined in Section
2.1(b)) or any of the transactions contemplated hereby or thereby, (y) have or
result in a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and its Subsidiaries, taken as
a whole or (z) impair the Company's ability to perform fully on a timely basis
its obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect"). The Company has furnished to each of the Purchasers
true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's Bylaws, as in effect on the date hereof (the
"Bylaws"), and the true, complete and accurate copies of documents evidencing
all classes of securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto. Authorization;
Enforcement. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by this Agreement and
the Certificate of Designation, the Warrants and the Registration Rights
Agreement (collectively, the "Transaction Documents"), and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of each
of this Agreement and the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further action is
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<PAGE> 8
required by the Company, its Board of Directors or its stockholders. Each of
this Agreement and the Transaction Documents has been duly executed by the
Company and when delivered in accordance with the terms hereof will constitute
the 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 or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto. Neither the Company
nor any Subsidiary is in any material violation of any of the provisions of its
respective certificate of incorporation, bylaws or other charter documents such
that any right of a holder of shares of Preferred Stock would be affected.
Capitalization. As of the date hereof, the authorized capital stock of the
Company is as set forth in Schedule 2.1(c). All of such outstanding shares of
capital stock have been, or upon issuance will be, validly authorized and
issued, fully paid and nonassessable and were issued in accordance with the
registration or qualification provisions of the Securities Act, or pursuant to
valid exemptions therefrom. Except as disclosed in Schedule 2.1(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company by virtue
of any Transaction Document, (ii) there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities, (iv) there are no agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except the Registration Rights Agreement),
(v) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the shares of Common Stock as described in this Agreement, (vii) the
Company does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement and (viii) except as specifically
disclosed in the SEC Documents (as defined in Section 2.1(k)), no Person (as
defined below) or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or has the right to acquire by agreement with or
by obligation binding upon the Company beneficial ownership of in excess of 5%
of the Common Stock. "Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
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<PAGE> 9
Authorization and Validity; Issuance of Shares. The shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
(collectively, the "Underlying Shares") are and will at all times hereafter
continue to be duly authorized and reserved for issuance and the shares of
Common Stock issued upon conversion of the Preferred Stock (the "Conversion
Shares") and exercise of the Warrants (the "Warrant Shares") and the Shares of
Preferred Stock and will be validly issued, fully paid and non-assessable, free
and clear of all liens, encumbrances and Company rights of first refusal, other
than liens and encumbrances created by the Purchasers (collectively, "Liens")
and will not be subject to any preemptive or similar rights. The issuance by the
Company of the Preferred Stock, the Warrants and the Underlying Shares is exempt
from registration under the Securities Act.
No Conflicts. The execution, delivery and performance of this Agreement and each
of the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including the issuance of
the Underlying Shares) do not and will not (i) conflict with or violate any
provision of the Certificate of Incorporation, Bylaws or other organizational
documents of the Company or any of the Subsidiaries, (ii) subject to obtaining
the consents referred to in Section 2.1(f), conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument (evidencing a Company or Subsidiary debt or otherwise) to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
any Subsidiary is subject (including Federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed) applicable to the Company or any of
its Subsidiaries, or by which any material property or asset of the Company or
any Subsidiary is bound or affected.
Consents and Approvals. Except as specifically set forth on Schedule 2.1(f),
neither the Company nor any Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to the Nasdaq SmallCap
Market ("Nasdaq") and the Boston Stock Exchange ("BSE") for the listing of the
Underlying Shares with Nasdaq and the BSE (and with any other national
securities exchange or market on which the Common Stock is then listed), and
(iii) any filings, notices or registrations under applicable state securities
laws (together with the consents, waivers, authorizations, orders, notices and
filings referred to on Schedule 2.1(f), the "Required Approvals").
Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Transaction
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<PAGE> 10
Documents or (ii) could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
No Default or Violation. Neither the Company nor any Subsidiary (i) is in
default under or in violation of any indenture, loan or other credit agreement
or any other agreement or instrument to which it is a party or by which it or
any of its properties is bound and which is required to be included as an
exhibit to any SEC Document (as defined in Section 2.1(k)) or will be required
to be included as an exhibit to the Company's next filing under either the
Securities Act or Exchange Act (ii) is in violation of any order of any court,
arbitrator or governmental body applicable to it, (iii) is in violation of any
statute, rule or regulation of any governmental authority to which it is
subject, (iv) is in default under or in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, respectively, or (v) is
in default under or in violation of any of the listing requirements of Nasdaq or
the BSE as in effect on the date hereof and is not aware of any facts which
would reasonably lead to delisting or suspension of the Common Stock by Nasdaq
or, the BSE in the foreseeable future. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, ordinance, rule or regulation of any governmental entity, except where
such violations have not resulted or would not reasonably result, individually
or in the aggregate, in a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in breach of any agreement where such breach,
individually or in the aggregate, would have a Material Adverse Effect
Disclosure; Absence of Certain Changes. None of this Agreement, the Schedules to
this Agreement, the Transaction Documents, the SEC Documents or any other
written or formally presented information, report, financial statement, exhibit,
schedule or document furnished by or on behalf of the Company in connection with
the negotiation of the transactions contemplated hereby contained, contains, or
will contain at the time it was or is so furnished any untrue statement of a
material fact or omitted, omits or will omit at such time to state any material
fact necessary in order to make the statements made herein and therein, in light
of the circumstances under which they were made, not misleading. Except as
disclosed on Schedule 2.1(i) or in SEC Documents filed on EDGAR at least five
business days prior to the date hereof, since December 31, 1998, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities or results of
operations or, insofar as can reasonably be foreseen, prospects of the Company
or the Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective businesses, properties, operations or financial
condition or, insofar as can reasonably be foreseen, prospects, that would be
required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the Commission, on the date this representation is made or deemed to be
made, relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly disclosed.
Private Offering. The Company and all Persons acting on its behalf have not
made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Preferred Stock, the Warrants, the Conversion
Shares, the Warrant Shares or the Underlying Shares or the issuance of such
securities under the Securities Act. The offer, sale and issuance of the
Preferred Stock, the
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<PAGE> 11
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers will
not be integrated with any other offer, sale and issuance of the Company's
securities (past, current, or future) under the Securities Act or any
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated or for purposes of any
stockholder approval provision applicable to the Company or its securities.
Subject to the accuracy and completeness of the representations and warranties
of the respective Purchasers contained in Section 2.2, the offer, sale and
issuance by the Company to the Purchasers of the Preferred Stock, the Warrants
and the Underlying Shares is exempt from the registration requirements of the
Securities Act.
SEC Documents; Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(b) of the Exchange Act. The Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the Commission pursuant to the reporting requirements of the
Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof (the
foregoing materials and all exhibits included therein and financial statements
and schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein being collectively referred to herein as the
"SEC Documents"), on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. The Company has delivered to each of the Purchasers or its
representatives true, complete and accurate copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject and which are required to be filed as exhibits to the SEC
Documents have been filed as exhibits to the SEC Documents as required and
neither the Company nor any Subsidiary is in breach of any such agreement. As of
their respective dates, the financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for 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, immaterial year-end audit adjustments.
No other information provided by or on behalf of the Company to the Purchasers
which is not included in the SEC Documents, including, without limitation,
information referred to in Section 2.1(i) of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Purchasers with any material, nonpublic information, except as set
forth in Schedule 2.1(k). The Company acknowledges that the Purchasers will be
trading in the securities of the Company in reliance on the foregoing
representation and warranty.
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Investment Company. The Company is not, and is not controlled by or under common
control with an affiliate (an "Affiliate") of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
Broker's Fees. No fees or commissions or similar payments with respect to the
transactions contemplated by this Agreement or the Transaction Documents have
been paid or will be payable by the Company to any broker, financial advisor,
finder, investment banker, or bank, other than as set forth in Schedule 2.1(m).
The Purchasers shall have no obligation with respect to any fees or with respect
to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section 2.1(m) that may be due in connection with the
transactions contemplated by this Agreement and the Transaction Documents.
Form S-3 Eligibility. The Company is, and at the Closing Date will be, eligible
to register securities (including the Underlying Shares) for resale with the
Commission under Form S-3 (or any successor form) promulgated under the
Securities Act.
Listing and Maintenance Requirements Compliance. The principal markets on which
the Common Stock is currently traded are Nasdaq and the BSE. Except as disclosed
on Schedule 2.1(o), the Company has not in the three years preceding the date
hereof received notice (written or oral) from Nasdaq or the BSE (or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted)) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts that would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq or the BSE. After giving
effect to the transactions contemplated by this Agreement and the Transaction
Documents, the Company is and will be in compliance with all such maintenance
requirements.
Intellectual Property Rights. The Company and each of its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trademark
applications, trade names and service marks, whether or not registered, and all
patents, patent applications, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and intellectual property rights
(collectively, "Intellectual Property Rights") which are necessary for use in
connection with their respective businesses as now conducted and as described in
the SEC Documents. Except as set forth on Schedule 2.1(p), none of the Company's
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within two years from the date of this Agreement. Neither
the Company nor any of its Subsidiaries has infringed or is infringing on any of
the Intellectual Property Rights of any Person and, except as set forth on
Schedule 2.1(p), there is no claim, action or proceeding which has been made or
brought against, or to the Company's knowledge, is being made, brought or
threatened against, the Company or its Subsidiaries regarding the infringement
of any of the Intellectual Property Rights, and the Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the
foregoing, except where any of the foregoing would not have a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual
properties.
Employee Relations. Neither the Company nor any of its Subsidiaries is involved
in any union labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that relations with their employees are good.
Except as set forth on Schedule 2.1(q), since December 31, 1998 no executive
officer (as defined in Rule 501(f) under the Securities Act) has notified the
Company
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that such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company.
Registration Rights; Rights of Participation. Except as described on Schedule
2.1(r) hereto, (i) the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any securities
of the Company registered with the Commission or any other governmental
authority which has not been satisfied and (ii) no Person, including, but not
limited to, current or former stockholders of the Company, underwriters, brokers
or agents, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by this Agreement or any Transaction Document.
Title. Except as disclosed on Schedule 2.1(s), the Company and each of its
Subsidiaries have good and marketable title in fee simple to all real property
and personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all Liens, except
for Liens that do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting
and, to the Company's best knowledge, enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and the Subsidiaries.
Permits. The Company and each of its Subsidiaries possess all certificates,
authorizations, licenses, easements, consents, approvals, orders and permits
necessary to own, lease and operate their respective properties and to conduct
their respective businesses as currently conducted except where the failure to
possess such permits would not, individually or in the aggregate, have a
Material Adverse Effect ("Material Permits"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverages as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business, at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its Subsidiaries, taken as a whole.
Internal Accounting Controls. The Company and each of the Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with United States
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Tax Status; Firpta. Except as set forth on Schedule 2.1(w), the Company and each
of its Subsidiaries has made or filed all federal and state income and all other
tax returns, reports and
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declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
(which are set forth on Schedule 2.1(w)), and has set aside on it books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company is not a "United States real property holding
corporation" within the meaning of Section 847(c)(2) of the Internal Revenue
Code of 1986, as amended.
Transactions With Affiliates. Except as set forth on Schedule 2.1(c) or Schedule
2.1(x), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
Application to Takeover Protection. The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination or other similar anti-takeover provision
under the Certificate of Incorporation, Bylaws or the laws of the state of
incorporation which is or could become applicable to the Purchasers or the
Transaction Documents as a result of the transactions contemplated by this
Agreement or the Transaction Documents. None of the transactions contemplated by
this Agreement or the Transaction Documents, including the conversion of the
shares of Preferred Stock and the exercise of the Warrants, will trigger any
poison pill provisions of any of the Company's stockholders' rights or similar
agreements.
