<PAGE> 1
- --------------------------------------------------------------------------------
As filed with the Securities and Exchange Commission on July 14, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
-------------------------
FORM S-3
Registration Statement
Under The
Securities Act of 1933
------------------------
INTERNATIONAL ISOTOPES INC.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C> <C>
TEXAS 2835 74-276837
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
3100 JIM CHRISTAL ROAD
Denton, Texas 76207-9987
(940) 484-9492
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
IRA LON MORGAN, CHAIRMAN
3100 JIM CHRISTAL ROAD
Denton, Texas 76207-9987
(940) 484-9492
(Name, Address and Telephone Number of Agent for Service)
COPY TO:
CURTIS R. ASHMOS
LOCKE LIDDELL & SAPP LLP
100 CONGRESS, SUITE 300
AUSTIN, TEXAS 78701
(512) 305-4716
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
- ----------------------- -------------------- --------------------- --------------------- --------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED SHARE PRICE REGISTRATION FEE
REGISTERED
- ----------------------- -------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 1,503,804 shares $9.03125 (1) $13,581,230 (1) $3,775.58
par value
- ----------------------- -------------------- --------------------- --------------------- --------------------
</TABLE>
(1) Estimated in accordance with Rule 457(c) of the Securities Act of
1933 solely for the purpose of calculating the registration fee based upon an
assumed price of $9.03125, the average of the high and low sales prices of the
Common Stock as reported on Nasdaq SmallCap Market on July 12, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
<PAGE> 2
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE> 3
PROSPECTUS
1,503,804 SHARES
INTERNATIONAL ISOTOPES INC.
COMMON STOCK
-------------------------
This Prospectus relates to the offering for resale of 1,503,804 shares
of Common Stock, par value $.01 per share (the "Common Stock"), of International
Isotopes Inc. ("I(3)" or the "Company"). All of the Common Stock being
registered may be offered and sold from time to time by certain selling
stockholders of the Company. See "Selling Stockholders" and "Plan of
Distribution." The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Stockholders.
The Company's Common Stock is quoted on the Nasdaq SmallCap Market
under the symbol "INIS" and is listed on the Boston Stock Exchange ("BSE") under
the symbol "ITL." On July 12, 1999, the last reported sale price for the
Company's Common Stock on the Nasdaq SmallCap Market was $9.1875 per share.
-----------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 1.
-----------------------------------
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED
OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------------------------------
The Company has not authorized any person, agent or entity to give any
information or make any representation other than those contained in this
Prospectus (including material incorporated by reference herein). You should not
rely on any such information or representation as having been authorized by the
Company. This Prospectus is not an offer to sell the securities and it is not
soliciting an offer to buy the securities in any state where offers or sales are
not permitted.
The date of this Prospectus is July 13, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Forward Looking Statements..................................................1
The Company.................................................................1
Risk Factors................................................................1
Selling Stockholders........................................................2
Plan of Distribution........................................................3
Incorporation of Certain Documents by Reference.............................4
Legal Matters...............................................................6
Experts.....................................................................6
Available Information.......................................................6
</TABLE>
<PAGE> 5
FORWARD-LOOKING STATEMENTS
This Prospectus contains, or incorporates by reference, certain
statements that may be deemed "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, that address activities,
events or developments that the Company intends, expects, projects, believes or
anticipates will or may occur in the future are forward-looking statements. Such
statements are based on experience, market trends, our perception of historical
trends, current conditions, expected future developments and other factors
believed to be appropriate. The forward-looking statements included in this
Prospectus are also subject to a number of material risks and uncertainties,
including but not limited to economic, competitive, market, governmental and
technological factors affecting the Company's operations, production, markets,
products, services and prices, and other factors discussed in our filings under
the Securities Act and the Exchange Act. Investors are cautioned that such
forward-looking statements are not guarantees of our future performance and that
actual results, developments and business decisions may differ from those
envisioned by our forward-looking statements.
THE COMPANY
International Isotopes Inc., a Texas corporation (the "Company," "We"
or "I(3)"), is a developmental stage Company that has begun executing plans for
operations in the production, marketing, and distribution of a full range of
products used in diagnostic and therapeutic nuclear medicine, research and
industry. Completion of the plans we have developed will establish the first
independent commercial domestic producer of a full range of finished
radiopharmaceuticals (on a contract or joint venture basis), pharmaceutical
grade radioisotopes, radioisotopes and medical devices for commercial sale to
the nuclear medicine industry for the diagnosis and therapeutic treatment of
cancer and other diseases. We are also engineering instrumentation and products
for the radiation therapy and medical imaging markets.
Our principal executive offices located at 3100 Jim Christal Road,
Denton, Texas 76207-9987. The telephone number is (940) 484-9492.
RISK FACTORS
An investment in our Common Stock is speculative and involves a
substantial degree of risk. Investors should carefully consider, along with
other information in this Prospectus, the considerations and risks set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
and other reports and documents filed by the Company from time to time with the
SEC in evaluating an investment in our Company. You should not purchase any
Common Stock unless you can afford to lose your entire investment.
<PAGE> 6
SELLING STOCKHOLDERS
The following table sets forth certain information, as of June 30, 1999, with
respect to the shares of Common Stock beneficially owned prior to the offering
and the shares being offered hereby by the stockholders listed below (the
"Selling Stockholders"). All of the shares of Common Stock offered hereby
underly other securities issued originally in a transaction not involving a
public offering. Absent the current registration, such shares may not be sold by
the Selling Stockholders, except in certain limited situations including
compliance with Rule 144 under the Securities Act.
The Selling Stockholders on May 18, 1999 acquired in a private
placement $10,000,000 of the Company's 5% Convertible Redeemable Preferred Stock
and Warrants to purchase up to 410,000 shares of the Company's Common Stock. The
shares offered hereby represent shares of Common Stock issuable to the Selling
Stockholders as a result of (i) conversion of the Preferred Stock (ii) payment
of interest on the Preferred Stock (in lieu of cash) and (iii) exercise of the
Warrants.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR SHARES OFFERED BY THIS PERCENTAGE OWNED FOLLOWING
NAME TO THIS OFFERING PROSPECTUS OFFERING (1)
---- ------------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Brown Simpson 556,407 556,407 0%
Strategic Growth Fund, L.P.
Brown Simpson 947,397 947,397 0%
Strategic Growth Fund, Ltd.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes all shares of Common Stock offered hereby are sold in this
offering. There is no assurance that the Selling Stockholders will
sell any or all of the shares of Common Stock offered hereby.
-2-
<PAGE> 7
PLAN OF DISTRIBUTION
The Company is registering the Common Stock ("Registrable Securities")
on behalf of the Selling Stockholders ("Holders"). As used herein, the term
Holder means the holder of the Registrable Securities and includes donees and
pledgees selling Registrable Securities received from a named Holder after the
date of this Prospectus. All costs, expenses and fees in connection with the
registration of the Registrable Securities offered hereby will be borne by the
Company. Brokerage commissions and similar selling expenses, if any,
attributable to the sale of Registrable Securities will be borne by the Holders.
Sales of Registrable Securities may be effected by Holders from time to time in
one or more types of transactions (which may include block transactions) on
Nasdaq, on the BSE, in the over-the-counter market, in negotiated transactions,
through put or call options transactions relating to the Registrable Securities,
through short sales of Registrable Securities, or a combination of such methods
of sale, at market prices prevailing at the time of sale, or at negotiated
prices. Such transactions may or may not involve brokers or dealers. The Holders
have advised the Company that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities, nor is there an underwriter or coordinated broker
acting in connection with the proposed sale of Registrable Securities by the
Holders.
The Holders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Registrable Securities or of securities convertible into or exchangeable for the
Registrable Securities in the course of hedging positions they assume with
Holders. The Holders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of Registrable Securities
offered by this Prospectus, which Registrable Securities such broker-dealer or
other financial institution may resell pursuant to this Prospectus (as amended
or supplemented to reflect such transaction).
The Holders may effect such transactions by selling Registrable
Securities directly to purchasers or to or through broker-dealers, which may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from Holders and/or the purchasers
of Registrable Securities for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Holders and any broker-dealers that act in connection with the sale
of Registrable Securities might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
such broker-dealers and any profit on the resale
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<PAGE> 8
of the Registrable Securities sold by them while acting as principals might be
deemed to be underwriting discounts or commissions under the Securities Act. The
Company has agreed to indemnify each Holder against certain liabilities,
including liabilities arising under the Securities Act. The Holders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the Registrable Securities against certain liabilities,
including liabilities arising under the Securities Act.
The Holders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act.
The Holders will be subject to the prospectus delivery requirements of
the Securities Act. The Company has informed the Holders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
Holders also may resell all or a portion of the Registrable Securities
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
Upon the Company being notified by a Holder that any material
arrangement has been entered into with a broker-dealer for the sale of
Registrable Securities through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this Prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such Holder and
of the participating broker-dealer(s), (ii) the number of Registrable Securities
involved, (iii) the initial price at which such Registrable Securities were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
referenced in this Prospectus and (vi) other facts material to the transactions.
In addition, upon the Company being notified by a Holder that a donee or pledgee
intends to sell more than 500 Registrable Securities, a supplement to this
Prospectus will be filed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as amended;
(2) the Company's Quarterly Report on Form 10-Q for the three month
periods ended March 31, 1999.
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(3) the Company's Current Report on Form 8-K filed on May 28, 1999;
and
-5-
<PAGE> 10
(4) the description of the Company's Common Stock contained in the
Company's Registration Statement on form 8-A filed August 1, 1997, including any
amendment or report filed for the purposes of updating such description.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Common Stock
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
A copy of the documents incorporated by reference (other than exhibits
thereto) will be forwarded without charge to each person to whom this Prospectus
is delivered, upon such person's written or oral request to International
Isotopes Inc., Office of the Secretary, 3100 Jim Christal Road, Denton, Texas
76207-9987, telephone number (940) 484-9492. The Company's internet address is
[email protected].
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby have been
passed upon for the Company by Locke Liddell & Sapp LLP, Austin, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1998 and for the years then ended and the periods from November 1, 1995
(inception) to December 31, 1996 and December 31, 1998 have been incorporated by
reference herein in reliance on the report of KPMG LLP, independent certified
public accountants, incorporated by reference herein and upon the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and accordingly files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other
-6-
<PAGE> 11
information filed by the Company with the Commission can be inspected and
copied, at prescribed rates, at the Public Reference Room maintained by the
Commission at 450 Fifth Street, N.W., Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet web site at
http://www.sec.gov/ that also contains such reports, proxy statements and other
information.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including all amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock offered hereby. The Registration Statement has been filed
electronically with the Commission pursuant to its Electronic Data Gathering and
Retrieval ("EDGAR") system. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all the information set forth in
the Registration Statement.
-7-
<PAGE> 12
PART II
Information Not Required in Prospectus
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of this offering, all of which will be paid by
Registrant, are as follows:
<TABLE>
<S> <C>
SEC Registration Fee $ 3,775.58
Nasdaq Listing Fee $ 7,500.00
Accounting Fees and Expenses $ 5,000.00
Registrant's Legal Fees and Expenses $ 20,000.00
Total $ 36,275.58
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Texas Business Corporation Act ("TBCA"), the
Company's Restated Articles of Incorporation provide that the Company will
indemnify its officers, directors, employees and agents to the fullest extent
permitted by the TBCA against actions that may arise against them in such
capacities, and advance expenses in connection with any such actions.
Registrant's Restated Articles of Incorporation provide that directors of the
Company will not be personally liable to Registrant or its stockholders for
monetary damages for any act or omission in his capacity as a director except as
authorized under the TBCA. The TBCA provides that a corporation may indemnify a
person who was, is, or is threatened to be made a named defendant in a
proceeding because such person is or was a director if it is determined in
accordance with the provisions of the TBCA that the person (i) conducted himself
in good faith, (ii) reasonably believed, in the case of conduct in his official
capacity as director, that his conduct was in the corporation's best interests
or, in other cases, that his conduct at least was not opposed to the
corporation's interests and (iii) in the case of any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. A director may not be
indemnified with respect to a proceeding in which the person is found liable on
the basis that personal benefit was improperly received by him, whether or not
the benefit resulted from an action taken in the person's official capacity, or
in which the person is found liable to the corporation. Officers, employees and
agents of a corporation are entitled to be indemnified by the corporation as,
and to the same extent provided for, directors of the corporation.