Environmental Laws. Except as set forth on Schedule 2.1(z), the Company and its
Subsidiaries (i) are in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permits, licenses or other
approvals except where the failure of any of the foregoing would not result in a
Material Adverse Effect.
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee form corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or made any unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or
employee.
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Solicitation Materials. The Company has not (i) distributed any offering
materials in connection with the offering and sale of the Preferred Stock or the
Warrants, other than the SEC Documents, the Schedules to this Agreement, any
amendments and supplements thereto and the materials listed on Schedule 2.1(bb),
or (ii) solicited any offer to buy or sell the Preferred Stock or the Warrants
by means of any form of general solicitation or advertising. Neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged or will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Preferred Stock or Warrants.
Acknowledgement of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Preferred Stock or
exercise of the Warrants. The Company further acknowledges that its obligation
to issue Conversion Shares and Warrant Shares upon conversion of the Preferred
Stock or exercise of the Warrants in accordance with this Agreement, the
Certificate of Designation and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company. Acknowledgement Regarding
Purchasers' Purchase of Preferred Stock. The Company acknowledges and agrees
that the Purchasers are acting solely in the capacity of arm's length purchasers
with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by any
Purchaser or any of their respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchasers' purchase of the
securities. The Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
Solvency. The Company (both before and after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a fair market
value in excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured) and currently the Company
has no information that would lead it to reasonably conclude that the Company
would not have the ability to, nor does it intend to take any action that would
impair its ability to, pay its debts from time to time incurred in connection
therewith as such debts mature. The Company did not receive a qualified opinion
from its auditors with respect to its most recent fiscal year end and does not
anticipate or know of any basis upon which its auditors might issue a qualified
opinion in respect of its current fiscal year.
Seniority; Exclusivity. No class of equity securities of the Company will be
senior to the Preferred Stock in right of payment, whether upon liquidation,
dissolution or otherwise. So long as any Preferred Stock issued hereunder
remains outstanding, the Company shall not exchange, redeem or covert any of the
Company's capital stock for indebtedness, including convertible debt, of the
Company. The Company shall not issue and sell any shares of Preferred Stock,
other than to the Purchasers pursuant to this Agreement, without the prior
written consent of each of the Purchasers.
Other Agreements. The Company has not, directly or indirectly, made any
agreements with any Purchasers relating to the terms and conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
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REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. EACH OF THE PURCHASERS,
SEVERALLY AND NOT JOINTLY, HEREBY REPRESENTS AND WARRANTS TO THE COMPANY AS
FOLLOWS:
Organization; Authority. Such Purchaser is a corporation or a limited duration
company or a limited liability company or limited partnership duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite power and authority, corporate or
otherwise, to enter into and to consummate the transactions contemplated hereby
and by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Purchaser of the shares of
Preferred Stock and the Warrants hereunder has been duly authorized by all
necessary action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
Investment Intent. Such Purchaser is acquiring the shares of Preferred Stock and
the Warrants for its own account and not with a present view to or for
distributing or reselling the shares of Preferred Stock, the Warrants, the
Conversion Shares or the Warrant Shares or any part thereof or interest therein
in violation of the Securities Act; provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the shares
of Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares
for any minimum or other specific term and reserves the right to dispose of the
shares of Preferred Stock at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
Purchaser Status. At the time such Purchaser was offered the Preferred Stock and
the Warrants, and at the Closing Date, (i) it was and will be an "accredited
investor" as defined in Rule 501 under the Securities Act and (ii) such
Purchaser, either alone or together with its representatives, had and will have
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Preferred Stock and the Warrants.
Reliance. Such Purchaser understands and acknowledges that (i) the Preferred
Stock and the Warrants are being offered and sold to such Purchaser without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder and (ii) the availability
of such exemption depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the representations set forth in this Section 2.2
and such Purchaser hereby consents to such reliance.
Information. Such Purchaser and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Preferred Stock and Warrants
which have been requested by such Purchaser or its advisors. Such Purchaser and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Purchaser or any of its advisors or representatives shall modify,
amend or affect Purchaser's right to rely on the Company's representations and
warranties contained in Section 2.1 above or representations and warranties of
the Company contained in any other transaction document. Such Purchaser
understands that its investment in the Preferred Stock and Warrants involves a
significant degree of risk.
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Governmental Review. Such Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Preferred Stock or Warrants.
Residency. Such Purchaser is a resident of the jurisdiction set forth
immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
OTHER AGREEMENTS
TRANSFER RESTRICTIONS.
If any Purchaser should decide to dispose of shares of the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares held by it, such Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act
or Rule 144 promulgated under the Securities Act ("Rule 144"). The Company shall
announce any material non-public information that it legally is required to
announce on or prior to the Effectiveness Date (as defined in the Registration
Rights Agreement) of the registration statement filed pursuant to the
Registration Rights Agreement and shall not enter into any subsequent
non-disclosure agreements that would prevent it from announcing an such
information that otherwise legally could have been announced on or prior to the
Effectiveness Date, unless confidential treatment for such information is
granted by the Commission. In connection with any transfer of any shares of the
Preferred Stock, Warrants, Conversion Shares or Warrant Shares other than
pursuant to an effective registration statement, Rule 144 or to the Company, the
Company may require the transferor thereof to provide to the Company a written
opinion of counsel experienced in the area of United States securities laws
selected by the transferor, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
such transfer does not require registration of such transferred securities under
the Securities Act; provided, however, that if the Preferred Stock, Warrants,
Conversion Shares or Warrant Shares may be sold pursuant to Rule 144(k), no
written opinion of counsel shall be required from the Purchaser if such
Purchaser provides reasonable assurances that such security can be sold pursuant
to Rule 144(k). Notwithstanding the foregoing, the Company hereby consents to
and agrees to register any transfer by any Purchaser to an Affiliate of such
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act. Any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Transaction Documents. If a Purchaser provides the Company with an opinion of
counsel, the form and substance of which opinion shall be customary for opinions
of counsel in comparable transactions, to the effect that a public sale,
assignment or transfer of the Preferred Stock, the Conversion Shares, the
Warrants and the Warrant Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Preferred Stock, the Warrants, the Conversion Shares and the Warrant
Shares can be sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be immediately
sold, the Company shall permit the transfer, and, in the case of the Conversion
Shares and the Warrant Shares, promptly instruct its transfer agent to issue one
or more
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certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. Notwithstanding the foregoing or
anything else contained herein to the contrary, the Preferred Stock, the
Warrants, the Conversion Shares and the Warrant Shares may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.
Each Purchaser agrees to the imprinting, so long as is required by this Section
3.1(b), of the following legend on the Preferred Stock certificates, the
Warrants, the Conversion Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
Neither the Preferred Stock certificates, the Warrants, the
Conversion Shares, nor the Warrant Shares shall contain the legend set forth
above (or any other legend) (i) at any time while a registration statement is
effective under the Securities Act covering such security, (ii) if in the
written opinion of counsel to the Company experienced in the area of United
States securities laws such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission) or (iii) if such shares of Preferred
Stock, Warrants, Conversion Shares or Warrant Shares may be sold pursuant to
Rule 144(k). The Company agrees that it will provide each Purchaser, upon
request, with a certificate or certificates representing shares of Preferred
Stock, Warrants, Conversion Shares or Warrant Shares, free from such legend at
such time as such legend is no longer required hereunder. If such certificate or
certificates had previously been issued with such a legend or any other legend,
the Company shall, upon request, receive such certificate or certificates free
of any legend.
STOP TRANSFER INSTRUCTION. THE COMPANY MAY NOT MAKE ANY NOTATION ON ITS RECORDS
OR GIVE INSTRUCTIONS TO ANY TRANSFER AGENT OF THE COMPANY WHICH ENLARGE THE
RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 3.1.
FURNISHING OF INFORMATION. AS LONG AS ANY PURCHASER OWNS SHARES OF THE PREFERRED
STOCK, THE WARRANTS, THE CONVERSION SHARES OR THE WARRANT SHARES, THE COMPANY
WILL CAUSE THE COMMON STOCK TO CONTINUE AT ALL TIMES TO BE REGISTERED UNDER
SECTION 12(g) OF THE EXCHANGE ACT, WILL TIMELY FILE (OR OBTAIN EXTENSIONS IN
RESPECT THEREOF AND FILE WITHIN THE APPLICABLE GRACE PERIOD) ALL REPORTS
REQUIRED TO BE FILED BY THE COMPANY AFTER THE DATE HEREOF PURSUANT TO SECTION
13, 14 OR 15(d) OF THE EXCHANGE ACT AND PROMPTLY FURNISH, BUT IN NO EVENT LATER
THAN TWO (2) BUSINESS DAYS AFTER THE FILING THEREOF WITH THE COMMISSION, THE
PURCHASERS WITH TRUE AND COMPLETE COPIES OF ALL SUCH FILINGS, AND WILL NOT TAKE
ANY ACTION OR FILE ANY DOCUMENT (WHETHER OR NOT PERMITTED BY THE EXCHANGE ACT OR
THE RULES THEREUNDER) TO TERMINATE OR SUSPEND SUCH REPORTING AND FILING
OBLIGATIONS. AS LONG AS ANY PURCHASER OWNS SHARES OF THE PREFERRED STOCK, THE
WARRANTS, THE CONVERSION SHARES OR THE WARRANT SHARES, IF THE COMPANY IS NOT
REQUIRED TO FILE REPORTS PURSUANT TO SECTION 13(a) OR 15(d) OF THE EXCHANGE ACT,
IT WILL PREPARE AND FURNISH TO THE PURCHASERS AND MAKE PUBLICLY
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AVAILABLE IN ACCORDANCE WITH RULE 144(c) PROMULGATED UNDER THE SECURITIES ACT
ANNUAL AND QUARTERLY FINANCIAL STATEMENTS, TOGETHER WITH A DISCUSSION AND
ANALYSIS OF SUCH FINANCIAL STATEMENTS IN FORM AND SUBSTANCE SUBSTANTIALLY
SIMILAR TO THOSE THAT WOULD OTHERWISE BE REQUIRED TO BE INCLUDED IN REPORTS
REQUIRED BY SECTION 13(a) OR 15(d) OF THE EXCHANGE ACT, AS WELL AS ANY OTHER
INFORMATION REQUIRED THEREBY, IN THE TIME PERIOD THAT SUCH FILINGS WOULD HAVE
BEEN REQUIRED TO HAVE BEEN MADE UNDER THE EXCHANGE ACT. THE COMPANY FURTHER
COVENANTS THAT IT WILL TAKE SUCH FURTHER ACTION AS ANY HOLDER OF THE SHARES OF
PREFERRED STOCK, THE WARRANTS, THE CONVERSION SHARES OR THE WARRANT SHARES MAY
REASONABLY REQUEST, ALL TO THE EXTENT REQUIRED FROM TIME TO TIME TO ENABLE SUCH
PERSON TO SELL THE SHARES OF PREFERRED STOCK, THE WARRANTS, THE CONVERSION
SHARES, OR THE WARRANT SHARES WITHOUT REGISTRATION UNDER THE SECURITIES ACT
WITHIN THE LIMITATION OF THE EXEMPTIONS PROVIDED BY RULE 144 PROMULGATED UNDER
THE SECURITIES ACT, INCLUDING THE LEGAL OPINION REFERENCED ABOVE IN SECTION
3.1(b). UPON THE REQUEST OF ANY SUCH PERSON, THE COMPANY SHALL DELIVER TO SUCH
PERSON A WRITTEN CERTIFICATION OF A DULY AUTHORIZED OFFICER AS TO WHETHER IT HAS
COMPLIED WITH SUCH REQUIREMENTS.
BLUE SKY LAWS. IN ACCORDANCE WITH THE REGISTRATION RIGHTS AGREEMENT, THE COMPANY
SHALL (i) QUALIFY THE CONVERSION SHARES AND THE WARRANT SHARES UNDER THE
SECURITIES OR "BLUE SKY" LAWS OF SUCH JURISDICTIONS AS THE PURCHASERS MAY
REQUEST (OR TO OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION), (ii) SHALL PROVIDE
EVIDENCE OF ANY SUCH ACTION SO TAKEN TO EACH PURCHASER ON OR BEFORE THE
EFFECTIVENESS DATE (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) AND (iii)
SHALL CONTINUE SUCH QUALIFICATION AT ALL TIMES THROUGH THE RESALE OF ALL
CONVERSION SHARES OR WARRANT SHARES, BUT IN ANY EVENT NOT PAST THE FOURTH
ANNIVERSARY OF THE CLOSING DATE.
INTEGRATION. THE COMPANY SHALL NOT SELL, OFFER FOR SALE OR SOLICIT OFFERS TO BUY
OR OTHERWISE NEGOTIATE IN RESPECT OF ANY SECURITY (AS DEFINED IN SECTION 2 OF
THE SECURITIES ACT) THAT WOULD BE INTEGRATED WITH THE OFFER OR SALE OF THE
PREFERRED STOCK, THE WARRANTS, THE CONVERSION SHARES OR THE WARRANT SHARES IN A
MANNER THAT WOULD REQUIRE THE REGISTRATION UNDER THE SECURITIES ACT OF THE SALE
OF THE PREFERRED STOCK, THE WARRANTS, THE CONVERSION SHARES OR THE WARRANT
SHARES TO ANY PURCHASER OR CAUSE THE OFFERING OF SUCH SECURITIES TO BE
INTEGRATED WITH ANY OTHER OFFERING OF SECURITIES BY THE COMPANY FOR THE PURPOSE
OF ANY STOCKHOLDER APPROVAL PROVISION APPLICABLE TO THE COMPANY OR ITS
SECURITIES.
LISTING AND RESERVATION OF CONVERSION SHARES AND WARRANT SHARES.
The Company shall (i) not later than ten (10) business days after the Closing
Date prepare and file with Nasdaq and the BSE (as well as any other national
securities exchange or market on which the Common Stock is then listed)
additional shares listing applications or letters acceptable to Nasdaq and the
BSE covering and listing a number of shares of Common Stock which is at least
equal to 120% the maximum number of Underlying Shares then issuable, assuming
that the payment of all future dividends on such shares then outstanding were
made in shares of Common Stock, (ii) take all steps necessary to cause the
Underlying Shares to be approved for listing on Nasdaq and the BSE (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, (iii) maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all such
Underlying Shares, and (iv) provide to the Purchasers evidence of such listing.
Neither the Company nor any of its Subsidiaries shall take any action that may
result in the delisting or suspension of the Common Stock on Nasdaq or the BSE.
The Company shall promptly provide to each Purchaser copies of any notices it
receives from Nasdaq or BSE regarding the continued
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eligibility of the Common Stock for listing on such automated quotation system,
so long as such notice does not include material, nonpublic information. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 3.6(a).
The Company at all times shall reserve a sufficient number of shares of its
authorized but unissued Common Stock to provide for 1.2 times the full
conversion of the outstanding shares of Preferred Stock (including the payment
of all dividends thereon) and exercise of the outstanding Warrants. Shares of
Common Stock reserved for issuance upon conversion of the shares of Preferred
Stock and the exercise of the Warrants shall be allocated pro rata to each of
the Purchasers in accordance with the number of shares of Preferred Stock and
Warrants issued and delivered to such Purchaser at the Closing. If at any time
the number of shares of Common Stock authorized and reserved for issuance is
insufficient to cover 100% of the number of Conversion Shares and Warrant Shares
issued and issuable upon conversion of the shares of Preferred Stock and
exercise of the Warrants (based on the Conversion Price (as defined in the
Certificate of Designation) of the shares of Preferred Stock in effect from time
to time and the Exercise Price (as defined in the Warrants) of the Warrants in
effect from time to time) without regard to any limitation on conversions or
exercises, the Company will promptly take all corporate action necessary to
authorize and reserve 120% of such shares pursuant to Section 3(b) of the
Registration Rights Agreement, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations under this Section 3.6(b), in the case of an insufficient number of
authorized shares, and using best efforts to obtain stockholder approval of an
increase in such authorized number of shares. In addition, if, at any time
within the 45-day period preceding a reset or adjustment (a "reset") of the
Conversion Price pursuant to the terms of the Certificate of Designation, the
closing bid price per share of the Common Stock on Nasdaq or the BSE (or any
Subsequent Market (as defined in Certificate of Designation) on which the Common
Stock is then listed, or if there is no such price on such date, then the
Average Price (as defined in the Certificate of Designation) is less than
$11.86, the Company shall be required to file within five (5) business days
after such five (5) Trading Day period a registration statement covering the
greater of (a) the product of (i) 1.2 and (ii) the aggregate number of
Underlying Shares that would be issuable based on a Conversion Price equal to
the average closing bid price during such five (5) Trading Day period, less the
number of Underlying Shares for which a registration statement is then effective
or (b) the aggregate number of Underlying Shares, calculated as if the
Conversion Price (as defined in the Certificate of Designation) was reset on
such fifth day pursuant to the Certificate of Designation; provided, however,
that if on the actual reset date (pursuant to the Certificate of Designation)
the registration statements are insufficient to register all Underlying Shares
(after giving effect to such reset), the Company shall immediately, but in no
more than five (5) business days thereafter, file a registration statement
sufficient to register such additional shares of Common Stock. All calculations
of the above amount shall be made without regard to any limitation on
conversions of shares of Preferred Stock or exercises of Warrants.
NOTICE OF BREACHES.
The Company and each Purchaser shall give prompt written notice to the other of
any breach by it of any representation, warranty or other agreement contained in
this Agreement or in the Transaction Documents, as well as any events or
occurrences arising after the date hereof and prior to the Closing Date, which
would reasonably be likely to cause any representation or warranty or other
agreement of such party, as the case may be, contained herein to be incorrect or
breached as of the Closing Date provided such notice will not constitute
material non-public
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information. However, no disclosure by either party pursuant to this Section 3.7
shall be deemed to cure any breach of any representation, warranty or other
agreement contained herein or in the Transaction Documents.
Notwithstanding the generality of Section 3.7(a), the Company shall promptly
notify, provided such notification will not constitute material non-public
information, each Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company or any Subsidiary to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
The default by any Purchaser of any of its obligations, representations or
warranties under this Agreement or the Transaction Documents shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under this Agreement or any Transaction Document to any
non-defaulting Purchaser.
FORM D. THE COMPANY AGREES TO FILE A FORM D WITH RESPECT TO THE PREFERRED STOCK
AND WARRANTS AS REQUIRED BY RULE 506 UNDER REGULATION D AND TO PROVIDE A COPY
THEREOF TO EACH PURCHASER PROMPTLY AFTER SUCH FILING.
FUTURE FINANCINGS.
Except for (i) issuance of the Underlying Shares; (ii) shares of Common Stock
deemed to have been issued by the Company in connection with any plan which has
been approved by the Board of Directors of the Company prior to the date hereof,
pursuant to which the Company's securities may be issued to any employee,
officer, director or consultant of the Company; (iii) shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the date
hereof and listed in Schedule 2.1(c) hereto; (iv) the securities to be issued in
the transactions set forth on such Schedule 2.1(c); (v) an Underwritten Offering
(as defined in the Registration Rights Agreement) occurring before December 31,
2000; or (vi) shares of Common Stock issued or deemed to have been issued as
consideration for an acquisition by the Company of a division, assets or
business (or stock constituting any portion thereof) from another Person, if the
Company agrees to issue shares of Common Stock or other securities convertible
into or exchangeable or exercisable for Common Stock (the "New Security") while
any shares of Preferred Stock are outstanding at (a) an effective price per
share which is less or may be less (including, without limitation, any security
which is convertible into or exchangeable or exercisable for Common Stock at a
price which may change with the market price of the Common Stock) than the
Conversion Price (as defined in the Certificate of Designation) of the shares of
Preferred Stock as of the date thereof or (b) an effective price per share
greater than the Conversion Price but less than the Average Price (as defined in
the Certificate of Designation) on the date of such issuance or sale (either of
(a) or (b) a "Future Financing"), the Company shall provide to the Purchasers by
5:00 p.m. (New York time) on or before the third (3rd) Trading Day (as defined
below) after the decision to issue the New Security has been made, written
notice of the Future Financing containing in reasonable detail (i) the proposed
terms of the Future Financing, (ii) the amount of the proceeds that will be
raised and (iii) the Person with whom such Future Financing shall be effected,
and attached to which shall be a term sheet or similar document relating thereto
(the "Future Financing Notice"). Upon receiving the Future Financing Notice,
each Purchaser shall have the pro rata right (based on the purchase price of the
shares of Preferred Stock held by such Purchaser relative to the aggregate
purchase price of shares of
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Preferred Stock) to purchase, on the same terms as the Future Financing, an
amount of New Securities having a purchase price which shall not exceed the sum
of (i) aggregate purchase price paid by such Purchaser for the shares of
Preferred Stock and the Warrants purchased by such Purchaser. In the event a
Purchaser desires to exercise the right granted under this Section 3.9, such
Purchaser must notify the Company on or prior to the fifth (5th) Trading Day
after such Purchaser has received the Future Financing Notice. In the event the
terms and conditions of a proposed Future Financing are amended in any respect
after delivery of the Future Financing Notice but prior to the closing of the
proposed Future Financing to which such Future Financing Notice relates, the
Company shall deliver a new notice to each Purchaser describing the amended
terms and conditions of the proposed Future Financing and each Purchaser
thereafter shall have an option during the five (5) Trading Days period
following delivery of such new notice to purchase its pro rata share (based on
the Purchaser's percentage of the aggregate purchase price of the outstanding
shares of Preferred Stock such Purchaser owns) of the New Securities being
offered on the same terms as contemplated by such proposed Future Financing, as
amended. The foregoing sentence shall apply to successive amendments to the
terms and conditions of any proposed Future Financing. In the event one or more
Purchasers elects not to exercise its rights granted hereby, the Company shall
permit those Purchasers electing to exercise the right granted under this
Section 3.9 to purchase, on a pro rata basis equal to its percentage ownership
of the then outstanding number of shares of Preferred Stock, the sum of the
number of shares of Common Stock that the other Purchaser(s) were eligible to
purchase, if they had exercised their right hereunder. Those Purchasers desiring
to purchase additional shares of Common Stock must notify the Company of their
intention to do so within five (5) Trading Days after the Company has informed
the Purchasers of their right to purchase additional shares of Common Stock.
Within five (5) Trading Days of the termination of the final notice period, the
transactions contemplated by this Section 3.9 shall close, subject to the
completion of mutually satisfactory documentation, and the Company shall tender
to each Purchaser certificates representing the New Securities that it agreed to
purchase and the Purchasers shall make payment for the entire purchase price in
immediately available funds at the closing of such sale; provided, however, that
each Purchaser, in lieu of providing cash as consideration for the purchase
price, may tender shares of Preferred Stock valued at the greater of the
Conversion Price then in effect or the Average Price on the date of tender
multiplied by the number of shares of Common Stock issuable upon conversion of
such Preferred Stock as payment of the purchase price for the shares of Common
Stock that it desires to purchase pursuant to this Section 3.9. Each Person who
purchases any New Security in such a Future Financing other than a Purchaser,
shall enter into a lock-up agreement with the Company, in form satisfactory to
the Purchasers, that such Person shall not sell or transfer any New Securities
purchased for a period of at least 180 calendar days after the closing date of
the Future Financing. The Company may not register any New Securities sold in
the Future Financing under the Securities Act except for those New Securities
sold and issued to any Purchaser. "Trading Day" shall mean a day on which the
Nasdaq or the BSE (or in the event the Common Stock is not traded on Nasdaq or
the BSE, such other securities market on which the Common Stock is listed) is
open for trading. If the Company shall enter into a transaction to issue any New
Securities prior to (6) months from Closing Date (a "Subsequent Transaction"),
each Purchaser shall have the right to have such Purchaser's Transaction
Documents amended to reflect the terms of such Subsequent Transaction and the
Company shall, if requested, issue new shares of Preferred Stock and Warrants to
such Purchaser reflecting the terms of the Subsequent Transaction.