Registrant carries directors' and officers' liability insurance with an
aggregate policy limit of $5,000,000.
II-1
<PAGE> 13
ITEM 16. EXHIBITS.
Exhibits
4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form SB-2 (Registration No.
333-26269)).
4.2 Form of Warrant issued to Selling Stockholders.
4.3 Certificate of Designation, Preferences and Rights of 5% Convertible
Redeemable Preferred Stock.
4.4 Securities Purchase Agreement between the Selling Stockholders and the
Company.
5. Opinion of Locke Liddell & Sapp LLP with respect to the legality of the
securities being registered hereby.
23.1 Consent of KPMG LLP
23.2 Consent of Locke Liddell & Sapp LLP (included in Exhibit 5).
24 Power of Attorney (included as part of Signature page).
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under Securities Act
may be permitted to directors, officers and controlling persons of Registrant
pursuant to the provisions of its Restated Articles of Incorporation, its
By-Laws, the Texas Business Corporation Act or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against liabilities (other than the payment by Registrant for expenses incurred
or paid by an officer, director or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a) (3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof)
II-2
<PAGE> 14
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (40
or 497(b) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 15
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint IRA LON MORGAN and CARL W. SEIDEL, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments to this Registration Statement and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same, as fully, for all
intents and purposes, as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Denton,
State of Texas, on the 8th day of July, 1999.
INTERNATIONAL ISOTOPES INC.
By: /s/ Ira Lon Morgan.
---------------------------------------
Ira Lon Morgan, Ph.D.
Chairman of the Board and Treasurer
By: /s/ Carl W. Seidel.
---------------------------------------
Carl W. Seidel
President, Chief Executive
Officer and Director
II-4
<PAGE> 16
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Carl W. Seidel President, Chief Executive July 8, 1999
- -------------------------- Officer, and Director (Principal
Carl W. Seidel Executive Officer)
/s/ Joan Gillett Chief Financial Officer July 8, 1999
- -------------------------- (Principal Financial and
Joan Gillett Accounting Officer)
/s/ Ira Lon Morgan Chairman of the Board and July 8, 1999
- -------------------------- Treasurer
Ira Lon Morgan, Ph.D.
/s/ Tommy L. Thompson Executive Vice President, Chief July 8, 1999
- -------------------------- Operating Officer and Director
Tommy L. Thompson
/s/ Virgil L. Simmons Senior Vice President and Director July 8, 1999
- --------------------------
Virgil L. Simmons
/s/ John M. McCormack Director July 8, 1999
- --------------------------
John M. McCormack
/s/ William W. Nicholson Director July 8, 1999
- --------------------------
William W. Nicholson
/s/ Robert J. Gary Director July 8, 1999
- --------------------------
Robert J. Gary
/s/ Frederick J. Bonte Director July 8, 1999
- --------------------------
Frederick J. Bonte, M.D.
/s/ Charles LeMaistre Director July 8, 1999
- --------------------------
Charles LeMaistre, M.D.
</TABLE>
II-5
<PAGE> 17
EXHIBIT INDEX
EXHIBIT NO.
4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form SB-2 (Registration No.
333-26269)).
4.2 Form of Warrant issued to Selling Stockholders.
4.3 Certificate of Designation, Preferences and Rights of 5% Convertible
Redeemable Preferred Stock.
4.4 Securities Purchase Agreement between the Selling Stockholders and the
Company.
5 Opinion of Locke Liddell & Sapp LLP with respect to the legality of the
securities being registered hereby.
23.1 Consent of KPMG LLP
23.2 Consent of Locke Liddell & Sapp LLP (included in Exhibit 5).
24 Power of Attorney (included as part of Signature page).
<PAGE> 1
EXHIBIT 4.2
FORM OF WARRANT
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.
[INSERT DATE OF ISSUANCE]
________shares Warrant No. __
INTERNATIONAL ISOTOPES INC.
STOCK PURCHASE WARRANT
Registered Owner: [INSERT REGISTERED OWNER]
This certifies that, for value received, International Isotopes Inc., a
Texas corporation, the ("Company") grants the following rights to the Registered
Owner, or assigns, of this Warrant:
1. ISSUE. Upon tender (as defined in Section 5) to the Company, the
Company, within three (3) Business Days of the date thereof, shall issue to the
Registered Owner, or assigns, up to the number of shares specified in Section 2
of fully paid and nonassessable shares of Common Stock that the Registered
Owner, or assigns, is otherwise entitled to purchase.
2. NUMBER OF SHARES. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant (the "Warrant Shares") is _____ shares, subject to
adjustment from time to time as set forth in Section 6. The Company shall at all
times reserve and hold available sufficient shares of Common Stock to satisfy
all conversion and purchase rights represented by outstanding convertible
securities, options and warrants, including this Warrant. The Company covenants
and agrees that all shares of Common Stock that may be issued upon the exercise
of this Warrant shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the
purchase and the issuance of the shares, and shall not have any legend or
restrictions on resale, except as required by Section 3.2(b) of the Purchase
Agreement.
<PAGE> 2
3. EXERCISE PRICE. The initial per share exercise price of this Warrant,
representing the price per share at which the shares of stock issuable upon
exercise of this Warrant may be purchased, is _______ ($_____) [insert 110% of
the Average Price on the applicable Closing Date] (the "Exercise Price").
4. EXERCISE PERIOD. This Warrant may be exercised from the Closing Date (as
defined in the Purchase Agreement) up to and including May 20, 2002 (the
"Exercise Period"). If not exercised during this period, this Warrant and all
rights granted under this Warrant shall expire and lapse.
5. TENDER; ISSUANCE OF CERTIFICATES.
a. This Warrant may be exercised, in whole or in part, by (i) actual
delivery of (a) the Exercise Price in cash, (b) a duly executed Warrant
Exercise Form, a copy of which is attached to this Warrant as Exhibit A,
properly executed by the Registered Owner, or assigns, of this Warrant, and
(c) by surrender of this Warrant, or (ii) if the resale of the Warrant
Shares by the Registered Owner is not then registered pursuant to an
effective registration statement under the Securities Act, delivery to the
Company of a written notice of an election to effect a "Cashless Exercise"
(as defined below) for the Warrant Shares specified in the Warrant Exercise
Form. The Warrant Shares so purchased shall be deemed to be issued to the
Registered Owner as of the close of business on the date on which this
Warrant shall have been surrendered, the completed Warrant Exercise Form
shall have been delivered and payment shall have been made for such shares
as set forth above. The payment and Warrant Exercise Form must be delivered
to the registered office of the Company either in person or as set for in
Section 14.
b. Commencing ninety (90) days from the Filing Date (as defined in the
Registration Rights Agreement), if, and only if, at the time of exercise of
this Warrant, the Warrant Shares are not saleable pursuant to an effective
registration statement, then in addition to the exercise of all or a part
of this Warrant by payment of the Exercise Price in cash as provided above,
and in lieu of such payment, the Registered Owner shall have the right to
effect a cashless exercise (a "Cashless Exercise"). In the event of a
Cashless Exercise, the Registered Owner may exercise this Warrant in whole
or in part by surrendering this Warrant in exchange for the number of
shares of Common Stock equal to the product of (x) the number of shares as
to which this Warrant is being exercised multiplied by (y) a fraction, the
numerator of which is the Per Share Market Value of the Common Stock less
the Exercise Price then in effect and the denominator of which is the Per
Share Market Value (in each case adjusted for fractional shares as herein
provided).
c. In lieu of physical delivery of the Warrant, provided the Company's
transfer agent is participating in the Depositary Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST") program, upon request of the
Registered Owner and in compliance with the provisions hereof, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares to the Registered Owner by crediting the
account of the Registered Owner's Prime Broker with DTC through its
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<PAGE> 3
Deposit Withdrawal Agent Commission system. The time period for delivery
described herein shall apply to the electronic transmittals described
herein.
d. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Warrant Exercise Form, shall be
delivered to the Registered Owner within a reasonable time, not exceeding
three (3) Business Days, after this Warrant shall have been so exercised.
The certificates so delivered shall be in such denominations as may be
requested by the Registered Owner and shall be registered in the name of
the Registered Owner or such other name as shall be designated by such
Registered Owner. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the Registered
Owner a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
6. ADJUSTMENT OF EXERCISE PRICE.
a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock
Splits. If the Company, at any time while this Warrant is outstanding, (a)
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares or (d)
issue by reclassification of shares of Common Stock any shares of capital
stock of the Company, then (i) the Exercise Price thereafter shall be
determined by multiplying the Exercise Price by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and the denominator of which
shall be the number of shares of Common Stock outstanding after such event
and (ii) the number of Warrant Shares shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event and the
denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event. Any
adjustment made pursuant to this paragraph (6)(a) shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b. Rights; Warrants. If the Company, at any time while this Warrant is
outstanding, shall issue rights or warrants to all of the holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than the Exercise Price, the Exercise Price shall
thereafter be determined by multiplying the Exercise Price by a fraction,
the denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common
Stock offered for subscription or purchase, and the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at the Exercise Price. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
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<PAGE> 4
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants.
c. Subscription Rights. If the Company, at any time while this Warrant
is outstanding, shall distribute to all of the holders of Common Stock
evidence of its indebtedness or assets or rights or warrants to subscribe
for or purchase any security (excluding those referred to in paragraphs
6(a) and (b) above), then in each such case the Exercise Price at which the
Warrant shall thereafter be exercisable shall be determined by multiplying
the Exercise Price in effect immediately prior to the record date fixed for
determination of shareholders entitled to receive such distribution by a
fraction, the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the
numerator of which shall be such Per Share Market Value of the Common Stock
on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of Common Stock as determined by the
Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company,
such fair market value shall be determined by an Appraiser selected in good
faith by the Registered Owner of the Warrant; and provided, further, that
the Company, after receipt of the determination by such Appraiser shall
have the right to select in good faith an additional Appraiser meeting the
same qualifications in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. Such adjustment
shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above
d. Rounding. All calculations under this Section 6 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is adjusted
pursuant to paragraphs 6(a), (b) or (c), the Company shall promptly deliver
to the Registered Owner a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
f. Redemption Events. The following are "Redemption Events" under this
Section 6(f): (A) any reclassification of the Common Stock, (B) any Change
of Control (as such term is defined in the Purchase Agreement), (C) any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, (D) any suspension from listing or
delisting of the Common Stock from the Nasdaq, the BSE, or any Subsequent
Market (as defined in the Purchase Agreement) on which the Common Stock is
listed for a period of five consecutive days, (E) the Company's notice to
any registered owner of the Warrants, including by way of public
announcement, at any time, of its intention, for any reason, not to comply
with proper requests for the exercise of any such Warrants, or (F) a breach
by the Company of any representation, warranty, covenant or other term or
condition of the Purchase Agreement, the Registration Rights Agreement, the
Preferred Stock, this Warrant or any other agreement, document, certificate
or other instrument delivered in connection with the transactions
contemplated thereby or hereby, except to the extent that such breach would
not have a
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<PAGE> 5
Material Adverse Effect (as defined in Section 2.1(a) of the Purchase
Agreement) and except, in the case of a breach of a covenant which is
curable, only if such breach continues for a period of at least ten days
after the Company knows or reasonably should have known of the existence of
such breach. On and after the date of any Redemption Event, the Registered
Owner shall have the option to require the Company to redeem (the
"Redemption Right") in cash and subject to the terms of payment provisions
set forth in Section 7(e), from funds legally available therefor at the
time of such redemption, the Registered Owner's shares of Common Stock
immediately theretofore acquirable and receivable upon the exercise of such
Registered Owner's Warrants at a price per share equal to the product of
(i) the Average Price immediately preceding the effective date, the date of
the closing, date of occurrence or the date of the announcement, as the
case may be, of the Redemption Event triggering such Redemption Right and
(ii) the number of shares of Common Stock of the Company for which the
Warrant could have been exercised immediately prior to such Redemption
Event. After the occurrence of (A), (B) or (C), the Registered Owner shall
have the right at his or its option, in lieu of the Redemption Right, to
exercise the Warrant for shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such Redemption Event; the Registered Owner shall be entitled
upon such event to receive such amount of securities, cash or property as
if the Registered Owner had held the shares of the Common Stock for which
the Warrant could have been exercised immediately prior to such Redemption
Event (without taking into account any limitations or restrictions on the
exercisability of the Warrants). In the case of a transaction specified in
(B) in which holders of the Company's Common Stock receive cash, the
Registered Owner shall have the right at his or its option, in lieu of the
Redemption Right, to exercise the Warrant for such number of shares of the
surviving company equal to the amount of cash for which the Warrant is
excercisable divided by the fair market value of the shares of the
surviving company on the effective date of the merger. In the case of (A),
(B) or (C), the Company shall not effect any such Redemption Event unless,
prior to the consummation thereof, each Person (other than the Company)
which may be required to deliver any stock, securities, cash or property
upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered and reasonably satisfactory to, the Registered
Owner of this Warrant, (a) the obligations of the Company under this
Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this
Warrant), (b) the obligations of the Company under the Purchase Agreement,
the Preferred Stock, this Warrant, and the Registration Rights Agreement,
and (c) the obligation to deliver to the Registered Owner such shares of
stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 6(f), the Registered Owner may be entitled to
receive. Nothing in this Section 6(f) shall be deemed to authorize the
Company to enter into any transaction not otherwise permitted by the
Purchase Agreement. This provision shall similarly apply to successive
Redemption Events.