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USE OF PROCEEDS. THE COMPANY SHALL USE THE PROCEEDS FROM THE SALE OF THE
PREFERRED STOCK AND THE EXERCISE OF THE WARRANTS TO ACQUIRE ASSETS, REDUCE DEBT
AND FOR WORKING CAPITAL.
TRANSACTIONS WITH AFFILIATES. SO LONG AS ANY PREFERRED STOCK OR WARRANTS ARE
OUTSTANDING, THE COMPANY SHALL NOT, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES NOT
TO, ENTER INTO, AMEND, MODIFY OR SUPPLEMENT, OR PERMIT ANY SUBSIDIARY TO ENTER
INTO, AMEND, MODIFY OR SUPPLEMENT, ANY AGREEMENT, TRANSACTION, COMMITMENT OR
ARRANGEMENT WITH ANY OF ITS OR ANY SUBSIDIARY'S OFFICERS, DIRECTORS OR PERSONS
WHO WERE OFFICERS OR DIRECTORS AT ANY TIME DURING THE PREVIOUS TWO YEARS,
STOCKHOLDERS WHO BENEFICIALLY OWN 5% OR MORE OF THE COMMON STOCK, OR AFFILIATES
OR ANY INDIVIDUAL RELATED BY BLOOD, MARRIAGE OR ADOPTION TO ANY SUCH INDIVIDUAL
OR WITH ANY ENTITY IN WHICH ANY SUCH ENTITY OR INDIVIDUAL OWNS A 5% OR MORE
BENEFICIAL INTEREST (EACH A "RELATED PARTY"), EXCEPT FOR (a) CUSTOMARY
EMPLOYMENT ARRANGEMENTS AND BENEFIT PROGRAMS ON REASONABLE TERMS, (b) ANY
AGREEMENT, TRANSACTION, COMMITMENT OR ARRANGEMENT ON AN ARMS-LENGTH BASIS ON
TERMS NO LESS FAVORABLE THAN TERMS WHICH WOULD HAVE BEEN OBTAINABLE FROM A
PERSON OTHER THAN SUCH RELATED PARTY, OR (c) ANY AGREEMENT, TRANSACTION,
COMMITMENT OR ARRANGEMENT WHICH IS APPROVED BY A MAJORITY OF THE DISINTERESTED
DIRECTORS OF THE COMPANY. FOR PURPOSES HEREOF, ANY DIRECTOR WHO IS ALSO AN
OFFICER OF THE COMPANY OR ANY SUBSIDIARY OF THE COMPANY SHALL NOT BE A
DISINTERESTED DIRECTOR WITH RESPECT TO ANY SUCH AGREEMENT, TRANSACTION,
COMMITMENT OR ARRANGEMENT. "AFFILIATE" FOR PURPOSES OF THIS SECTION ONLY MEANS,
WITH RESPECT TO ANY PERSON OR ENTITY, ANOTHER PERSON OR ENTITY THAT, DIRECTLY OR
INDIRECTLY, (i) HAS A 5% OR MORE EQUITY INTEREST IN THAT PERSON OR ENTITY, (ii)
HAS 5% OR MORE COMMON OWNERSHIP WITH THAT PERSON OR ENTITY, (iii) CONTROLS THAT
PERSON OR ENTITY, OR (iv) SHARES COMMON CONTROL WITH THAT PERSON OR ENTITY.
"CONTROL" OR "CONTROLS" FOR PURPOSES OF THIS SECTION MEANS THAT A PERSON OR
ENTITY HAS THE POWER, DIRECT OR INDIRECT, TO CONDUCT OR GOVERN THE POLICIES OF
ANOTHER PERSON OR ENTITY.
TRANSFER AGENT INSTRUCTIONS. AT EACH CLOSING THE COMPANY SHALL ISSUE IRREVOCABLE
INSTRUCTIONS TO ITS TRANSFER AGENT (AND SHALL ISSUE TO ANY SUBSEQUENT TRANSFER
AGENT AS REQUIRED), TO ISSUE CERTIFICATES, REGISTERED IN THE NAME OF EACH SUCH
PURCHASER OR ITS RESPECTIVE NOMINEE(S), FOR THE CONVERSION SHARES AND/OR THE
WARRANT SHARES IN SUCH AMOUNTS AS SPECIFIED FROM TIME TO TIME BY EACH PURCHASER
TO THE COMPANY IN A FORM ACCEPTABLE TO SUCH PURCHASERS (THE "IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS"). SO LONG AS REQUIRED PURSUANT TO SECTION 3.1(b),
ALL SUCH CERTIFICATES SHALL BEAR THE RESTRICTIVE LEGEND SPECIFIED IN SECTION
3.1(b) OF THIS AGREEMENT. THE COMPANY WARRANTS THAT NO INSTRUCTION OTHER THAN
THE IRREVOCABLE TRANSFER AGENT INSTRUCTIONS REFERRED TO IN THIS SECTION 3.12,
AND STOP TRANSFER INSTRUCTIONS TO GIVE EFFECT TO SECTION 3.1 (IN THE CASE OF THE
CONVERSION SHARES AND THE WARRANT SHARES, PRIOR TO REGISTRATION OF THE
CONVERSION SHARES UNDER THE SECURITIES ACT) WILL BE GIVEN BY THE COMPANY TO ITS
TRANSFER AGENT AND THAT THE PREFERRED STOCK, THE WARRANTS, THE CONVERSION SHARES
AND THE WARRANT SHARES SHALL OTHERWISE BE FREELY TRANSFERABLE ON THE BOOKS AND
RECORDS OF THE COMPANY AS AND TO THE EXTENT PROVIDED IN THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS. IF A PURCHASER PROVIDES THE COMPANY WITH AN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH OPINION SHALL BE CUSTOMARY FOR OPINIONS
OF COUNSEL IN COMPARABLE TRANSACTIONS, TO THE EFFECT THAT A PUBLIC SALE,
ASSIGNMENT OR TRANSFER OF THE PREFERRED STOCK, THE CONVERSION SHARES, THE
WARRANTS AND THE WARRANT SHARES MAY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR THE PURCHASER PROVIDES THE COMPANY WITH REASONABLE ASSURANCES
THAT THE WARRANTS, THE CONVERSION SHARES AND THE WARRANT SHARES CAN BE SOLD
PURSUANT TO RULE 144 WITHOUT ANY RESTRICTION AS
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TO THE NUMBER OF SECURITIES ACQUIRED AS OF A PARTICULAR DATE THAT CAN THEN BE
IMMEDIATELY SOLD, THE COMPANY SHALL PERMIT THE TRANSFER, AND, IN THE CASE OF THE
CONVERSION SHARES AND THE WARRANT SHARES, PROMPTLY INSTRUCT ITS TRANSFER AGENT
TO ISSUE ONE OR MORE CERTIFICATES IN SUCH NAME AND IN SUCH DENOMINATIONS AS
SPECIFIED BY SUCH PURCHASER AND WITHOUT ANY RESTRICTIVE LEGEND. THE COMPANY
ACKNOWLEDGES THAT A BREACH BY IT OF ITS OBLIGATIONS HEREUNDER WILL CAUSE
IRREPARABLE HARM TO THE PURCHASERS BY VIOLATING THE INTENT AND PURPOSE OF THE
TRANSACTIONS CONTEMPLATED HEREBY. ACCORDINGLY, THE COMPANY ACKNOWLEDGES THAT THE
REMEDY AT LAW FOR A BREACH OF ITS OBLIGATIONS UNDER THIS SECTION 3.12 WILL BE
INADEQUATE AND AGREES, IN THE EVENT OF A BEACH OR THREATENED BREACH BY THE
COMPANY OF THE PROVISIONS OF THIS SECTION 3.12, THAT THE PURCHASERS, SHALL BE
ENTITLED, IN ADDITION TO ALL OTHER AVAILABLE REMEDIES, TO AN ORDER AND/OR
INJUNCTION RESTRAINING ANY BREACH AND REQUIRING IMMEDIATE ISSUANCE AND TRANSFER,
WITHOUT THE NECESSITY OF SHOWING ECONOMIC LOSS AND WITHOUT ANY BOND OR OTHER
SECURITY BEING REQUIRED.
PRESS RELEASE; FILING OF FORM 8-K. SUBJECT TO THE PROVISIONS OF SECTION 6.10,
PRIOR TO THE OPENING OF NASDAQ AND THE BSE ON MAY 19, 1999, THE COMPANY SHALL
FILE A PRESS RELEASE IN FORM AND SUBSTANCE ACCEPTABLE TO THE PURCHASERS. ON OR
BEFORE THE 3RD BUSINESS DAY FOLLOWING THE CLOSING DATE, THE COMPANY SHALL FILE A
FORM 8-K WITH THE COMMISSION DESCRIBING THE TERMS OF THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT AND THE TRANSACTION DOCUMENTS IN THE FORM
REQUIRED BY THE EXCHANGE ACT.
FINANCIAL INFORMATION. THE COMPANY AGREES TO SEND THE FOLLOWING TO EACH
PURCHASER PRIOR TO AND DURING THE EFFECTIVENESS PERIOD (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT): (i) WITHIN THREE (3) BUSINESS DAYS AFTER THE
FILING THEREOF WITH THE SEC, A COPY OF ITS ANNUAL REPORTS ON FORM 10-K, ITS
QUARTERLY REPORTS ON FORM 10-Q, ANY CURRENT REPORTS ON FORM 8-K AND ANY
REGISTRATION STATEMENTS OR AMENDMENTS (OTHER THAN ON FORM S-8) FILED PURSUANT TO
THE SECURITIES ACT, (ii) ON THE SAME DAY AS THE RELEASE THEREOF, FACSIMILE
COPIES OF ALL PRESS RELEASES ISSUED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES,
AND (iii) COPIES OF ANY NOTICES AND OTHER INFORMATION MADE AVAILABLE OR GIVEN TO
THE STOCKHOLDERS OF THE COMPANY GENERALLY, CONTEMPORANEOUSLY WITH THE MAKING
AVAILABLE OR GIVING THEREOF TO THE STOCKHOLDERS.
ORDINARY COURSE BROKERAGE AND TRADING. SUBJECT TO COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS, NASDAQ REGULATIONS AND BSE REGULATIONS, NO PURCHASER SHALL BE
PROHIBITED FROM ENGAGING IN ITS ORDINARY COURSE BROKERAGE AND TRADING ACTIVITIES
IN RESPECT OF THE COMPANY'S COMMON STOCK; PROVIDED THAT THE PERSONNEL ENGAGED IN
SUCH ACTIVITIES HAVE NOT BEEN INVOLVED WITH THE TRANSACTIONS CONTEMPLATED HEREBY
AND HAVE NOT BEEN PROVIDED WITH CONFIDENTIAL INFORMATION WITH RESPECT TO THE
COMPANY; PROVIDED FURTHER THAT PURCHASERS SHALL NOT ENGAGE IN ANY ORDINARY
COURSE BROKERAGE OR TRADING ACTIVITIES IN RESPECT OF THE COMPANY'S COMMON STOCK
DURING THE SIX-MONTH PERIOD COMMENCING ON THE CLOSING DATE, UNLESS THE AVERAGE
PRICE (AS DEFINED IN THE CERTIFICATE OF DESIGNATION) ON ANY GIVEN DATE AS
CALCULATED ON THE BASIS OF 22 CONSECUTIVE TRADING DAYS RISES ABOVE 200% OF THE
CONVERSION PRICE (AS DEFINED IN THE CERTIFICATE OF DESIGNATION).
BEST EFFORTS. EACH OF THE PARTIES HERETO SHALL USE ITS BEST EFFORTS TO SATISFY
EACH OF THE CONDITIONS TO BE SATISFIED BY IT AS PROVIDED IN ARTICLE IV OF THIS
AGREEMENT.
CORPORATE EXISTENCE. UNTIL SUCH TIME AS ALL OF THE PURCHASERS PROVIDE THE
COMPANY WITH WRITTEN NOTICE THAT THEY DO NOT BENEFICIALLY OWN ANY SHARES OF
PREFERRED STOCK OR WARRANTS, THE COMPANY SHALL MAINTAIN ITS CORPORATE EXISTENCE
AND SHALL NOT SELL ALL OR SUBSTANTIALLY ALL OF THE COMPANY'S ASSETS, EXCEPT IN
THE EVENT OF A MERGER OR CONSOLIDATION OR SALE OF ALL OR
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SUBSTANTIALLY ALL OF THE COMPANY'S ASSETS, WHERE THE SURVIVING OR SUCCESSOR
ENTITY IN SUCH TRANSACTION (i) ASSUMES THE COMPANY'S OBLIGATIONS HEREUNDER AND
UNDER THE AGREEMENTS AND INSTRUMENTS ENTERED INTO IN CONNECTION HEREWITH AND
(ii) IS A PUBLICLY TRADED CORPORATION WHOSE COMMON STOCK IS LISTED FOR TRADING
ON THE NASDAQ, THE NEW YORK STOCK EXCHANGE OR THE AMERICAN STOCK EXCHANGE.
NO VIOLATION OF APPLICABLE LAW. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT
TO THE CONTRARY, IF THE REDEMPTION OF SHARES OF PREFERRED STOCK OR UNDERLYING
SHARES OTHERWISE REQUIRED UNDER THIS AGREEMENT OR THE REGISTRATION RIGHTS
AGREEMENT WOULD BE PROHIBITED BY THE RELEVANT PROVISIONS OF THE TEXAS BUSINESS
CORPORATION ACT, SUCH REDEMPTION SHALL BE EFFECTED AS SOON AS IT IS PERMITTED
UNDER SUCH LAW; PROVIDED, HOWEVER, THAT FROM THE FIFTH (5TH) DAY AFTER SUCH
REDEMPTION NOTICE (AS DEFINED IN THE CERTIFICATE OF DESIGNATION) UNTIL SUCH
REDEMPTION PRICE (AS DEFINED IN THE CERTIFICATE OF DESIGNATION) IS PAID IN FULL,
INTEREST ON ANY SUCH UNPAID AMOUNT SHALL ACCRUE AND BE PAYABLE AT THE RATE OF
15% PER ANNUM IN ACCORDANCE WITH THE CERTIFICATE OF DESIGNATION.
SUBSEQUENT REGISTRATIONS. OTHER THAN UNDERLYING SHARES AND OTHER REGISTRABLE
SECURITIES (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) TO BE REGISTERED IN
ACCORDANCE WITH THE REGISTRATION RIGHTS AGREEMENT, THE SECURITIES TO BE ISSUED
IN THE TRANSACTIONS SET FORTH ON SCHEDULE 2.1(c), AND ANY SECURITIES IN AN
UNDERWRITTEN OFFERING (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) BEFORE
DECEMBER 31, 2000, THE COMPANY SHALL NOT, FOR A PERIOD OF NOT LESS THAN 90
TRADING DAYS AFTER THE DATE THAT THE REGISTRATION STATEMENT IS DECLARED
EFFECTIVE BY THE COMMISSION, WITHOUT THE PRIOR WRITTEN CONSENT OF TWO-THIRDS OF
THE PURCHASERS, (i) ISSUE OR SELL ANY OF ITS OR ANY OF ITS AFFILIATES' EQUITY OR
EQUITY-EQUIVALENT SECURITIES UNLESS SUCH ISSUANCE OR SALE IS EQUAL TO OR AT A
PREMIUM TO THE PER SHARE MARKET PRICE (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) ON THE DATE SUCH ISSUANCE OR SALE, (ii) REGISTER FOR RESALE ANY
SECURITIES OF THE COMPANY OR (iii) HAVE A REGISTRATION STATEMENT DECLARED
EFFECTIVE COVERING AN ISSUANCE BY THE COMPANY OF ANY OF ITS SECURITIES. ANY DAYS
THAT ANY PURCHASER IS UNABLE TO SELL UNDERLYING SHARES UNDER AN REGISTRATION
STATEMENT SHALL BE ADDED TO SUCH 90 TRADING DAY PERIOD FOR THE PURPOSES OF (i),
(ii) AND (iii) ABOVE.
CONDITIONS
FIRST CLOSING.
Conditions Precedent to the Obligation of the Company to Sell the Shares of
Preferred Stock and Warrants. The obligation of the Company to sell the shares
of Preferred Stock and Warrants is subject to the satisfaction or waiver (with
prior written notice to each Purchaser) by the Company, at or before the First
Closing Date of each of the following conditions:
(q) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement
shall be true and correct in all material respects as of the date
when made and as of the First Closing;
(r) Performance by the Purchasers. Each Purchaser 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 such Purchaser at or before the First
Closing; and
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(s) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Transaction
Documents.
Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares
of Preferred Stock and Warrants at the First Closing. The obligation of each
Purchaser hereunder to acquire and pay for the shares of Preferred Stock and
Warrants at the First Closing is subject to the satisfaction or waiver by such
Purchaser, at or before the First Closing Date, of each of the following
conditions:
(t) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement and in the Registration Rights Agreement shall be true and
correct in all respects as of the date when made and as of the First
Closing Date;
(u) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or before the First Closing Date;
(v) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement and the Transaction
Documents;
(w) No Suspensions of Trading in Common Stock. The trading in the Common
Stock shall not have been suspended by the Commission, on Nasdaq or
on the BSE (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the
Company);
(x) Listing of Common Stock. The Common Stock shall have been at all
times since the date of this Agreement and on the Closing Date listed
for trading on the Nasdaq and the BSE;
(y) Required Approvals. All Required Approvals, other than those relating
solely to Closing Dates other than the First Closing Date, shall have
been obtained and copies thereof delivered to the Purchasers other
than those relating solely to Closing Dates other than the First
Closing Date;
(z) Shares of Common Stock. The Company shall have duly reserved the
number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved upon the exercise of the
Warrants or the conversion of the shares of Preferred Stock acquired
by the Purchaser on the First Closing Date;
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(aa) Adverse Changes. Since the date of the financial statements included
in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall
have occurred which is not disclosed on any Schedule hereto (for
purposes hereof, changes in the market price of the Common Stock may
be considered in determining whether there has occurred an event
which has had a Material Adverse Effect);
(bb) Litigation. No litigation shall have been instituted or threatened
against the Company which could reasonably be expected to,
individually or in the aggregate, have had a Material Adverse Effect;
(cc) Change of Control. No Change of Control shall have occurred between
the date hereof and the First Closing Date. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by
an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act), other than the
Purchasers or any of their Affiliates, of in excess of 40% of the
voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Company's Board of Directors that is
not approved by those individuals who are members of the Board of
Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another
entity, unless following such transaction the Holders of the Issuer's
securities continue to hold at least 67% of such securities following
such transaction, (iv) the consolidation or sale of all or
substantially all of the assets of the Company in one or a series of
related transactions or (v) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii), (iii)
or (iv); and
(dd) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been
delivered to and acknowledged in writing by the Company's transfer
agent with a copy forwarded to each Purchaser.
Documents and Certificates. At the First Closing, the Company shall have
delivered to the Purchasers, the following in form and substance reasonably
satisfactory to the Purchasers:
(ee) Opinion. An opinion of the Company's legal counsel in the form
attached hereto as Exhibit D dated as of the First Closing Date;
(ff) Preferred Stock Certificate. A Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on Schedule
I, registered in the name of such Purchaser, each in form
satisfactory to the Purchaser and issued pursuant to the Certificate
of Designation with a Conversion Price equal to $11.86;
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(gg) Warrant. A Warrant(s), in the form of Exhibit B hereto and with the
Exercise Price equal to $11.86 representing the Warrant(s) being
purchased by each Purchaser as set forth next to such Purchaser's
name on the Schedule I, registered in the name of such Purchaser;
(hh) Registration Rights. The Company shall have executed and delivered
the Registration Rights Agreement;
(ii) Officer's Certificate. An Officer's Certificate dated the First
Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties
and covenants as of such First Closing Date and confirming the
compliance by the Company with the conditions precedent set forth in
this Section 4.1(b) as of the First Closing Date;
(jj) Secretary's Certificate. A Secretary's Certificate dated the First
Closing Date and signed by the Secretary or Assistant Secretary of
the Company certifying (A) that attached thereto is a true and
complete copy of the Certificate of Incorporation of the Company, as
in effect on the First Closing Date, (B) that attached thereto is a
true and complete copy of the by-laws of the Company, as in effect on
the First Closing Date and (C) that attached thereto is a true and
complete copy of the Resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement and of the Transaction Documents, and
that such Resolutions have not been modified, rescinded or revoked;
(kk) Certificates of Incorporation. The Company shall have delivered to
each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary,
in such corporation's state of incorporation issued by the Secretary
of State of such state of incorporation as of a date within ten days
of the First Closing Date. The Company shall have delivered to each
of the Purchasers a copy of its Certificate of Incorporation as
certified by the Secretary of State of the State of Texas within ten
days of the First Closing Date;
(ll) Transfer Agent Letter. The Company shall have delivered to each
Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within five
days of the First Closing Date; and
(mm) Other Documents. The Company shall have delivered to each Purchaser
such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably
request.
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SECOND CLOSING.
Conditions Precedent to the Obligation of the Company to Sell the shares
of Preferred Stock and Warrants. The obligation of the Company to sell the
shares of Preferred Stock and Warrants at the Second Closing is subject to
the satisfaction or waiver (with prior written notice to each Purchaser) by
the Company, at or before the Second Closing Date of each of the following
conditions:
(nn) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement
shall be true and correct in all material respects as of the date
when made and as of the Second Closing;
(oo) Performance by the Purchasers. Each Purchaser 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 such Purchaser at or before the Second
Closing; and
(pp) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Transaction
Documents.
Conditions Precedent to the Obligation of the Purchasers to Purchase. The
obligation of each Purchaser hereunder to acquire and pay for the shares of
Preferred Stock and Warrants at the Second Closing is subject to the
satisfaction or waiver (with prior written notice to the Company and each
other Purchaser) by such Purchaser, at or before the Second Closing Date,
of each of the following conditions:
(qq) First Closing. The First Closing shall have occurred;
(rr) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement and the Registration Rights Agreement shall be true and
correct in all respects as of the date when made and as of the Second
Closing Date as though made at that time (except for representations
and warranties made as of a specific date);
(ss) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the
Transaction Documents to be performed, satisfied or complied with by
the Company at or before to the Second Closing;
(tt) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed
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by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(uu) Registration Statements for Underlying ShareS from First Closing. The
Registration Statement with respect to the Underlying Shares of the
Warrants sold at the First Closing the Preferred Stock and shall have
been declared effective under the Securities Act by the SEC; and on
the Second Closing Date such Registration Statement shall be
effective, not subject to any stop order and not be subject to any
suspension pursuant to Section 3(o) of the Registration Rights
Agreement, and shall have been effective and shall not have been
subject to any stop order for the thirty (30) business days prior to
the Second Closing Date and no stop order shall be pending or
threatened as at the Second Closing Date.