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<PAGE> 6
g. Reclassification, Etc. If:
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to the holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(iv) the approval of any shareholders of the Company shall be required
in connection with any reclassification of the Common Stock of the Company,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be delivered to the
Registered Owner, at least 10 Business Days prior to the applicable record or
effective date hereinafter specified, a notice (provided such notice shall not
include any material non-public information) stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
h. Adjustment to Exercise Price. If the Company, at any time while this
Warrant is outstanding, takes any of the actions described in this Section 6(h),
then, in order to prevent dilution of the rights granted under this Warrant, the
Exercise Price will be subject to adjustment from time to time as provided in
this Section 6(h).
i. Adjustment of Exercise Price upon Issuance of Common Stock. If at any
time while this Warrant is outstanding the Company issues or sells, or is deemed
to have issued or sold, any shares of Common Stock (other than (1) the
Underlying Shares or shares of Common Stock deemed to have been issued by the
Company in connection
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<PAGE> 7
with an Approved Stock Plan, (2) the 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) of the Purchase Agreement, (3) the securities to be issued in
the transactions set forth on such Schedule 2.1(c), (4) the shares of Common
Stock issuable upon an Underwritten Offer (as defined in the Registration Rights
Agreement) occurring before December 2000, or (5) the 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) for a consideration per share less than the
Exercise Price in effect immediately prior to such issuance or sale, then
immediately after such issue or sale, the Exercise Price then in effect shall be
reduced to an amount equal to the consideration per share of Common Stock of
such issuance or sale. For the purpose of determining the adjusted Exercise
Price under this Section 6(h)(i), the following shall be applicable:
(A) Issuance of Options. If at any time while this Warrant is
outstanding the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (other than (1) the
Underlying Shares or shares of Common Stock deemed to have been issued by
the Company in connection with an Approved Stock Plan, (2) the 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) of the
Purchase Agreement, (3) the securities to be issued in the transactions set
forth on such Schedule 2.1(c), (4) the shares of Common Stock issuable upon
an Underwritten Offer (as defined in the Registration Rights Agreement)
occurring before December 2000, (5) the shares of Common Stock issuable
upon an Underwritten Offer (as defined in the Registration Rights
Agreement) or (6) the 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) (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange
of such Convertible Securities is less than the Exercise Price in effect
immediately prior to such grant, then the Exercise Price shall be adjusted
to equal the price per share for which Common Stock is issuable upon the
exercise of such Options or upon the conversion or exchange of such
Convertible Securities. No adjustment of the Exercise Price shall be made
upon the actual issuance of such Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities.
(B) Issuance of Convertible Securities. If at any time while this
Warrant is outstanding the Company in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon such conversion or exchange (other than the Underlying Shares
or
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<PAGE> 8
shares of Common Stock deemed to have been issued by the Company in
connection with an Approved Stock Plan, 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) of the Purchase Agreement, 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) is less than the
Exercise Price in effect immediately prior to issuance or sale, then the
Exercise Price shall be adjusted to equal the price per share for which
Common Stock is issuable upon the conversion or exchange of such
Convertible Securities.
(C) Change in Option Price or Rate of Conversion. If there is a change
at any time in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the issuance, conversion or
exchange of any Convertible Securities or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock, then the Exercise Price in effect at the time of such change shall
be readjusted to the Exercise Price which would have been in effect at such
time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued
or sold; provided that no adjustment shall be made if such adjustment would
result in an increase of the Exercise Price then in effect.
(D) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under this Section 6(h)(i), the
following shall be applicable:
(I) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will
be deemed to be the net amount received by the Company therefor. In
case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by
the Company will be the Average Price of such security on Trading Day
immediately preceding the date of receipt thereof. In case any Common
Stock, Options or Convertible Securities are issued to the owners of
the non-surviving entity in connection with any merger in which the
Company is the surviving entity the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such
Common Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or securities will
be determined jointly by the Company and the registered owners of a
majority of the Underlying
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<PAGE> 9
Shares of Warrants then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an Appraiser
selected in good faith by the Company and agreed upon in good faith by
the holders of a majority of the Warrants then outstanding. The
determination of such Appraiser shall be binding upon all parties
absent manifest error.
(II) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for an aggregate
consideration of $.01.
(III) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by
or for the account of the Company, and the disposition of any shares
so owned or held will be considered an issue or sale of Common Stock.
(IV) Record Date. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may
be.
(V) Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 6(h)(i) (subject to the exceptions
stated therein) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price so as to protect the rights of the
Registered Owner, or assigns, of this Warrant; provided, however, that
no such adjustment will increase the Exercise Price as otherwise
determined pursuant to this Section 6(h).
Notwithstanding the foregoing, in no event shall any provision in this
Section 6 cause the Exercise Price to be greater than the Exercise Price on the
date of issuance of this Warrant.
j. Adjustment of Number of Shares. Upon each adjustment of the
Exercise Price as a result of the calculations made in this Section 6, this
Warrant shall thereafter
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evidence the right to receive, at the adjusted Exercise Price, that number
of shares of Common Stock (calculated to the nearest one-hundredth)
obtained by dividing (i) the product of the aggregate number of shares
covered by this Warrant immediately prior to such adjustment and the
Exercise Price in effect immediately prior to such adjustment of the
Exercise Price by (ii) the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
7. OPTIONAL REDEMPTION.
a. Optional Redemption. This Warrant is redeemable in whole or in part
at the option of the Company during the following time periods, from time
to time, under the following conditions and subject also to the conditions
set forth in Section 7(b) (the "Optional Redemption"):
(i) Prior to the first anniversary of the Closing Date, the
Company may redeem the Warrant, subject to the other conditions
herein, if the average closing price of the Company's Common Stock
over twenty (20) consecutive Trading Days reaches over 200% of the
Exercise Price as at the Closing Date;
(ii) During the period commencing on the First Business Day
immediately after the first anniversary of the Closing Date and ending
on the second anniversary of the Closing Date, the Company may redeem
the Warrant, subject to the other conditions herein, if the average
closing price of the Company's Common Stock over twenty (20)
consecutive Trading Days reaches over 175% of the Exercise Price as at
the Closing Date; and
(iii) After the second anniversary of the Closing Date, the
Company may redeem the Warrant, subject to the other conditions
herein, if the average closing price of the Company's Common Stock
over twenty (20) consecutive Trading Days reaches over 150% of the
Exercise Price as at the Closing Date.
b. Redemption Notice. Subject to the conditions set forth in Section
7(a), so long as (i) no Event of Default (or any event that with the
passage of time or giving of notice or both would constitute an Event of
Default) shall have occurred and be continuing, (ii) any Registration
Statement required to be filed and be effective pursuant to the
Registration Rights Agreement is then in effect and has been in effect and
sales of all of the Registrable Securities can be made thereunder for at
least twenty (20) days prior to the Redemption Notice Date (as defined
below) and (iii) the Company has a sufficient number of authorized shares
of Common Stock reserved for issuance upon full exercise of the outstanding
Warrants, upon ten (10) Business Days prior written notice to the
Registered Owner (a "Redemption Notice"), the Warrant may be redeemed by
the Company, in whole or in part, at a redemption price equal to $.01 per
Warrant (the "Redemption Price').
c. Mechanics of Redemption. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight
courier to each Registered Owner (such date that the Redemption Notice is
given on the "Redemption
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Notice Date"). Such Redemption Notice shall indicate (A) the Redemption
Price, (B) each Registered Owner's pro rata allocation of such maximum
amount, and (C) a confirmation of the date that the Company shall effect
the redemption (the "Redemption Date"). The Redemption Date shall be not
less than thirty (30) Business Days and not more than sixty (60) calendar
days after the Redemption Notice Date. Notwithstanding anything in this
Section 7(c), the Company shall convert any Warrant pursuant to Section 5
if the Warrant Exercise Form for a Warrant submitted for exercise is (i)
delivered before the Redemption Date, (ii) for an Exercise Price greater
than or equal to the Redemption Price (appropriately adjusted in accordance
with the terms hereof) or (iii) in excess of such Registered Owner's pro
rata allocation of the maximum Redemption Price indicated in its Redemption
Notice.
d. Payment of Redemption Price. The Company shall pay the applicable
Redemption Price to the Registered Owner of the Warrants being redeemed in
cash on the Redemption Date. If the Company shall fail to pay the
applicable Redemption Price to such Registered Owner on the Redemption
Date, in addition to any remedy such Registered Owner may have under this
Warrant and the Purchase Agreement, such unpaid amount shall bear interest
at the rate of 2.0% per month until paid in full. Until the Company pays
such unpaid applicable Redemption Price in full to each Registered Owner,
each Registered Owner of Warrants submitted for redemption pursuant to this
Section 7 and for which the applicable Redemption Price has not been paid,
shall have the option, in lieu of redemption, (A) to require the Company to
promptly return to such Registered Owner all of the Warrants that were
submitted for redemption by such Registered Owner under this Section 7 and
for which the applicable Redemption Price has not been paid or (B) to
exercise those Warrants for which the applicable Redemption Price has not
been paid at an Exercise Price equal to the lesser of (I) the Exercise
Price applicable to such exercise on the Redemption Date and (II) the
lowest Per Share Market Value from the Redemption Date to the date the
Registered Owner gives a Void Redemption Notice by sending written notice
thereof to the Company via facsimile (the "Void Redemption Notice"). Upon
the Company's receipt of such Void Redemption Notice(s) requesting the
return of the Warrants and before payment of the full applicable Redemption
Price to each Registered Owner, (i) the redemption shall be null and void
with respect to those Warrants submitted for redemption and for which the
applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Warrants submitted to the Company by each Registered
Owner for redemption under this Section 7 and for which the applicable
Redemption Price has not been paid and (iii) the Exercise Price of such
returned Warrants shall be adjusted to the lesser of (I) the Exercise Price
applicable to such conversion on the date on which such Warrants were
originally presented for redemption and (II) the lowest Per Share Market
Value from the Redemption Date to the date the Registered Owner gives a
Void Redemption Notice. If the Company fails to timely effect a redemption
in accordance with this Section 7, the Company shall not be allowed to
submit another Redemption Notice without the prior written consent of
Registered Owners of at least two-thirds (2/3) of the principal amount of
the Warrants then outstanding.
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8. NASDAQ LIMITATION. In no event shall the Issuer be required to issue
shares of Common Stock upon the exercise of a Warrant if such issuance would
violate the rules of Nasdaq.
9. RESTRICTION ON EXERCISE BY EITHER THE REGISTERED OWNER OR THE COMPANY.
Notwithstanding anything herein to the contrary, in no event shall any
Registered Owner or the Company have the right or be required to exercise this
Warrant if as a result of such conversion the aggregate number of shares of
Common Stock beneficially owned by such Registered Owner and its Affiliates
would exceed 4.99% of the outstanding shares of the Common Stock following such
exercise. For purposes of this Section 9, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. The provisions of this Section 9 may be waived by a Registered
Owner as to itself (and solely as to itself) upon not less than 65 days prior
written notice to the Company.
10. OFFICER'S CERTIFICATE. Whenever the number of shares purchasable upon
exercise shall be adjusted as required by the provisions of Section 6, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any Registered Owner of the Warrants and the Company shall,
forthwith after each such adjustment, deliver a copy of such certificate to the
each of the Registered Owners.
11. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" shall mean a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Approved Stock Plan" shall mean any contract, plan or agreement which has
been approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director or
consultant.
"Average Price" has the meaning set forth in the Preferred Stock.
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<PAGE> 13
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing" has the meaning set forth for "First Closing" as in Section
1.2(a) of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value
$0.01 per share.
"Company" means International Isotopes Inc., a Texas corporation.
"Convertible Securities" has the meaning assigned to it in Section
6(h)(i)(A).
"Distribution Date" has the meaning assigned to it in Section 22.
"Exercise Period" has the meaning assigned to it the Section 4.
"Exercise Price" has the meaning assigned to it in Section 3
"Options" has the meaning assigned to it in Section 6(h)(i)(A).
"Per Share Market Value" means on any particular date (i) the closing bid
price per share of the Common Stock on such date on the Nasdaq SmallCap Market
or other registered national stock exchange on which the Common Stock is then
listed or if there is no such price on such date, then the closing bid price on
such exchange or quotation system on the date nearest preceding such date, or
(ii) if the Common Stock is not listed then on the Nasdaq National Market or the
Nasdaq SmallCap Market or any registered national stock exchange, the closing
bid price for a share of Common Stock in the over-the-counter market, as
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (iii) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as determined by an Appraiser
selected in good faith by the holder of this Warrant; provided, however, that
the Company, after receipt of the determination by such Appraiser, shall have
the right to select, in good faith, an additional Appraiser, in which case the
fair market value shall be equal to the average of the determinations by each
such Appraiser; and provided, further that all determinations of the Per Share
Market Value shall be appropriately adjusted for any stock dividends, stock
splits or other similar transactions during such period.
"Preferred Stock" means the shares of the Series A 5% convertible
redeemable preferred stock issued pursuant to the Company's Certificate Of
Designation Of Preferences and Rights and sold pursuant to the Purchase
Agreement.
"Prepayment Amount" has the meaning assigned to it in Section 8.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated May 18, 1999, among the Company and the Purchasers.
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<PAGE> 14
"Purchaser" has the meaning set forth in the Purchase Agreement.
"Redemption Date" has the meaning assigned to it in Section 7(c).
"Redemption Event" has the meaning assigned to it in Section 6(f).
"Redemption Notice" has the meaning assigned to it in Section 7(b).
"Registered Owner" means the person identified on the face of this Warrant
as the registered owner hereof or such other person as shown on the records of
the Company as being the registered owner of this Warrant.
"Redemption Price" has the meaning assigned to it in Section 7(b) hereof.
"Registrable Securities" has the meaning assigned to it in the Registration
Rights Agreement.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated May 18, 1999, among the Company and the Purchasers.
"Rights" has the meaning assigned to it in Section 22.
"Trading Day(s)" means any day on which the primary market on which shares
of Common Stock are listed is open for trading.
"Underlying Shares" has the meaning assigned to it in Section 2.1(d) of the
Purchase Agreement.
"Void Redemption Notice" has the meaning assigned to it in Section 7(d).
"Warrant(s)" means the warrants issuable at the Closing.
12. REGISTRATION RIGHTS. The Company will undertake the registration of the
Common Stock into which such Warrants are exercisable at such times and upon
such terms pursuant to the provisions of the Registration Rights Agreement.
13. RESERVATION OF UNDERLYING SHARES; LISTING. The Company covenants that
it will at all times reserve and keep available out of its authorized shares of
Common Stock, free from preemptive rights, solely for the purpose of issue upon
exercise of the Warrants as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the exercise of all outstanding Warrants
into Common Stock. The Company covenants that all shares of the Common Stock
issued upon exercise of the Warrant which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable. The
Company shall promptly secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock form time to time issuable upon the
14
<PAGE> 15
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange or automated
quotation system.
14. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first Business Day following such
delivery (if received after 8:00 p.m. EST where such notice is to be received)
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications are (i) if to the Company to International Isotopes Inc., 3100
Jim Christal Road, Denton, Texas 76207, Telephone: (940) 484-9492, Facsimile:
(940) 484-0877, Attention: Ira Lon Morgan with copies to Locke Liddell & Sapp
LLP, 100 Congress, Suite 300, Austin, Texas, 78701, Attention: Curtis R. Ashmos
and (ii) if to the Registered Owner to ________ with copies to Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022,
Attn: James Kaye, fax no. (212) 872-1002 or such other address as may be
designated in writing hereafter, in the same manner, by such person.
15. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Company covenants that
if any shares of Common Stock required to be reserved for purposes of exercise
of Warrants hereunder require registration with or approval of any governmental
authority under any Federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
16. FRACTIONAL SHARES. Upon any exercise hereunder, the Company shall not
be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
17. PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of certificates for
shares of the Common Stock upon exercise of the Warrants shall be made without
charge to the Registered Owners thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the
Registered Owner of such Warrant so converted 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.
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<PAGE> 16
18. WARRANTS OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining
whether the holders of the outstanding Warrants have concurred in any direction,
consent or waiver under this Warrant, Warrants which are owned by the Company or
any other obligor on the Warrants or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Warrants shall be disregarded and deemed not
to be outstanding for the purpose of any such determination; provided that any
Warrants owned by the Purchasers (as defined in the Purchase Agreement) shall be
deemed outstanding for purposes of making such a determination. Warrants so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Company the pledgee's right
so to act with respect to such Warrants and that the pledgee is not the Company
or any other obligor upon the Warrants or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Warrants.
19. EFFECT OF HEADINGS; REFERENCES. The section headings herein are for
convenience only and shall not affect the construction hereof. References herein
to Sections are to Sections of this Warrant, unless otherwise expressly
provided.
20. NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle the Registered
Owner to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent exercised for shares of
Common Stock in accordance with the terms hereof.
21. CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
22. SHAREHOLDER RIGHTS PLAN. Notwithstanding the foregoing, in the event
that the Company shall distribute "poison pill" rights pursuant to a "poison
pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of
making any adjustment pursuant to Section 6, make proper provision so that each
Registered Owner who exercises a Warrant after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, a number of Rights to be determined as
follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such
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<PAGE> 17
exercise at the time of such exercise would be entitled in accordance with the
terms and provisions of and applicable to the Rights; and (ii) if such exercise
occurs after the Distribution Date, the same number of Rights to which a holder
of the number of shares into which the Warrant to exercised was exercisable
immediately prior to the Distribution Date would have been entitled on the
Distribution Date in accordance with the terms and provisions of and applicable
to the Rights, and in each case subject to the terms and conditions of the
Rights.
23. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon and inure to
the benefit of the Registered Owners and its assigns, and shall be binding upon
any entity succeeding to the Company by merger or acquisition of all or
substantially all the assets of the Company. The Company may not assign this
Warrant or any rights or obligations hereunder without the prior written consent
of the Registered Owner. The Registered Owner may assign this Warrant without
the prior written consent of the Company.
24. GOVERNING LAW. This Warrant 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 Warrant 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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first set forth above.
INTERNATIONAL ISOTOPES INC.
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
17
<PAGE> 18
EXHIBIT A
Warrant Exercise Form
TO: INTERNATIONAL ISOTOPES INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of International Isotopes Inc., pursuant
to Warrant No. ___ heretofore issued to ___________________ on ____________,
1999; (2) encloses a payment of $__________ for these shares at a price of $____
per share (as adjusted pursuant to the provisions of the Warrant); and (3)
requests that a certificate for the shares be issued in the name of the
undersigned and delivered to the undersigned at the address specified below.
Date:
--------------------------------------------------------
Investor Name:
-----------------------------------------------
Taxpayer Identification:
--------------------------------------
Number:
------------------------------------------------------
By:
----------------------------------------------------------
Printed Name:
------------------------------------------------
Title:
-------------------------------------------------------
Address:
-----------------------------------------------------
Note: The above signature should correspond exactly with the
name on the face of this Warrant Certificate or with the name
of assignee appearing in assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
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<PAGE> 1
EXHIBIT 4.3
INTERNATIONAL ISOTOPES INC.
Certificate of Designation, Preferences and Rights
of Preferred Stock by Resolution of the
Board of Directors Providing for an
Issue of 10,000 Shares of Preferred
Stock Designated
Series A 5% Convertible Redeemable Preferred Stock
----------------
We, Carl W. Seidel, President, and Virgil L. Simmons, of International
Isotopes Inc., a Texas corporation (the "Company"), in accordance with the
provisions of Article 2.13 of the Texas Business Corporation Act, do HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Articles of Incorporation of the Company (hereinafter referred to as the
"Articles of Incorporation"), said Board of Directors has duly adopted the
following resolution effective May 17, 1999 providing for the issuance of a
series of Preferred Stock, designated "Series A 5% Convertible Redeemable
Preferred Stock."
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company by the Articles of Incorporation of the Company, the
Board of Directors hereby authorizes and provides for the issue of a series of
Convertible Redeemable Preferred Stock, $.01 par value per share, of the Company
to be designated as Series A 5% Convertible Redeemable Preferred Stock,
consisting of 10,000 shares, and does hereby fix, state and express the
designations, voting powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof as set forth in Exhibit A hereto.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by Carl W. Seidel, its President and Virgil L. Simmons, its Secretary,
this ______ day of May, 1999. The date of adoption of this resolution is the
17th day of May, 1999.
INTERNATIONAL ISOTOPES INC.
By:
------------------------------
Name: Carl W. Seidel, President
By:
------------------------------
Name: Virgil L. Simmons, Secretary
<PAGE> 2
EXHIBIT A
ARTICLE I
DESIGNATION, AMOUNT, PAR VALUE, LIQUIDATION VALUE AND RANK
1.1 The series of preferred stock shall be designated as Series A 5%
Convertible Redeemable Preferred Stock, ("Series A Preferred Stock" or
"Preferred Stock"), and the number of shares so designated shall be up to 10,000
(which shall not be subject to increase without the consent of each of the
holders of the Series A Preferred Stock ("Holders")). Each share of Preferred
Stock, $.01 par value per share, shall have a liquidation value of $1,000 per
share (the "Liquidation Value").
1.2 The Series A Preferred Stock shall rank senior to the Junior
Securities as to dividends, distributions and upon liquidation, dissolution or
winding up. No class of equity securities of the Company shall be senior to the
Series A Preferred Stock as to dividends, distributions and upon liquidation,
dissolution or winding up.
ARTICLE II
DIVIDENDS
2.1 Holders of Series A Preferred Stock shall be entitled to receive,
out of funds legally available therefor, and the Company shall pay, cumulative
dividends at the rate per share (as a percentage of the Liquidation Value per
share) equal to 5% per annum, payable quarterly, on January 15, April 15, July
15 and October 15 of each year (each a "Dividend Payment Date") commencing on
October 15, 1999, in cash or shares of Common Stock, as set forth in Section
2.2, at the option of the Company. The "Record Date" for any dividend payment is
the close of business on January 1, April 1, July 1 or October 1, as the case
may be, whether or not a Business Day, immediately preceding the Dividend
Payment Date on which such dividend is payable. Dividends on the Series A
Preferred Stock shall be calculated on the basis of a 365-day year (or 366-day
year for any leap year), shall accrue daily commencing on the Issuance Date, and
shall be deemed to accrue from such date and be cumulative whether or not earned
or declared and whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. Accrued and unpaid
dividends of the Preferred Stock for any shares which are being converted shall
be paid on the date on which such Preferred Stock is converted. Except as
otherwise provided herein, if at any time the Company pays less than the total
amount of dividends then accrued on account of the Preferred Stock, such payment
shall be distributed ratably among the Holders based upon the number of shares
held by each Holder.
2.2 Dividends may, at the Company's option be paid in shares of Common
Stock calculated based upon the Average Price on the date such dividends are
due. It shall be assumed that the Company shall elect to make all payments of
dividends in cash, unless the Company shall have given written notice to each
Holder not less than four (4) Business Days' prior to the applicable Dividend
Payment Date of its intention to pay such dividends in Common Stock.
Notwithstanding anything to the contrary contained herein, the Company may not
issue
<PAGE> 3
shares of Common Stock in payment of the dividends if: (i) the number of shares
of Common Stock at the time authorized, unissued and unreserved for all other
purposes is insufficient to pay dividends hereunder in shares of Common Stock or
there is an insufficient number of authorized shares of Common Stock reserved
(pursuant to Section 3.6(b) of the Purchase Agreement) for issue for full
conversion of all shares of Preferred Stock issued pursuant to the Purchase
Agreement; (ii) such shares are not either registered for resale pursuant to the
Registration Statement (as defined in the Registration Rights Agreement) or
freely transferable without volume restrictions pursuant to Rule 144(k)
promulgated under the Act, as determined by counsel to the Company pursuant to a
written opinion letter addressed and in form and substance acceptable to the
Holder and the transfer agent for such shares, subject to receipt from the
Holder of a representation from such Holder that it is not an Affiliate of the
Company; (iii) such shares are not listed or quoted on the Nasdaq or a
Subsequent Market; or (iv) the issuance of such shares would result in the
recipient thereof beneficially owning more than 4.99% of the issued and
outstanding shares of Common Stock as determined in accordance with Section 7.4.