(vv) Adverse Changes. Since the date of the financial statements included
in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall
have occurred which is not disclosed on any Schedule hereto or
otherwise in writing to each of the Purchasers;
(ww) Litigation. No litigation shall have been instituted or threatened
against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(xx) Management. There shall have been no substantial changes in the
position or responsibilities of the Chief Executive Officer and the
Chief Financial Officer of the Company;
(yy) No Suspensions of Trading in Common Stock. The trading in the Common
Stock shall not have been suspended by the Commission, on Nasdaq or
on the BSE (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the
Company);
(zz) Listing of Common Stock. The Underlying Shares shall on the Second
Closing Date be, listed for trading on Nasdaq, on the BSE, or other
exchange acceptable to Purchasers;
(aaa) Required Approvals. All Required Approvals shall have been obtained
and copies thereof delivered to the Purchasers.
(bbb) Shares of Common Stock. The Company shall have duly reserved the
number of Underlying Shares required by this Agreement to be reserved
for issuance upon exercise of the Warrants purchased on the First
Closing Date and on the Second Closing Date or the conversion of the
shares of
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Preferred Stock purchased on the First Closing Date and on the Second
Closing Date.
(ccc) Performance of Conversion/Exercise Obligations. The Company shall
have delivered Underlying Shares upon any demand for conversion of
any of the shares of Preferred Stock or exercise of the Warrant(s)
and otherwise performed its obligations in accordance with the terms,
conditions and timing requirements of the Transaction Documents.
(ddd) Change of Control. No Change of Control in the Company shall have
occurred; and
(eee) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been
delivered to and acknowledged by the Company's transfer agent with a
copy forwarded to each Purchaser.
(fff) Documents and Certificates. On the Second Closing Date, the Company
shall have delivered to the Purchasers, the following in form and
substance reasonably satisfactory to the Purchasers: Registration
Rights Agreement. The Company and each of the Purchasers shall have
executed and delivered a Registration Rights Agreement substantially
in the form of Exhibit C attached hereto pursuant to which the
Company shall agree to provide certain registration rights under the
Securities Act and the rules and regulations promulgated thereunder
and applicable state laws with respect to the shares of Common Stock
issuable upon the conversion of the shares of Preferred Stock, and
upon the exercise of the Warrants, to be issued at the Second
Closing;
(ggg) Opinion. An opinion of the Company's legal counsel, in substantially
the form attached hereto as Exhibit D dated as of the Second Closing
Date;
(hhh) Preferred Stock Certificate. A Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the
Second Closing Schedule, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser and issued pursuant to the
Certificate of Designation with a Conversion Price equal to $11.86;
(iii) Warrant. A Warrant(s), in the form of Exhibit B hereto and with the
Exercise Price equal to $11.86 representing the Warrant(s) being
purchased by each Purchaser as set forth next to such Purchaser's
name on the Second Closing Schedule, registered in the name of such
Purchaser;
(jjj) Officer's Certificate. The Company shall deliver to the Purchasers an
Officer's Certificate dated the Second Closing Date and signed by an
executive officer of the Company confirming the accuracy of the
Company's representations, warranties and covenants as of such Second
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<PAGE> 32
Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in Section 4.2(b) as of the Second
Closing Date.
(kkk) Secretary's Certificate. A Secretary's Certificate dated the Second
Closing Date and signed by the Secretary or Assistant Secretary of
the Company certifying (A) that attached thereto is a true and
complete copy of the Certificate of Incorporation of the Company, as
in effect on the Second Closing Date, (B) that attached thereto is a
true and complete copy of the bylaws of the Company, as in effect on
the Second Closing Date and (C) that attached thereto is a true and
complete copy of the resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of the Agreement and the Transaction Documents and that
such resolutions have not been modified, rescinded or revoked.
(lll) Certificates of Incorporation. The Company shall have delivered to
each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary,
in such corporation's state of incorporation issued by the Secretary
of State of such state of incorporation as of a date within ten days
of the Second Closing Date. The Company shall have delivered to each
of the Purchasers a copy of its Certificate of Incorporation as
certified by the Secretary of State of the State of Texas within ten
days of the Second Closing Date;
(mmm) Transfer Agent Letter. The Company shall have delivered to each
Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within five
days of the Second Closing Date; and
(nnn) Other Documents. The Company shall have delivered to each Purchaser
such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably
request.
THIRD CLOSING.
Conditions Precedent to the Obligation of the Company to Sell the
Shares of Preferred Stock and Warrants. The obligation of the Company
to sell the shares of Preferred Stock and Warrants at the Third
Closing is subject to the satisfaction or waiver (with prior written
notice to each Purchaser) by the Company, at or before the Third
Closing Date of each of the following conditions:
(ooo) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement
shall be true and correct in all material respects as of the date
when made and as of the Third Closing;
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(ppp) Performance by the Purchasers. Each Purchaser 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 such Purchaser at or before the Third
Closing; and
(qqq) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Transaction
Documents.
Conditions Precedent to the Obligation of the Purchasers to Purchase.
The obligation of each Purchaser hereunder to acquire and pay for the
shares of Preferred Stock and Warrants at the Third Closing is
subject to the satisfaction or waiver (with prior written notice to
the Company and each other Purchaser) by such Purchaser, at or before
the Third Closing Date, of each of the following conditions:
(rrr) First and Second Closings. The First and Second Closings shall have
occurred;
(sss) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement and the Registration Rights Agreement shall be true and
correct in all respects as of the date when made and as of the Third
Closing Date as though made at that time (except for representations
and warranties made as of a specific date);
(ttt) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the
Transaction Documents to be performed, satisfied or complied with by
the Company at or before to the Third Closing;
(uuu) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement and the Transaction
Documents;
(vvv) Registration Statements for Underlying Shares of Preferred Stock and
Warrants issued at First and Second Closings. The Registration
Statement with respect to the Underlying Shares with respect to the
Warrants and Preferred Stock sold at the First Closing and the Second
Closing shall have been declared effective under the Securities Act
by the SEC and such Registration Statement shall be effective, not
subject to any stop order and not be subject to any suspension
pursuant to Section 3(o) of the
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Registration Rights Agreement, and shall have been effective and
shall not have been subject to any stop order for the thirty (30)
business days prior to the Third Closing Date and no stop order
shall be pending or threatened as at the Third Closing Date.
(www) Adverse Changes. Since the date of the financial statements included
in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall
have occurred which is not disclosed on any Schedule hereto or
otherwise in writing to each of the Purchasers;
(xxx) Litigation. No litigation shall have been instituted or threatened
against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(yyy) Management. There shall have been no substantial changes in the
position or responsibilities of the Chief Executive Officer and the
Chief Financial Officer of the Company;
(zzz) No Suspensions of Trading in Common Stock. The trading in the Common
Stock shall not have been suspended by the Commission, on Nasdaq or
on the BSE (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the
Company);
(aaaa) Listing of Common Stock. The Underlying Shares shall on the Third
Closing Date be listed for trading on Nasdaq, on the BSE, or other
exchange acceptable to Purchasers;
(bbbb) Required Approvals. All Required Approvals shall have been obtained
and copies thereof delivered to the Purchasers.
(cccc) Shares of Common Stock. The Company shall have duly reserved the
number of Underlying Shares required by this Agreement to be
reserved for issuance upon exercise of the Warrants, purchased on
the First Closing Date, the Second Closing Date and the Third
Closing Date, and the conversion of the Preferred Stock, purchased
on the First Closing Date, the Second Closing Date, and the Third
Closing Date.
(dddd) Performance of Conversion/Exercise Obligations. The Company shall
have delivered Underlying Shares upon any demand for conversion of
any of the Preferred Stock or exercise of the Warrant(s) and
otherwise performed its obligations in accordance with the terms,
conditions and timing requirements of the Transaction Documents.
(eeee) Change of Control. No Change of Control in the Company shall have
occurred; and
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(ffff) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have
been delivered to and acknowledged by the Company's transfer agent
with a copy forwarded to each Purchaser.
(gggg) Documentsand Certificates. On the Third Closing Date, the Company
shall have delivered to the Purchasers, the following in form and
substance reasonably satisfactory to the Purchasers: Registration
Rights Agreement. The Company and each of the Purchasers shall have
executed and delivered a Registration Rights Agreement substantially
in the form of Exhibit C attached hereto pursuant to which the
Company shall agree to provide certain registration rights under the
Securities Act and the rules and regulations promulgated thereunder
and applicable state laws with respect to the shares of Common Stock
issuable upon the conversion of the Preferred Stock, and upon the
exercise of the Warrants to be issued at the Third Closing;
(hhhh) Opinion. An opinion of the Company's legal counsel, in substantially
the form attached hereto as Exhibit D dated as of the Third Closing
Date;
(iiii) Preferred Stock Certificate. A Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the
Third Closing Schedule, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser and issued pursuant to
the Certificate of Designation, except that Section 5.1(b) thereof
shall be omitted, with a Conversion Price equal to $11.86;
(jjjj) Warrant. A Warrant(s), in the form of Exhibit B hereto representing
the Warrant(s) with an Exercise Price (as defined therein) equal to
110% of the Average Price on the Third Closing Date being purchased
by each Purchaser as set forth next to such Purchaser's name on the
Third Closing Schedule, registered in the name of such Purchaser;
(kkkk) Officer's Certificate. The Company shall deliver to the Purchasers
an Officer's Certificate dated the Third Closing Date and signed by
an executive officer of the Company confirming the accuracy of the
Company's representations, warranties and covenants as of such Third
Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in Section 4.3(b) as of the Third
Closing Date.
(llll) Secretary's Certificate. A Secretary's Certificate dated the Third
Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete
copy of the Certificate of Incorporation of the Company, as in
effect on the Third Closing Date, (B) that attached thereto is a
true and complete copy of the bylaws of the
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<PAGE> 36
Company, as in effect on the Third Closing Date and (C) that
attached thereto is a true and complete copy of the resolutions duly
adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of the Agreement and the
Transaction Documents and that such resolutions have not been
modified, rescinded or revoked.
(mmmm) Certificates of Incorporation. The Company shall have delivered to
each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary,
in such corporation's state of incorporation issued by the Secretary
of State of such state of incorporation as of a date within ten days
of the Third Closing Date. The Company shall have delivered to each
of the Purchasers a copy of its Certificate of Incorporation as
certified by the Secretary of State of the State of Texas within ten
days of the Third Closing Date;
(nnnn) Transfer Agent Letter. The Company shall have delivered to each
Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within
five days of the Third Closing Date; and
(oooo) Other Documents. The Company shall have delivered to each Purchaser
such other documents relating to the transactions contemplated by
the Transaction Documents as the Purchasers or its counsel may
reasonably request.