2.3 So long as any Preferred Stock shall remain outstanding or
unconverted, except pursuant to existing agreements of the Company on the date
hereof, neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities, nor shall the
Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described herein) upon, nor
shall any distribution be made in respect of, any Junior Securities, nor shall
any monies be set aside for or applied to the purchase or redemption (through a
sinking fund or otherwise) of any Junior Securities.
ARTICLE III
VOTING RIGHTS
3.1 Except as otherwise provided herein and as otherwise required by
law, the Preferred Stock shall have no voting rights. However, so long as any
shares of Preferred Stock are outstanding, the Company shall not and shall cause
its subsidiaries not to, without the affirmative vote of the Holders of more
than 75% of the shares of the Preferred Stock then outstanding, (a) alter or
change adversely the absolute or relative powers, preferences or rights given to
the Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
amend its, or their, Certificate of Incorporation, bylaws or other charter
documents so as to affect adversely any rights of any Holders, (d) increase the
authorized number of shares of Preferred Stock, (e) sell all or substantially
all of its, or their, assets, (f) merge with or into another company, in the
event that the Company will not be the surviving entity or (g) enter into any
agreement with respect to the foregoing.
ARTICLE IV
LIQUIDATION
4.1 Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary (a "Liquidation"), the Holders shall be
entitled to receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Preferred
2
<PAGE> 4
Stock an amount equal to the Liquidation Value, plus all accrued but unpaid
dividends per share, whether declared or not, before any distribution or payment
shall be made to the Holders of any Junior Securities. If the assets of the
Company shall be insufficient to pay in full all amounts due to the Holders then
the entire assets to be distributed to the Holders and the Holders of all
securities ranking pari passu to the Preferred Stock ratably in accordance with
the respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full. A sale, conveyance, lease, transfer or
disposition of all or substantially all of the assets of the Company or the
consummation by the Company of a transaction or series of related transactions
in which more than 40% of the voting power of the Company is disposed of, or a
consolidation or merger of the Company with or into any other company or
companies shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Article VII. The Company shall mail written notice of any such
Liquidation, not less than 45 days prior to the payment date stated therein, to
each Holder.
ARTICLE V
CONVERSION
5.1 RIGHT OF HOLDERS TO CONVERT PREFERRED STOCK INTO COMMON STOCK.
(a) Conversion Price. Subject to and upon compliance with the
provisions of this Section 5.1, each share of Preferred Stock (and any declared
but unpaid dividends thereon) may, at any time at or before the close of
business on May 20, 2002 be converted into duly authorized, validly issued,
fully-paid and nonassessable shares of Common Stock at a conversion price of
$11.86 per share to be adjusted as set forth in Section 5.1(b), and subject to
the provisions of this Article V (the "Conversion Price").
[PARAGRAPH (b) SHALL NOT APPEAR IN THE CERTIFICATE OF DESIGNATION
ISSUED IN THE THIRD CLOSING]
(b) Quarterly Adjustments of Conversion Price. At 5:00 p.m. on October
15, 1999 and on each Dividend Payment Date thereafter (each, a "Reset Date"),
subject to the last sentence of this Section 5.1(b), the Conversion Price shall
be adjusted to be equal to the Average Price on such Reset Date. The Holder
shall send written notice to the Company of the Conversion Price, as adjusted
pursuant to this paragraph, together with computation of such adjusted
Conversion Price and the computation of the average Per Share Market Value for
each such ten-day period, no later than the second (2nd) Business Day after the
Reset Date. The Conversion Price shall be deemed to be adjusted to such new
Conversion Price unless the Company notifies the Holder within two (2) Business
Days after receipt of such written notice from the Holder that the Company
disagrees with the computation of such adjustment. If the Holder and the Company
fail to agree upon the adjusted Conversion Price within one (1) Business Day
after the Company has given such notice, the Conversion Price shall be computed
promptly by a securities firm acceptable to both the Holder and the Company, and
such computation shall be final; provided, however, that the Conversion Price
shall always be greater than or equal to $7.00 per share but in no event shall
the Conversion Price exceed $11.86.
3
<PAGE> 5
(c) Notice of Conversion. If an adjustment in the Conversion Price and,
if applicable, a change in the securities or other property issuable upon
conversion has taken place pursuant to Articles V or VII, then the conversion
described in Section 5.1(a) shall be at the applicable Conversion Price and in
such securities or other property as so adjusted. The Purchaser desiring to make
a conversion shall deliver to the Company, during usual business hours of the
Company's office, or, at the Purchaser's option, to the Company's transfer agent
during its usual business hours (with a copy to the Company), a written notice
of election to convert, as provided in the form attached hereto as Exhibit A (a
"Notice of Conversion"), accompanied, if required, by the stock certificate(s)
evidencing the shares of Preferred Stock which are to be converted.
5.2 ADJUSTMENT FOR DIVIDENDS; INTEREST PAYMENT AFTER CONVERSION. No
payment or adjustment will be made for dividends on any Common Stock except as
provided herein. On conversion of shares of Preferred Stock, any declared but
unpaid dividends thereon attributable to the period from the Original Issuance
Date to the Conversion Date with respect to the converted shares of Preferred
Stock shall not be canceled, extinguished or forfeited, but rather shall be paid
in full to the Holder thereof by the payment of an amount of shares of Common
Stock valued at the Average Price equal thereto; provided, however, that the
Company shall pay such amount in cash if the Holder provides the Company with
ten (10) days prior written notice of its intention to be paid in cash.
5.3 ISSUANCE OF SHARES UPON CONVERSION.
(a) As promptly as practicable, but in any event no later than two (2)
Trading Days after delivery of a Notice of Conversion and, if required, the
surrender, as herein provided, of any certificates for shares of Preferred Stock
for conversion, the Company shall deliver or cause to be delivered to the Holder
of the Preferred Stock delivering such Notice of Conversion, or such Holder's
designee, a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such shares of Preferred Stock may be converted in accordance with
the provisions of this Article V. Such conversion shall be deemed to have been
made at the time and on the date the Notice of Conversion is delivered to the
Company, as long as, if required, the Preferred Stock being converted are
promptly delivered to the Company and the rights of the Holder of such Preferred
Stock as a Holder (subject to the Company's satisfaction of its obligations
hereunder with respect to such conversion) shall cease at such time with respect
to the shares of Preferred Stock that such Holder would have held had the shares
of Preferred Stock converted into Underlying Shares not been so converted (the
"Converted Preferred Stock"), the Person or Persons entitled to receive the
shares of Common Stock, upon conversion of such Preferred Stock, shall be
treated for all purposes as having become the record holder or holders of such
shares of Common Stock at such time, and such conversion shall be at the
Conversion Price in effect at such time (the "Conversion Date"). Subject to
paragraph 5.3(b), if any certificated shares of Preferred Stock are converted in
part only, upon such conversion the Company shall execute and deliver to the
Holder thereof, as requested by such Holder, a new Preferred Stock certificate
for the number of shares of Preferred Stock equal to the unconverted portion of
such Preferred Stock certificate. Without in any way limiting the Holder's right
to pursue other remedies, including actual damages and/or equitable relief, the
parties hereto agree that if the
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Company fails to deliver the shares of Common Stock required to be issued upon
the conversion of such shares of Preferred Stock under this Section 5.3 within
the two (2) Trading Day period referred above, the Company shall pay to the
Holder upon demand an amount of cash (at the Holder's option) equal to: (i) the
commissions, discounts and similar expenses charged to the Holder in purchasing
a number of shares of Common Stock no greater than the number of shares of
Common Stock required to be issued upon the conversion of the Preferred Stock,
or (ii) the product of (w) the number of shares of Common Stock required to be
issued upon the conversion of the Preferred Stock, (x) the Per Share Market
Value of such shares on the Conversion Date, (y) the number of days after such
two (2) day period that such shares are not delivered to the Holder, and (z)
0.005.
(b) Notwithstanding anything to the contrary set forth herein, upon
conversion of shares of Preferred Stock in accordance with the terms hereof, the
Holder shall not be required to physically surrender its certificate of
Preferred Stock to the Company unless the entire amount of shares of Preferred
Stock is so converted. The Holder and the Company shall maintain records showing
the number of shares of Preferred Stock already converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of the Preferred
Stock certificate(s) upon each such conversion. In the event of any dispute or
discrepancy, such records of the Company shall be controlling and determinative
in the absence of manifest error. Notwithstanding the foregoing, if any portion
of shares of a Preferred Stock certificate is converted, the Holder may not
transfer the Preferred Stock certificate unless the Holder first physically
surrenders the certificate to the Company, whereupon the Company shall promptly
issue and deliver upon the order of the Holder a new certificate of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer
taxes) may request, representing the number of remaining unconverted shares of
Preferred Stock. The Holder and any assignee, by acceptance of the Preferred
Stock, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of a Preferred Stock certificate,
the unpaid and unconverted shares of such Preferred Stock certificate may be
less than the amount stated on the face thereof.
(c) In lieu of delivering physical certificates representing the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder and in compliance with the provisions of Sections 5.1
and 5.3, the Company shall use its best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion of
the Preferred Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.
(d) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates for
shares of Common Stock pursuant to Section 5.3(a), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of any declared but unpaid dividends hereunder, by the second (2nd)
Trading Day after the Conversion Date, and if after such second (2nd) Trading
Day the Holder purchases (in an open market transaction or otherwise) Common
Stock to deliver in
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satisfaction of a sale by such Holder of the Underlying Shares which the Holder
was entitled to receive upon such conversion (a "Buy-In"), then the Company
shall (A) pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) at the option of the Holder, either return
the Preferred Stock for which such conversion was not honored or deliver to such
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its conversion and delivery obligations under
Section 5.3(a). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Preferred Stock with respect to which the market price of the
Underlying Shares on the date of conversion totaled $10,000, under clause (A) of
the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In.
5.4 MANDATORY REDEMPTION ON MAY 20, 2002.
(a) All outstanding and unconverted shares of Series A Preferred Stock
on May 20, 2002 shall be redeemed by the Company pursuant to this Section 5.4
from funds or shares of Common Stock legally available therefor at a price per
share equal to the purchase price as set forth in the Purchase Agreement plus
any and all accrued but unpaid dividends. Thereafter, all shares of Series A
Preferred Stock shall cease to be outstanding and shall have the status of
authorized but undesignated preferred stock. The Company, at its option, shall
pay the redemption price either in cash or in shares of Common Stock valued at
the Average Price on May 20, 2002.
(b) If any portion of the applicable redemption price under Section
5.4(a) shall not be paid by the Company within seven (7) calendar days after the
date due, interest shall accrue thereon at the rate of 15% per annum until the
redemption price plus all such interest is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). In addition, if any portion of
such redemption price remains unpaid for more than seven (7) calendar days after
the date due, the Holder of the Preferred Stock subject to such redemption may
elect, by written notice to the Company given within 30 days after the date due,
to either (i) demand conversion in accordance with the formula and the time
frame therefor set forth in Section 5.1 of all of the shares of Preferred Stock
for which such redemption price, plus accrued liquidated damages thereof, has
not been paid in full (the "Unpaid Redemption Shares"), in which event the Per
Share Market Price for such shares shall be the lower of the Per Share Market
Price calculated on the date such redemption price was originally due and the
Per Share Market Price as of the Holder's written demand for conversion, or (ii)
invalidate ab initio such redemption, notwithstanding anything herein contained
to the contrary. If the Holder elects option (i) above, the Company shall within
five Trading Days of its receipt of such election deliver to the Holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares
subject to such Holder conversion demand and otherwise perform its obligations
hereunder with respect thereto; or, if the Holder elects option (ii) above, the
Company shall promptly, and in any event
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not later than five Trading Days from receipt of Holder's notice of such
election, return to the Holder all of the Unpaid Redemption Shares.