INDEMNIFICATION
INDEMNIFICATION. EXCEPT TO THE EXTENT THAT MATTERS WHICH COULD BE COVERED BY
THIS SECTION 5 ARE COVERED BY SECTION 5 OF THE REGISTRATION RIGHTS AGREEMENT, IN
CONSIDERATION OF THE PURCHASERS EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS AND ACQUIRING THE PREFERRED STOCK, CONVERSION SHARES,
WARRANTS AND WARRANT SHARES THEREUNDER AND IN ADDITION TO ALL OF THE COMPANY'S
OTHER OBLIGATIONS UNDER THIS AGREEMENT AND THE TRANSACTION DOCUMENTS, THE
COMPANY SHALL DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS EACH PURCHASER, ITS
PAST AND PRESENT AFFILIATES AND THEIR SUCCESSORS AND ASSIGNS (IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 6.5), EACH OTHER HOLDER OF THE UNDERLYING SHARES AND
ALL OF THEIR STOCKHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES AND DIRECT OR INDIRECT
INVESTORS AND ANY OF THE FOREGOING PERSON'S AGENTS OR OTHER REPRESENTATIVES
(INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT) (COLLECTIVELY, THE "INDEMNITIES")
FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES,
PROCEEDINGS, COSTS (AS INCURRED), PENALTIES, FEES (INCLUDING LEGAL FEES AND
EXPENSES), LIABILITIES AND DAMAGES, AND EXPENSES IN CONNECTION THEREWITH
(IRRESPECTIVE OF WHETHER ANY SUCH INDEMNITY IS A PARTY TO THE ACTION FOR WHICH
INDEMNIFICATION HEREUNDER IS SOUGHT), AND INCLUDING INTEREST, PENALTIES AND
ATTORNEYS' FEES AND DISBURSEMENTS (THE "INDEMNIFIED LIABILITIES"), INCURRED BY
ANY INDEMNITY AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (a) ANY
MISREPRESENTATION OR BREACH OF ANY
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REPRESENTATION OR WARRANTY MADE BY THE COMPANY IN THIS AGREEMENT OR IN THE
TRANSACTION DOCUMENTS, OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT
CONTEMPLATED HEREBY OR THEREBY, (B) ANY BREACH OF ANY COVENANT, AGREEMENT OR
OBLIGATION OF THE COMPANY CONTAINED IN THIS AGREEMENT OR THE TRANSACTION
DOCUMENTS, OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY
OR THEREBY, OR (C) ANY CAUSE OF ACTION, SUIT OR CLAIM BROUGHT OR MADE, OTHER
THAN BY THE COMPANY, AGAINST SUCH INDEMNITY AND ARISING OUT OF OR RESULTING FROM
(I) THE EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR THE
TRANSACTION DOCUMENTS, (II) ANY TRANSACTION FINANCED OR TO BE FINANCED IN WHOLE
OR IN PART, DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF THE ISSUANCE OF THE
PREFERRED STOCK OR WARRANTS OR (III) SOLELY THE STATUS OF SUCH PURCHASERS OR
HOLDER OF THE PREFERRED STOCK, THE CONVERSION SHARES, THE WARRANTS OR THE
WARRANT SHARES AS AN INVESTOR IN THE COMPANY. THE INDEMNIFICATION OBLIGATIONS OF
THE COMPANY UNDER THIS PARAGRAPH SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE
COMPANY MAY OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO
ANY AFFILIATE OF THE PURCHASERS AND PARTNERS, DIRECTORS, AGENTS, EMPLOYEES AND
CONTROLLING PERSONS (IF ANY), AS THE CASE MAY BE, OF THE PURCHASERS AND ANY SUCH
AFFILIATE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY SUCCESSORS,
ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF THE COMPANY, THE PURCHASERS AND
ANY SUCH AFFILIATE AND ANY SUCH PERSON. THE COMPANY ALSO AGREES THAT NEITHER THE
PURCHASERS NOR ANY SUCH AFFILIATES, PARTNERS, DIRECTORS, AGENTS, EMPLOYEES OR
CONTROLLING PERSONS SHALL HAVE ANY LIABILITY TO THE COMPANY OR ANY PERSON
ASSERTING CLAIMS ON BEHALF OF OR IN RIGHT OF THE COMPANY IN CONNECTION WITH OR
AS A RESULT OF THE CONSUMMATION OF THIS AGREEMENT OR ANY OF THE TRANSACTION
DOCUMENTS EXCEPT TO THE EXTENT THAT ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES OR
EXPENSES INCURRED BY THE COMPANY RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH PURCHASER OR ENTITY IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE TRANSACTION DOCUMENTS. TO THE EXTENT THAT
THE FOREGOING UNDERTAKING BY THE COMPANY MAY BE UNENFORCEABLE FOR ANY REASON,
THE COMPANY SHALL MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION
OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE
LAW.
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<PAGE> 38
MISCELLANEOUS
ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE EXHIBITS AND SCHEDULES
HERETO AND THE TRANSACTION DOCUMENTS CONTAIN THE ENTIRE UNDERSTANDING OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, ORAL OR WRITTEN, WITH RESPECT TO SUCH MATTERS.
NOTICES. ANY NOTICES, CONSENTS, WAIVERS OR OTHER COMMUNICATIONS REQUIRED OR
PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS AGREEMENT MUST BE IN WRITING AND
WILL BE DEEMED TO HAVE BEEN DELIVERED (I) UPON RECEIPT, WHEN DELIVERED
PERSONALLY; (II) UPON RECEIPT, WHEN SENT BY FACSIMILE, PROVIDED CONFIRMATION OF
TRANSMISSION IS MECHANICALLY OR ELECTRONICALLY GENERATED AND KEPT ON FILE BY THE
SENDING PARTY (IF RECEIVED BY 7:00 P.M. EST WHERE SUCH NOTICE IS RECEIVED) OR
THE FIRST BUSINESS DAY FOLLOWING SUCH DELIVERY (IF RECEIVED AFTER 7:00 P.M. EST
WHERE SUCH NOTICE IS RECEIVED); OR (III) ONE BUSINESS DAY AFTER DEPOSIT WITH A
NATIONALLY RECOGNIZED OVERNIGHT DELIVERY SERVICE, IN EACH CASE PROPERLY
ADDRESSED TO THE PARTY TO RECEIVE THE SAME. THE ADDRESSES AND FACSIMILE NUMBERS
FOR SUCH COMMUNICATIONS SHALL BE:
If to the Company:
International Isotopes Inc.
3100 Jim Christal Road
Denton, Texas 76207
Telephone: (940) 484-9492
Facsimile: (940) 484-0877
Attention: Ira Lon Morgan
With a copy to:
Locke Liddell & Sapp LLC
100 Congress, Suite 300
Austin, Texas 78701
Telephone: (512)305-4716
Facsimile: (512)305-4800
Attention: Curtis R. Ashmos
If to the Transfer Agent:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone: (718)921-8256
Facsimile: (718)921-8327
Attention: Joseph Comito
If to Brown Simpson Strategic Growth Fund, Ltd. to:
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
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If to Brown Simpson Strategic Growth Fund, L.P. to:
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
With a copy, in the case of Notice to Brown Simpson Strategic
Growth Fund, Ltd., or Brown Simpson Strategic Growth Fund, L.P., to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Attention: James Kaye
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
AMENDMENTS; WAIVERS. NO PROVISION OF THIS AGREEMENT MAY BE WAIVED OR AMENDED
EXCEPT IN A WRITTEN INSTRUMENT SIGNED, IN THE CASE OF AN AMENDMENT, BY BOTH THE
COMPANY AND EACH OF THE PURCHASERS OR, IN THE CASE OF A WAIVER, BY THE PARTY
AGAINST WHOM ENFORCEMENT OF ANY SUCH WAIVER IS SOUGHT. NO WAIVER 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
PROVISION, CONDITION OR REQUIREMENT HEREOF, NOR SHALL ANY DELAY OR OMISSION OF
EITHER PARTY TO EXERCISE ANY RIGHT HEREUNDER IN ANY MANNER IMPAIR THE EXERCISE
OF ANY SUCH RIGHT ACCRUING TO IT THEREAFTER. NOTWITHSTANDING THE FOREGOING, NO
SUCH AMENDMENT SHALL BE EFFECTIVE TO THE EXTENT THAT IT APPLIES TO LESS THAN ALL
OF THE HOLDERS OF THE SHARES OF PREFERRED STOCK OUTSTANDING. THE COMPANY SHALL
NOT OFFER OR PAY ANY CONSIDERATION TO A PURCHASER FOR CONSENTING TO SUCH AN
AMENDMENT OR WAIVER UNLESS THE SAME CONSIDERATION IS OFFERED TO EACH PURCHASER
AND THE SAME CONSIDERATION IS PAID TO EACH PURCHASER WHICH CONSENTS TO SUCH
AMENDMENT OR WAIVER.
HEADINGS. THE HEADINGS HEREIN ARE FOR CONVENIENCE ONLY, DO NOT CONSTITUTE A PART
OF THIS AGREEMENT AND SHALL NOT BE DEEMED TO LIMIT OR AFFECT ANY OF THE
PROVISIONS HEREOF.
REFERENCES. REFERENCES HEREIN TO SECTIONS ARE TO SECTIONS OF THIS AGREEMENT,
UNLESS OTHERWISE EXPRESSLY PROVIDED.
SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF THE PARTIES AND THEIR SUCCESSORS AND PERMITTED ASSIGNS. THE COMPANY
MAY NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE
PRIOR WRITTEN CONSENT OF EACH OF THE PURCHASERS. THE PURCHASERS MAY ASSIGN THIS
AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY, PROVIDED, THAT ANY ASSIGNEES MUST MAKE THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 2.2 AND OTHERWISE COMPLY
WITH THE TERMS OF THIS AGREEMENT OTHERWISE APPLICABLE TO ITS ASSIGNOR. THIS
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PROVISION SHALL NOT LIMIT A PURCHASER'S RIGHT TO TRANSFER SECURITIES IN
ACCORDANCE WITH ALL OF THE TERMS OF THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
NO THIRD-PARTY BENEFICIARIES. THIS AGREEMENT IS INTENDED FOR THE BENEFIT OF THE
PARTIES HERETO AND THEIR RESPECTIVE PERMITTED SUCCESSORS AND ASSIGNS AND IS NOT
FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED BY, ANY OTHER
PERSON.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
SURVIVAL. THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PURCHASERS
CONTAINED IN SECTIONS 2.1 AND 2.2, THE AGREEMENTS AND COVENANTS SET FORTH IN
SECTION 3, AND THE INDEMNIFICATION PROVISIONS SET FORTH IN SECTION 5, SHALL
SURVIVE THE CLOSING AND ANY CONVERSION OF THE SHARES OF PREFERRED STOCK OR
EXERCISE OF THE WARRANTS REGARDLESS OF ANY INVESTIGATION MADE BY OR ON BEHALF OF
THE SUCH PURCHASER OR BY OR ON BEHALF OF THE COMPANY, EXCEPT THAT, IN THE CASE
OF REPRESENTATIONS AND WARRANTIES SUCH SURVIVAL SHALL BE LIMITED TO THE PERIOD
OF FOUR (4) YEARS FOLLOWING THE CLOSING DATE ON WHICH THEY WERE MADE OR DEEMED
TO HAVE BEEN MADE (OTHER THAN WITH RESPECT TO ANY CLAIM BY A THIRD PARTY AGAINST
THE PARTY TO THIS AGREEMENT WHO SEEKS TO ASSERT A CLAIM BASED ON SUCH
REPRESENTATIONS AND WARRANTIES). THIS SECTION SHALL HAVE NO EFFECT ON THE
SURVIVAL OF THE INDEMNIFICATION PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT.
COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS, ALL OF
WHICH WHEN TAKEN TOGETHER SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT AND
SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH PARTY AND
DELIVERED TO THE OTHER PARTY, IT BEING UNDERSTOOD THAT BOTH PARTIES NEED NOT
SIGN THE SAME COUNTERPART. IN THE EVENT THAT ANY SIGNATURE IS DELIVERED BY
FACSIMILE TRANSMISSION, SUCH SIGNATURE SHALL CREATE A VALID AND BINDING
OBLIGATION OF THE PARTY EXECUTING (OR ON WHOSE BEHALF SUCH SIGNATURE IS
EXECUTED) THE SAME WITH THE SAME FORCE AND EFFECT AS IF SUCH FACSIMILE SIGNATURE
PAGE WERE AN ORIGINAL THEREOF.