ARTICLE VI
REGISTRATION REQUIREMENTS
6.1 RESERVATION OF SHARES. The Company covenants that it will at all
times reserve and keep available out of its authorized shares of Common Stock,
free from preemptive rights, solely for the purpose of issue upon conversion of
the Preferred Stock as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock into Common Stock (the "Reserved Amount"). The Company covenants
that all shares of the Common Stock issued upon conversion of the Preferred
Stock which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and non-assessable.
6.2 If, at any time a Holder of Preferred Stock submits a Notice of
Conversion, and the Company does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article VI (a "Conversion Default"), subject to Section
7.10, the Company shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of Preferred
Stock which the Holder included in its Conversion Notice and which exceeds the
amount which is then convertible into available shares of Common Stock (the
"Excess Amount") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date additional shares
of Common Stock are authorized by the Company to permit such conversion at which
time the Conversion Price in respect thereof shall be the lesser of (i) the Per
Share Market Value on the Conversion Default Date (as defined below) and (ii)
the Per Share Market Value on the Conversion Date thereafter elected by the
Holder in respect thereof. In addition, the Company shall pay to the Holder
payments ("Conversion Default Payments") for a Conversion Default in the amount
of (x) the sum of (1) the number of the Holder's then outstanding shares of
Preferred Stock plus (2) any declared and unpaid dividends on such shares of
Preferred Stock through the Authorization Date (as defined below) multiplied by
(y) .24, multiplied by (z) (N/365), where N equals the number of days from the
day the holder submits a Notice of Conversion giving rise to a Conversion
Default (the "Conversion Default Date") to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of the full number of outstanding shares of Preferred Stock.
The Company shall use its best efforts to authorize a sufficient number of
shares of Common Stock as soon as practicable following the earlier of (i) such
time that the Holder notifies the Company or that the Company otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof and (ii) a Conversion Default. The
Company shall send notice to the Holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default Payments for
each calendar month shall be paid in cash or shall be convertible into Common
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<PAGE> 9
Stock (at such time as there are sufficient authorized shares of Common Stock
following the Authorization Date) at the applicable Conversion Price, at the
Holder's option, as follows:
(a) In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) Business Day of the month
following the month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common Stock,
the Holder may convert such payment amount into Common Stock at the lesser of
the Conversion Price (as in effect at the time of conversion) and the Per Share
Market Value (on the fifth day of the month referred to below) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article VI (so long as there is then a
sufficient number of authorized shares of Common Stock).
6.3 The Holder's election shall be made in writing to the Company at
any time prior to 9:00 p.m., New York City Time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the conversion Default Payments) for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
Holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).
6.4 Notwithstanding the foregoing, the provisions of Section 2(d) of
the Registration Rights Agreement are incorporated herein by reference.
ARTICLE VII
ADJUSTMENT OF CONVERSION PRICE
7.1 ADJUSTMENT OF CONVERSION PRICE. In addition to any adjustment to
the Conversion Price provided elsewhere in this Certificate of Designation, the
Conversion Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits; Reverse Common Stock
Splits. If the Company, at any time while the Preferred Stock is outstanding,
(a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 7.1(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
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Notwithstanding the foregoing, if the Company shall combine outstanding shares
of Common Stock into a smaller number of shares (a "reverse stock split") at any
time prior to the twelve (12) month anniversary of the Closing Date, then the
Conversion Price in effect immediately prior to such reverse stock split shall
not be adjusted and shall remain in effect after giving effect to such reverse
stock split.
(b) Rights; Warrants. If the Company, at any time while the Preferred
Stock is outstanding, shall issue rights or warrants to all of the holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Conversion Price, the Conversion Price shall
be multiplied by a fraction, the denominator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase, and the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Conversion Price. Such adjustment shall
be made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such rights or warrants.
(c) Subscription Rights. If the Company, at any time while the
Preferred Stock is outstanding, shall distribute to all of the holders of Common
Stock evidence of its indebtedness or assets or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Sections 7.1(a) and
(b) above), then in each such case the Conversion Price at which the Preferred
Stock shall thereafter be exercisable shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed for
determination of shareholders entitled to receive such distribution by a
fraction, the denominator of which shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and the numerator of
which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by an Appraiser selected in good faith by the Holder; and provided,
further, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser meeting the same
qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(d) Rounding. All calculations under Section 7.1 shall be made to the
nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Conversion Price is adjusted
pursuant to paragraphs 7.1(a), (b) or (c), the Company shall promptly deliver to
the Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
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(f) Redemption Events. The following are "Redemption Events" under this
Section 7.1(f): (A) any reclassification of the Common Stock, (B) any Change of
Control, (C) any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, (D) any suspension from
listing or delisting of the Common Stock from the Nasdaq, the BSE, or any
Subsequent Market on which the Common Stock is listed for a period of five
consecutive days, (E) the Company's notice to any Holder of the Preferred Stock,
including by way of public announcement, at any time, of its intention, for any
reason, not to comply with proper requests for the conversion of any such
Preferred Stock, or (F) a breach by the Company of any representation, warranty,
covenant or other term or condition of the Purchase Agreement, the Registration
Rights Agreement, the Warrant, this Certificate of Designation, or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated thereby or hereby, except to the extent that
such breach would not have a Material Adverse Effect (as defined in Section
2.1(a) of the Purchase Agreement) and except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least ten days after the Company knows or reasonably should have known of the
existence of such breach. On and after the date of any Redemption Event, the
Holder shall have the option to require the Company to redeem (the "Redemption
Right") in cash and subject to the terms of payment provisions set forth in
Section 5.3, from funds legally available therefor at the time of such
redemption, the Holder's shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such Holder's Preferred Stock
at a price per share equal to the product of (i) the Average Price immediately
preceding the effective date, the date of the closing, date of occurrence or the
date of the announcement, as the case may be, of the Redemption Event triggering
such Redemption Right and (ii) the number of shares of Common Stock of the
Company into which the Preferred Stock could have been converted immediately
prior to such Redemption Event. After the occurrence of (A), (B) or (C), the
Holder shall have the right at his or its option, in lieu of the Redemption
Right, to convert the Preferred Stock for shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common
Stock following such Redemption Event; the Holder shall be entitled upon such
event to receive such amount of securities, cash or property as if the Holder
had converted the shares of the Common Stock into which the Preferred Stock
could have been converted immediately prior to such Redemption Event (without
taking into account any limitations or restrictions on the convertibility of the
Preferred Stock). In the case of a transaction specified in (B) in which holders
of the Company's Common Stock receive cash, the Holder shall have the right at
his or its option, in lieu of the Redemption Right, to convert the Preferred
Stock for such number of shares of the surviving company equal to the amount of
cash into which the Preferred Stock is convertible divided by the fair market
value of the shares of the surviving company on the effective date of the
merger. In the case of (A), (B) or (C), the Company shall not effect any such
Redemption Event unless, prior to the consummation thereof, each Person (other
than the Company) which may be required to deliver any stock, securities, cash
or property upon the conversion of the Preferred Stock as provided herein shall
assume, by written instrument delivered and reasonably satisfactory to, the
Holder of the Preferred Stock, (a) the obligations of the Company under this
Certificate of Designation (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this
Certificate of Designation), (b) the obligations of the Company under the
Purchase Agreement, the Warrant, this Certificate of Designation, and the
Registration Rights
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Agreement, and (c) the obligation to deliver to the Registered Owner such shares
of stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 7.1(f), the Holder may be entitled to receive.
Nothing in this Section 7.1(f) shall be deemed to authorize the Company to enter
into any transaction not otherwise permitted by the Purchase Agreement. This
provision shall similarly apply to successive Redemption Events.
(g) Adjustment to Conversion Price.
(i) If the Company, at any time while the Preferred Stock is
outstanding, takes any of the actions described in this Section
7.1(g), then, in order to prevent dilution of the rights granted under
this Certificate of Designation, at any time prior to the Maturity
Date, the Conversion Price will be subject to adjustment from time to
time as provided in this Section 7.1(g).
(ii) Adjustment of Conversion Price upon Issuance of Common
Stock. If at any time while the Preferred Stock is outstanding the
Company issues or sells, or is deemed to have issued or sold, any
shares of Common Stock (other than the shares of Common Stock
underlying the Warrants or the Preferred Stock or shares issued upon
exercise of the Warrants or conversion of the Preferred Stock
(collectively, the "Underlying Shares") or shares of Common Stock
deemed to have been issued by the Company in connection with a Stock
Option Plan, or 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) of the Purchase Agreement or the securities to be
issued in the transactions set forth on such Schedule 2.1(c) or any
securities to be issued in an Underwritten Offering (as defined in the
Registration Rights Agreement) before December 31, 2000 or 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), for a
consideration per share less than the Conversion Price in effect
immediately prior to such issuance or sale, then immediately after
such issuance or sale the Conversion Price then in effect shall be
reduced to an amount equal to the consideration per share of Common
Stock in such issuance or sale. For the purpose of determining the
adjusted Conversion Price under this Section 7.1(g), the following
shall be applicable:
(A) Issuance of Options. If at any time while the Preferred
Stock is outstanding the Company in any manner grants any rights
or options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for
Common Stock (other than the Underlying Shares or shares of
Common Stock deemed to have been issued by the Company in
connection with a Stock Option Plan, or 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) of the Purchase
Agreement, or the securities to be issued in the transactions set
forth on such Schedule 2.1(c), or any securities to be issued in
an Underwritten Offering (as defined in the Registration Rights
Agreement) before December 31, 2000, or 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)
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(such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for
which Common Stock is issuable upon the exercise of such Options
or upon conversion or exchange of such Convertible Securities is
less than the Conversion Price in effect immediately prior to
such grant, then the Conversion Price then in effect shall be
reduced to equal the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities. No adjustment of the
Conversion Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Options.
(B) Issuance of Convertible Securities. If at any time while
the Preferred Stock is outstanding the Company in any manner
issues or sells any Convertible Securities and the price per
share for which Common Stock is issuable upon such conversion or
exchange (other than the Underlying Shares or shares of Common
Stock deemed to have been issued by the Company in connection
with a Stock Option Plan, 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) of the Purchase Agreement,
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) is less than the Conversion Price in effect
immediately prior to issuance or sale, then the Conversion Price
then in effect shall be reduced to an amount equal to the price
per share for which the Common Stock is issuable upon the
conversion or exchange of such Convertible Securities. No
adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(C) Change in Option Price or Rate of Conversion. If there
is a change at any time in (i) the Purchase Price provided for in
any Options, (ii) the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible
Securities or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock, then
immediately after such change in option price or rate of
conversion the Conversion Price in effect at the time of such
change shall be readjusted to the Conversion Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed Purchase
Price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold;
provided that no adjustment shall be made if such adjustment
would result in an increase of the Conversion Price then in
effect.
(D) Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under
Section 7.1(g)(ii), the following shall be applicable:
(I) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued
or sold or
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deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net
amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of the
consideration other than cash received by the Company will
be the fair value of such consideration, except where such
consideration consists of securities, in which case the
amount of consideration received by the Company will be the
Average Price of such security immediately preceding the
date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which
the Company is the surviving entity the amount of
consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the
Holders of Preferred Stock representing a majority of the
aggregate number of shares of Preferred Stock then
outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event
requiring valuation (a "Valuation Event"), the fair value of
such consideration will be determined within forty-eight
(48) hours of the tenth (10th) day following the Valuation
Event by an Appraiser selected in good faith by the Company
and agreed upon by the Holders of Preferred Stock
representing a majority of the aggregate number of shares of
Preferred Stock then outstanding. The determination of such
Appraiser shall be binding upon all parties absent manifest
error.
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other
securities of the Company, together comprising one
integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for an aggregate
consideration of $.01.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares
owned or held by or for the account of the Company, and the
disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.
(IV) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them
(1) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities or (2) to
subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed
to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the
declaration of such dividend or the
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making of such other distribution or the date of the
granting of such right of subscription or purchase, as the
case may be.
(E) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 7.1(g) (subject to the
exceptions stated therein) but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with
equity features), then the Company's Board of Directors will make
an appropriate adjustment in the Conversion Price so as to
protect the rights of the Holder, or assigns, of the Preferred
Stock; provided, however, that no such adjustment will increase
the Conversion Price as otherwise determined pursuant to this
Section 7.1(g).
(F) Notices. The Company shall give the Holder written
notice of the occurrence of any of the events specified in this
Section 7.1(g) as soon as practicable, but in no event later than
three (3) Business Days, after such event and shall publicly
disclose such event prior to or concurrently with the giving of
such notice. Such notice shall contain at least: (A) a
description of the event, (B) the adjusted Conversion Price with
a reference to the applicable paragraph in Section 7.1(g), and
(C) the dates of the five (5) Trading Day period during which the
adjusted Conversion Price is in effect.
(h) Delay in Payment to Holder. If the Company fails for any reason,
voluntarily or involuntarily, to pay any amount of money to the Holder
(including, without limitation, the declared dividends on the Preferred Stock,
penalties or liquidated damages) in full on the date such amount is due to the
Holder (the "Payment Due Date"), then, as partial relief for the delay in such
payment to the Holder (which remedy shall not be exclusive of any other remedies
available at law or in equity and shall not excuse or waive the Company's
obligation to make such payment), from and after the Payment Due Date the
Conversion Price in effect on the Payment Due Date shall be adjusted to the
lesser of (i) the Conversion Price in effect on the Payment Due Date and (ii)
80% of the lowest Per Share Market Value on any day during the period beginning
on and including the Payment Due Date and ending on the including the date, if
ever, the Company pays in full to the Holder all amounts the Company's failure
of which to pay is the basis for this adjustment, subject to further adjustment
pursuant to this paragraph or other provisions of this Certificate of
Designation. No adjustments will be made under this paragraph if the Company's
failure to pay is due solely to delays caused by the Commission, so long as the
Company has not breached or failed to observe or perform any covenant or
agreement contained in this Certificate of Designation, the Warrant(s), the
Purchase Agreement or the Registration Rights Agreement.
7.2 QUALIFIED AUDITORS' REPORT. In the event that the Company's
independent certified public accountants issue a report on their audit of the
Company's financial statements for a full fiscal year and such report contains
either a qualification or an explanatory paragraph relating to the Company's
ability to continue as a going concern, the Conversion Price shall be adjusted
to be equal to the lesser of: (i) the then current Conversion Price, or (ii) the
Average Price for the ten-day period commencing on the first public announcement
of such audit report.
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7.3 RESTRICTION ON CONVERSION BY EITHER THE HOLDER OR THE COMPANY.
Notwithstanding anything herein to the contrary, in no event shall any Holder or
the Company have the right or be required to convert any or all of the aggregate
purchase price of the Preferred Stock and declared but unpaid dividends thereon
of the Preferred Stock if as a result of such conversion the aggregate number of
shares of Common Stock beneficially owned by such Holder and its Affiliates
would exceed 4.99% of the outstanding shares of the Common Stock following such
conversion. For purposes of this Section 7.3, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. The provisions of this Section 7.3 may be waived by a Holder
as to itself (and solely as to itself) upon not less than 65 days prior written
notice to the Company, and the provisions of this Section 7.3 shall continue to
apply until such 65th day (or later, if stated in the notice of waiver).
7.4 OFFICER'S CERTIFICATE. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 7.1,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Preferred Stock and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the each of
the Holders.
7.5 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Preferred Stock hereunder require registration with or approval of
any governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Company will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
7.6 FRACTIONAL SHARES. Upon a conversion hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
the Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market Value at such
time. If the Company elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
7.7 PAYMENT OF TAX UPON ISSUE OR TRANSFER. The issuance of certificates
for shares of the Common Stock on conversion of the Preferred Stock shall be
made without charge to the Holders thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Preferred Stock so converted 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
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to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
7.8 NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first Business Day following such
delivery (if received after 8:00 p.m. EST where such notice is to be received)
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications are (i) if to the Company to International Isotopes Inc., 3100
Jim Christal Road, Denton, Texas 76207, Telephone: (940) 484-9492, Facsimile:
(940) 484-0877, Attention: Ira Lon Morgan with copies to Locke Liddell & Sapp,
LLP, 100 Congress, Suite 300, Austin, Texas 78731, Attention: Curtis R. Ashmos,
and (ii) if to any Holder to the address set forth on Schedule II to the
Purchase Agreement with copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590
Madison Avenue, New York, New York 10022, Attn: James Kaye, fax no. (212)
872-1002 or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
7.9 ALLOCATIONS OF RESERVED AMOUNT. The Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock issued to each Holder. Each increase to the Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the event a Holder shall sell or otherwise transfer any of such Holder's
Preferred Stock, each transferee shall be allocated a pro rata portion of such
transferor's Reserved Amount. Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Preferred Stock shall
be allocated to the remaining Holders, pro rata, based on the number of shares
of Preferred Stock then held by such Holders.
7.10 NASDAQ LIMITATION. In no event shall the Company be required to
issue shares of Common Stock upon the conversion of Preferred Stock if such
issuance would violate the rules of Nasdaq.
ARTICLE VIII
OPTIONAL REDEMPTION
8.1 OPTIONAL REDEMPTION.
(a) The shares of Preferred Stock are redeemable, in whole or in part,
at the option of the Company during the following time periods, from time to
time, under the following conditions and subject also to the conditions set
forth in Section 8.1(b) (the "Optional Redemption"):
(i) Prior to the first anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the
other conditions
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herein, if the average closing price of the Company's Common Stock
over twenty (20) consecutive Trading Days reaches over 200% of the
Conversion Price as at the Original Issue Date;
(ii) During the period commencing on the first Business Day
immediately after the first anniversary of the Original Issue Date and
ending on the second anniversary of the Original Issue Date, the
Company may redeem the shares of Preferred Stock subject to the other
conditions herein, if the average closing price of the Company's
Common Stock over twenty (20) consecutive Trading Days reaches over
175% of the Conversion Price as at the Original Issue Date; and
(iii) After the second anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the
other conditions herein, if the average closing price of the Company's
Common Stock over twenty (20) consecutive Trading Days reaches over
150% of the Conversion Price as at the Original Issue Date.
(b) Subject to the conditions set forth in Section 8.1(a), so long as
(i) any Registration Statement required to be filed and be effective pursuant to
the Registration Rights Agreement is then in effect and has been in effect and
sales of all of the Registrable Securities can be made thereunder for at least
twenty (20) days prior to the Redemption Notice Date (as defined below) and (ii)
the Company has a sufficient number of authorized shares of Common Stock
reserved for issuance upon full conversion of the Preferred Stock, upon ten (10)
Business Days prior written notice to the Holder (a "Redemption Notice"), the
full number of outstanding shares of Preferred Stock may be redeemed by the
Company, in whole at a price equal to the original purchase price of the
Preferred Stock (the "Redemption Price"), together with any declared but unpaid
dividends and all liquidated damages and other amounts due in respect thereof up
to the Redemption Date (as defined below) (subject to the right of the Holder on
the Record Date to receive dividends due on the Dividend Payment Date).
8.2 MECHANICS OF REDEMPTION. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight courier to
each Holder (such date that the notice is given, the "Redemption Notice Date").
Such Redemption Notice shall indicate (A) the Redemption Price, (B) each
Holder's pro rata allocation of such maximum amount, and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
date shall be not less than thirty (30) Business Days and not more than sixty
(60) calendar days after the Redemption Notice Date. Notwithstanding anything in
this Section 8.2, the Company shall convert any Preferred Stock pursuant to
Article VIII if the Conversion Notice for shares of Preferred Stock submitted
for conversion is (i) delivered before the Redemption Date, (ii) for a
Conversion Price greater than or equal to the Redemption Price (appropriately
adjusted in accordance with the terms hereof) or (iii) in excess of such
Holder's pro rata allocation of the maximum Redemption Price indicated in its
Redemption Notice.
8.3 PAYMENT OF REDEMPTION PRICE. The Company shall pay the applicable
Redemption Price to the Holder of the shares of Preferred Stock being redeemed
in cash on the Redemption Date. If the Company shall fail to pay the applicable
Redemption Price to such Holder on the Redemption Date, in addition to any
remedy such Holder may have under this
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Certificate of Designation and the Purchase Agreement, such unpaid amount shall
bear interest at the rate of 2.0% per month until paid in full. Until the
Company pays such unpaid applicable Redemption Price in full to each Holder,
each Holder of shares of Preferred Stock submitted for redemption pursuant to
this Article VIII and for which the applicable Redemption Price has not been
paid, shall have the option, in lieu of redemption, (A) to require the Company
to promptly return to such Holder all of the shares of Preferred Stock that were
submitted for redemption by such Holder under this Article VIII and for which
the applicable Redemption Price has not been paid or (B) to convert those shares
of Preferred Stock for which the applicable Redemption Price has not been paid
at a Conversion Price equal to the lesser of (I) the Conversion Price applicable
to such conversion on the Redemption Date and (II) the lowest Per Share Market
Value from the Redemption Date to the date the Holder gives a Void Redemption
Notice by sending written notice thereof to the Company via facsimile (the "Void
Redemption Notice"). Upon the Company's receipt of such Void Redemption
Notice(s) requesting the return of the shares of Preferred Stock and prior to
payment of the full applicable Redemption Price to each Holder, (i) the
redemption shall be null and void with respect to those shares of Preferred
Stock submitted for redemption and for which the applicable Redemption Price has
not been paid, (ii) the Company shall immediately return any Preferred Stock
certificates submitted to the Company by each Holder for redemption under this
Article VIII and for which the applicable Redemption Price has not been paid and
(iii) the Conversion Price of such returned shares of Preferred Stock shall be
adjusted to the lesser of (I) the Conversion Price applicable to such conversion
on the date on which such shares of Preferred Stock were originally presented
for redemption and (II) the lowest Per Share Market Value from the Redemption
Date to the date the Holder gives a Void Redemption Notice. If the Company fails
to timely effect a redemption in accordance with this Article VIII, the Company
shall not be allowed to submit another Redemption Notice without the prior
written consent of Holders of at least two-thirds (2/3) of the number of shares
of Preferred Stock then outstanding.
ARTICLE IX
DEFINITIONS
9.1 DEFINITIONS. For the purposes hereof, the following terms shall
have the following meanings:
"Act" means the Securities Act of 1993, as amended.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Authorization Date" has the meaning set forth in Section 6.2.
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"Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8), or a similar
calculation if another figure for the number of Trading Days is set forth for
clause (x) of this definition.
"BSE" means the Boston Stock Exchange.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"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 Section 13(d)(3) of the Exchange Act) of in excess of 40% of the voting
securities of the Issuer, (ii) a replacement of more than one-half of the
members of the Issuer's Board of Directors which is not approved by a majority
of those individuals who are members of the Board of Directors on the date
hereof, or their duly elected successors who are directors immediately prior to
such transaction, in one or a series of related transactions, (iii) the merger
of the Issuer 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 Issuer in one or a series of related
transactions, or (v) the execution by the Issuer of an agreement to which the
Issuer is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii) or (iv).
"Closing Date" means the date of the closing of the purchase and sale
of the Preferred Stock.
"Commission" means the United States Securities and Exchange
Commission, or any successor to such agency.
"Common Stock" means the Company's common stock, $.01 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Conversion Date" has the meaning set forth in Section 5.3(a).
"Conversion Default" has the meaning set forth in Section 6.2.
"Conversion Default Date" has the meaning set forth in Section 6.2.
"Conversion Default Payments" has the meaning set forth in Section 6.2.
"Conversion Price" has the meaning set forth in Section 5.1.
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is the Liquidation Value and the denominator of which is the Conversion
Price at such time.
"Conversion Shares" has the meaning set forth in the Purchase
Agreement.
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"Converted Preferred Stock" has the meaning set forth in Section
5.3(a).
"Convertible Securities" has the meaning set forth in Section
7.1(g)(ii)(A).
"Dividend Payment Date" has the meaning set forth in Section 2.1.
"DTC" means the Depositary Trust Corporation.
"Excess Amount" has the meaning set forth in Section 6.2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or other similar terms means the registered holder of any
share of Preferred Stock.
"Issuance Date" means the date of first issue of any shares of
Preferred Stock.
"Junior Securities" means the Common Stock and all other equity
securities of the Company]which are junior in rights and liquidation preference
to Preferred Stock.
"Liquidation Value" has the meaning set forth in Section 1.1.
"Nasdaq" means the Nasdaq SmallCap Market.
"Notice of Conversion" has the meaning set forth in Section 5.1(c).
"Options" has the meaning set forth in Section 7.1(g)(ii)(A).
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Payment Due Date" has the meaning set forth in Section 7.1(h).