PUBLICITY. THE COMPANY AND THE PURCHASERS SHALL CONSULT WITH EACH OTHER IN
ISSUING ANY PRESS RELEASES OR OTHERWISE MAKING PUBLIC STATEMENTS WITH RESPECT TO
THE TRANSACTIONS CONTEMPLATED HEREBY AND NEITHER PARTY SHALL ISSUE ANY SUCH
PRESS RELEASE OR OTHERWISE MAKE ANY SUCH PUBLIC STATEMENT WITHOUT THE PRIOR
WRITTEN CONSENT OF THE OTHER, WHICH
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CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED, EXCEPT THAT NO PRIOR
CONSENT SHALL BE REQUIRED IF SUCH DISCLOSURE IS REQUIRED BY LAW, IN WHICH SUCH
CASE THE DISCLOSING PARTY SHALL PROVIDE THE OTHER PARTY WITH PRIOR NOTICE OF
SUCH PUBLIC STATEMENT. THE COMPANY SHALL NOT PUBLICLY OR OTHERWISE DISCLOSE THE
NAMES OF ANY OF THE PURCHASERS WITHOUT EACH SUCH PURCHASER'S PRIOR WRITTEN
CONSENT. THE PURCHASERS AND THEIR AFFILIATED COMPANIES SHALL, WITHOUT FURTHER
COST, HAVE THE RIGHT TO USE IN ITS ADVERTISING, MARKETING OR OTHER SIMILAR
MATERIALS ALL OR PARTS OF THE COMPANY'S PRESS RELEASES THAT FOCUS ON THE
TRANSACTION FORMING THE SUBJECT MATTER OF THIS AGREEMENT OR WHICH MAKE REFERENCE
TO THE TRANSACTION. THE PURCHASERS UNDERSTAND THAT THIS GRANT BY THE COMPANY
ONLY WAIVES OBJECTIONS THAT THE COMPANY MIGHT HAVE TO THE USE OF SUCH MATERIALS
BY THE PURCHASERS AND IN NO WAY CONSTITUTES A REPRESENTATION BY THE COMPANY THAT
REFERENCES IN SUCH MATERIALS TO THE ACTIVITIES OF THIRD-PARTIES HAVE BEEN
CLEARED OR CONSTITUTE A FAIR USE.
SEVERABILITY. IN CASE ANY ONE OR MORE OF THE PROVISIONS OF THIS AGREEMENT SHALL
BE INVALID OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY AND ENFORCEABILITY OF
THE REMAINING TERMS AND PROVISIONS OF THIS AGREEMENT SHALL NOT IN ANY WAY BE
AFFECTED OR IMPAIRED THEREBY AND THE PARTIES WILL ATTEMPT TO AGREE UPON A VALID
AND ENFORCEABLE PROVISION WHICH SHALL BE A REASONABLE SUBSTITUTE THEREFOR, AND
UPON SO AGREEING, SHALL INCORPORATE SUCH SUBSTITUTE PROVISION IN THIS AGREEMENT.
REMEDIES. IN ADDITION TO BEING ENTITLED TO EXERCISE ALL RIGHTS PROVIDED HEREIN
OR GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES, THE PURCHASERS WILL BE
ENTITLED TO SPECIFIC PERFORMANCE OF THE OBLIGATIONS OF THE COMPANY UNDER THIS
AGREEMENT OR THE TRANSACTION DOCUMENTS WITHOUT THE SHOWING OF ECONOMIC LOSS AND
WITHOUT ANY BOND OR OTHER SECURITY BEING REQUIRED. EACH OF THE COMPANY AND THE
PURCHASERS (SEVERALLY AND NOT JOINTLY) AGREE THAT MONETARY DAMAGES WOULD NOT BE
ADEQUATE COMPENSATION FOR ANY LOSS INCURRED BY REASON OF ANY BREACH OF ITS
OBLIGATIONS DESCRIBED IN THE FOREGOING SENTENCE AND HEREBY AGREE TO WAIVE IN ANY
ACTION FOR SPECIFIC PERFORMANCE OF ANY SUCH OBLIGATION THE DEFENSE THAT A REMEDY
AT LAW WOULD BE ADEQUATE.
INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. THE OBLIGATIONS OF
EACH PURCHASER HEREUNDER IS SEVERAL AND NOT JOINT WITH THE OBLIGATIONS OF THE
OTHER PURCHASERS HEREUNDER, AND NO PURCHASER SHALL BE RESPONSIBLE IN ANY WAY FOR
THE PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER PURCHASER HEREUNDER. NOTHING
CONTAINED HEREIN OR IN ANY OTHER AGREEMENT OR DOCUMENT DELIVERED AT ANY CLOSING,
AND NO ACTION TAKEN BY ANY PURCHASER PURSUANT HERETO OR THERETO, SHALL BE DEEMED
TO CONSTITUTE THE PURCHASERS AS A PARTNERSHIP, AN ASSOCIATION, A JOINT VENTURE
OR ANY OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE PURCHASERS ARE IN
ANY WAY ACTING IN CONCERT WITH RESPECT TO SUCH OBLIGATIONS OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PURCHASER SHALL BE ENTITLED TO PROTECT AND
ENFORCE ITS RIGHTS, INCLUDING WITHOUT LIMITATION THE RIGHTS ARISING OUT OF THIS
AGREEMENT OR OUT OF THE TRANSACTION DOCUMENTS, AND IT SHALL NOT BE NECESSARY FOR
ANY OTHER PURCHASER TO BE JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR
SUCH PURPOSE.
PAYMENT SET ASIDE. TO THE EXTENT THAT THE COMPANY MAKES A PAYMENT OR PAYMENTS TO
THE PURCHASERS HEREUNDER OR PURSUANT TO THE TRANSACTION DOCUMENTS OR THE
PURCHASERS ENFORCE OR EXERCISE THEIR RIGHTS HEREUNDER OR THEREUNDER, AND SUCH
PAYMENT OR PAYMENTS OR THE PROCEEDS OF SUCH ENFORCEMENT OR EXERCISE OR ANY PART
THEREOF ARE SUBSEQUENTLY INVALIDATED, DECLARED FRAUDULENT OR PREFERENTIAL, SET
ASIDE, RECOVERED FROM, DISGORGED BY OR ARE REQUIRED TO BE REFUNDED, REPAID OR
OTHERWISE RESTORED TO THE COMPANY, A TRUSTEE, RECEIVER OR ANY OTHER PERSON UNDER
ANY LAW (INCLUDING, WITHOUT LIMITATION, ANY BANKRUPTCY
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<PAGE> 42
LAW, STATE OR FEDERAL LAW, COMMON LAW OR EQUITABLE CAUSE OF ACTION), THEN TO THE
EXTENT OF ANY SUCH RESTORATION THE OBLIGATION OR PART THEREOF ORIGINALLY
INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUED IN FULL FORCE AND EFFECT
AS IF SUCH PAYMENT HAD NOT BEEN MADE OR SUCH ENFORCEMENT OR SETOFF HAD NOT
OCCURRED.
FURTHER ASSURANCES. EACH PARTY SHALL DO AND PERFORM, OR CAUSE TO BE DONE AND
PERFORMED, ALL SUCH FURTHER ACTS AND THINGS, AND SHALL EXECUTE AND DELIVER ALL
SUCH OTHER AGREEMENTS, CERTIFICATES, INSTRUMENTS AND DOCUMENTS, AS THE OTHER
PARTY MAY REASONABLY REQUEST IN ORDER TO CARRY OUT THE INTENT AND ACCOMPLISH THE
PURPOSES OF THIS AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREBY.
FEES AND EXPENSES. EXCEPT AS SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT,
EACH PARTY SHALL PAY THE FEES AND EXPENSES OF ITS ADVISERS, COUNSEL, ACCOUNTANTS
AND OTHER EXPERTS, IF ANY, AND ALL OTHER EXPENSES INCURRED BY SUCH PARTY
INCIDENT TO THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY AND PERFORMANCE OF
THIS AGREEMENT; PROVIDED, HOWEVER, THAT THE COMPANY SHALL PAY THE PURCHASERS AN
AGGREGATE FEE OF $30,000 AT THE FIRST CLOSING. THE COMPANY SHALL PAY ALL STAMP
AND OTHER TAXES AND DUTIES LEVIED IN CONNECTION WITH THE ISSUANCE OF THE
PREFERRED STOCK, WARRANTS AND UNDERLYING SHARES PURSUANT HERETO.
41
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
INTERNATIONAL ISOTOPES INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, LTD.
By:
---------------------------------------
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By:
---------------------------------------
Name:
Title:
1
<PAGE> 44
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Preferred Stock at First Number of shares
Name of Purchaser Closing Purchase Price underlying Warrant
- ----------------------- ------------------------ -------------- ------------------
<S> <C> <C> <C>
Brown Simpson Strategic 1,850 $1,850,000 75,850
Growth Fund, L.P.
Brown Simpson Strategic 3,150 $3,150,000 129,150
Growth Fund, Ltd.
</TABLE>
<PAGE> 45
SCHEDULE II
<TABLE>
<CAPTION>
Name of Purchaser Address
- ----------------- -------
<S> <C>
Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: Grand Cayman, Cayman Islands
Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: New York, New York
</TABLE>
1
<PAGE> 46
Exhibit A
[Form of Certificate of Designation]
<PAGE> 47
Exhibit B
[Form of Warrant]
<PAGE> 48
Exhibit C
[Registration Rights Agreement]
<PAGE> 49
Exhibit D
[Company's Legal Opinion]
1. Each of the Company(1) and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
the Subsidiaries. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to enter into
and consummate the transactions contemplated by each of the Transaction
Documents(2) and otherwise to carry out its obligations thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the Company.
Each of the Transaction Documents has been duly executed and delivered by
the Company and constitutes the 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 or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
3. The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions
contemplated by such agreements do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or Bylaws, (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party and
which is required to be included as an exhibit to the SEC Documents (as
defined herein), or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restrictions of
any court or governmental authority to which the Company is subject
(including Federal and state securities laws and regulations), or by which
any property or asset of the Company is bound or affected. The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority.
4. Neither the Company nor any Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing
or registration with, any court or other Federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of the Transaction Documents. Based
on the representations and warranties of the Company set forth in Section
2.1 of the Purchase Agreement and assuming the accuracy of the
representations and warranties of the Purchasers set forth in Section 2.2
of the Purchase Agreement, the offer, issuance and sale of the shares of
Preferred Stock and the Warrants to the Purchasers pursuant to the Purchase
Agreement and the Warrant are exempt from the registration requirements of
the Securities Act.
- --------------------
(1) The opinion letter should state that capitalized terms not otherwise defined
have the meanings assigned to them in the Purchase Agreement.
(2) The term Transaction Documents means the Purchase Agreement, the
Registration Rights Agreement, the Certificate of Designation and the
Warrants.
<PAGE> 50
5. To my knowledge, the Company has filed all reports required to be filed by
it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the three years preceding the date hereof (the "SEC
Documents") on a timely basis. As of their respective dates, the SEC
Documents complied in all material respects as to form with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder.
6. There is no pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator involving
the Company or any of its Subsidiaries which, if adversely decided, could
reasonably be expected to have a material adverse effect on the issuance of
the shares of Preferred Stock or the Conversion Shares, or the issuance or
exercise of the Warrants or Warrant Shares, or the consummation of the
transactions contemplated by the Transaction Documents.
7. All of the Company's issued and outstanding capital stock has been duly
authorized, validly issued and is fully paid and non-assessable as of the
date hereof.
8. The Company has full corporate power and authority to issue, sell and
deliver the Preferred Stock, Conversion Shares, Warrants and Warrant Shares
pursuant to the Transaction Documents.
9. The Company has duly authorized and reserved for issuance such number of
shares of Common Stock as are issuable upon conversion of the Preferred
Stock and exercise of the Warrants (the "Underlying Shares") in accordance
with the terms of the Preferred Shares and the Warrants. When issued by the
Company in accordance with the terms of the Preferred Shares and the
Warrants, the Underlying Shares will be validly issued, fully paid and
non-assessable. When issued by the Company in accordance with the terms of
the Securities Purchase Agreement, the shares of Preferred Stock will be
validly issued, fully paid and non-assessable.