"Per Share Market Value" means (i) on any particular date the closing
bid price per share of the Common Stock on such date (as reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq, any Subsequent Market on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Debenture; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select in good faith an
additional Appraiser, in which case, the fair market value
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shall be equal to the average of the determinations by each such Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of the Original Issue Date, among the Company and the original Holders of the
Preferred Stock.
"Record Date" has the meaning set forth in Section 2.1.
"Redemption Date" has the meaning set forth in Section 8.2.
"Redemption Notice" has the meaning set forth in Section 8.1(b).
"Redemption Notice Date" has the meaning set forth in Section 8.2.
"Redemption Price" has the meaning set forth in Section 8.1(b).
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
"Registration Statement" has the meaning set forth in the Registration
Rights Agreement.
"Reserved Amount" has the meaning set forth in Section 6.2.
"Reset Date" has the meaning set forth in Section 5.1(b).
"Stock Option Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Issuer, pursuant to which the
Issuer's securities may be issued to any employee, officer, director or
consultant.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Subsequent Market" means the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market.
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or
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a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter Market, as reported by the OTC Bulletin Board, or (c) if the
Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock
is quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions or reporting prices) provided, however that in any event that the
Common Stock is not listed or quoted as set forth in (a), (b), or (c) hereof,
then a Trading Day shall mean any Business Day.
"Underlying Shares" means the number of shares of Common Stock into
which the shares of Preferred Stock are convertible in accordance with the terms
hereof and the Purchase Agreement.
"Unpaid Redemption Shares" has the meaning set forth in Section 5.4(b).
"Valuation Event" has the meaning set forth in Section
7.1(g)(ii)(D)(I).
"Void Redemption Notice" has the meaning set forth in Section 8.3.
"Warrant" or "Warrants" has the meaning set forth in the Purchase
Agreement.
ARTICLE X
MISCELLANEOUS
10.1 MODIFICATION OF CERTIFICATE OF DESIGNATION. This Certificate of
Designation may be modified without prior notice to any Holder upon the written
consent of the Company and the Holders of more than 75% of the shares of
Preferred Stock then outstanding. The Holders of more than 75% of the shares of
Preferred Stock then outstanding may waive compliance by the Company with any
provision of this Certificate of Designation without prior notice to any Holder.
However, without the consent of each Holder affected, an amendment, supplement
or waiver may not (1) reduce the number of shares of Preferred Stock whose
Holders must consent to an amendment, supplement or waiver, or (2) make any
shares of Preferred Stock payable in money or property other than as stated in
the Certificate of Designation.
10.2 MISCELLANEOUS. This Certificate of Designation 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, except
for matters of corporate law, which shall be governed by the laws of the State
of Texas. 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. The parties
hereto, including all guarantors or endorsers, hereby waive presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Certificate of
Designation, except as specifically provided herein, and assent to extensions of
the time of payment, or forbearance or other indulgence
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without notice. The Holder of Preferred Stock by acceptance of a share of
Preferred Stock agrees to be bound by the provisions of this Certificate of
Designation which are expressly binding on such Holder.
10.3 PREFERRED STOCK OWNED BY COMPANY DEEMED NOT OUTSTANDING. In
determining whether the holders of the requisite number of shares of Preferred
Stock have concurred in any direction, consent or waiver under this Certificate
of Designation, shares of Preferred Stock which are owned by the Company or any
other obligor on the Preferred Stock or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Preferred Stock shall be disregarded and
deemed not to be outstanding for the purpose of any such determination; provided
that any shares of Preferred Stock owned by the Purchasers shall be deemed
outstanding for purposes of making such a determination. Shares of Preferred
Stock so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such shares of Preferred Stock and
that the pledgee is not the Company or any other obligor upon the Preferred
Stock or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Preferred Stock.
10.4 NOTICE TO HOLDERS PRIOR TO TAKING CERTAIN TYPES OF ACTION. In
case:
(a) the Company shall authorize the issuance, at any time from and
after the Original Issue Date, to all holders of any class or series of its
Capital Stock, of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;
(b) the Company shall authorize, at any time from and after the
Original Issue Date, the distribution to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;
(c) the Company shall declare a dividend (or other distribution) on its
Common Stock or the Company shall declare a special nonrecurring dividend on or
a redemption of its Common Stock;
(d) of any subdivision, combination or reclassification of any class or
series of Capital Stock of the Company at any time from and after the Original
Issue Date or of any consolidation or merger to which the Company is a party and
for which approval by the shareholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(e) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be mailed to the Holders, at their last
addresses as they shall appear upon the registration books of the Company, at
least 10 days prior to the applicable record date hereinafter specified, a
notice stating (i) the date as of which the holders of record of such class or
series of Capital Stock are to be entitled to receive any such rights, warrants
or
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distribution are to be determined, or (ii) the date on which any such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action is expected to
become effective, and the date as of which it is expected that holders of record
of such class or series of Capital Stock record shall be entitled to exchange
their stock for securities or other property, if any, deliverable upon such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 10.4 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.
10.5 EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10.6 REFERENCES. References to Sections and Articles are to Sections
and Articles of this Certificate of Designation, unless otherwise expressly
provided.
10.7 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
10.8 LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to the Company (including any bond the
Company's transfer agent requires the Holders to post) of the loss, theft,
destruction or mutilation of any stock certificates representing Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of such Series A Preferred Stock
certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such Preferred Stock into
Common Stock.
10.9 REMEDIES CHARACTERIZED; OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Preferred Stock that there
shall be no characterization concerning this instrument other than as expressly
provided herein. The Company further covenants that it will not take any action
which might materially and adversely affect the rights of the Holders of
Preferred Stock. Amounts set forth or provided for herein with respect to
payments, conversion
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<PAGE> 26
and the like (and the computation thereof) shall be the amounts to be received
by the Holder thereof and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holders of the Preferred Stock and that the remedy at
law in the event of any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holders
of the Preferred Stock shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
10.10 SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Purchasers (as defined in
this Purchase Agreement) and shall not be construed against any person as the
drafter hereof.
10.11 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of a Holder of Preferred Stock in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
10.12 PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of
certificates for shares of the Common Stock upon conversion of the Preferred
Shares shall be made without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holders so converted 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.
[SIGNATURE PAGE(S) TO FOLLOW]
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<PAGE> 27
IN WITNESS WHEREOF International Isotopes Inc. has caused this
Certificate of Designation to be signed by its President and Secretary on this
___ day of May, 1999.
By:
-----------------------------
Name: Carl W. Seidel
President
By:
-----------------------------
Name: Virgil L. Simmons
Secretary
26
<PAGE> 28
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered
Holder in order to convert shares
of Series A Convertible Redeemable
Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series
A Convertible Redeemable Preferred Stock ("Series A Preferred Stock") indicated
below, into shares of common stock, par value $.01 per share (the "Common
Stock"), of International Isotopes Inc. (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations:
-----------------------------------------------
Date to effect conversion
-----------------------------------------------
Number of shares of Series A Preferred Stock
to be converted
-----------------------------------------------
Number of shares of Common Stock to be issued
-----------------------------------------------
Applicable Conversion Price
-----------------------------------------------
Signature
-----------------------------------------------
Name
-----------------------------------------------
Address
27
<PAGE> 1
EXHIBIT 4.4
================================================================================
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
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase and Sale.
a. 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.
b. 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.
c. 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.
1.2 Closings.
a. 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:
(i) 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;
(ii) 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;
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<PAGE> 4
(iii) 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
such Purchaser's name on the Schedule I, registered in the name of such
Purchaser; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.1.
b. 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:
(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 "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;
(ii) 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;
(iii) 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
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.2.
c. 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
3
<PAGE> 5
the Purchasers Call Option Notice (such date or the date of the Third Closing
under the Company 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;
(ii) 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.
(iii) 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
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.3.
d. 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
4
<PAGE> 6
the Company Put Option 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:
(i) 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;
(ii) 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;
(iii) 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
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.3.
e. 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;
5
<PAGE> 7
where CP is the Conversion Price (as defined in the Certificate of Designation)
of the shares of Preferred Stock; and
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
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to each of the
Purchasers:
a. 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
6
<PAGE> 8
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.
b. 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 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.
c. 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
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<PAGE> 9
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.
d. 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.
e. 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.
f. 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
8
<PAGE> 10
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").
g. 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 Documents or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
h. 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
i. 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
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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.
j. 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 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.
k. 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
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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.
l. 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.
m. 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.
n. 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.
o. 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.
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p. 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.
q. 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 that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
r. 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.
s. 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.
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<PAGE> 14
t. 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.
u. 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.
v. 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.
w. 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 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.
x. 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
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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.
y. 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.
z. 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.
aa. 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.
bb. 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.
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cc. 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.
dd. 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.
ee. 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.
ff. 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.
gg. 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.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
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a. 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.
b. 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.
c. 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.
d. 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.
e. 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
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any other transaction document. Such Purchaser understands that its investment
in the Preferred Stock and Warrants involves a significant degree of risk.
f. 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.
g. 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.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. 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
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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 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.
b. 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.
3.2 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.
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3.3 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 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.
3.4 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.
3.5 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.
3.6 Listing and Reservation of Conversion Shares and Warrant Shares.
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a. 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 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).
b. 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
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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.
3.7 Notice of Breaches.
a. 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 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.
b. 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.
c. 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.
3.8 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.
3.9 Future Financings.
a. 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
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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 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
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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.
b. 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.
3.10 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.
3.11 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.
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"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.
3.12 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 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.
3.13 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.
3.14 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
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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.
3.15 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).
3.16 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.
3.17 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 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.
3.18 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.
3.19 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
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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.
ARTICLE IV.
CONDITIONS
4.1 First Closing.
a. 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:
(i) 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;
(ii) 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
(iii) 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.
b. 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:
(i) 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;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions
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required by this Agreement to be performed, satisfied or complied with by the
Company at or before the First Closing Date;
(iii) 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;
(iv) 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);
(v) 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;
(vi) 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;
(vii) 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;
(viii) 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);
(ix) 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;
(x) 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
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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
(xi) 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.
c. 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:
(i) Opinion. An opinion of the Company's legal counsel in the
form attached hereto as Exhibit D dated as of the First Closing Date;
(ii) 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;
(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
Schedule I, registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
delivered the Registration Rights Agreement;
(v) 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;
(vi) 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;
(vii) Certificates of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing
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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;
(viii) 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
(ix) 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.
4.2 Second Closing.
a. 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:
(i) 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;
(ii) 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
(iii) 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.
b. 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:
(i) First Closing. The First Closing shall have occurred;
(ii) 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
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<PAGE> 31
Second Closing Date as though made at that time (except for representations and
warranties made as of a specific date);
(iii) 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;
(iv) 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;
(v) 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.
(vi) 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;
(vii) 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;
(viii) 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;
(ix) 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 Underlying Shares shall on the
Second Closing Date be, listed for trading on Nasdaq, on the BSE, or other
exchange acceptable to Purchasers;
(xi) Required Approvals. All Required Approvals shall have been
obtained and copies thereof delivered to the Purchasers.
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<PAGE> 32
(xii) 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
Preferred Stock purchased on the First Closing Date and on the Second Closing
Date.
(xiii) 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.
(xiv) Change of Control. No Change of Control in the Company
shall have occurred; and
(xv) 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.
c. 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:
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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
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<PAGE> 33
as of such Second 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.
(vi) 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.
(vii) 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;
(viii) 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
(ix) 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.
4.3 Third Closing.
a. 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:
(i) 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;
(ii) 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
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or
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<PAGE> 34
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Transaction Documents.
b. 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:
(i) First and Second Closings. The First and Second Closings
shall have occurred;
(ii) 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);
(iii) 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;
(iv) 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;
(v) 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 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.
(vi) 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;
(vii) 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;
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<PAGE> 35
(viii) 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;
(ix) 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 Underlying Shares shall on the
Third Closing Date be listed for trading on Nasdaq, on the BSE, or other
exchange acceptable to Purchasers;
(xi) Required Approvals. All Required Approvals shall have been
obtained and copies thereof delivered to the Purchasers.
(xii) 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.
(xiii) 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.
(xiv) Change of Control. No Change of Control in the Company
shall have occurred; and
(xv) 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.
c. Documents and 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:
(i) 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;
(ii) 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;
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<PAGE> 36
(iii) 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;
(iv) 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;
(v) 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.
(vi) 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
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.
(vii) 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;
(viii) 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
(ix) 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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<PAGE> 37
ARTICLE V.
INDEMNIFICATION
5.1 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 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
ARTICLE VI.
MISCELLANEOUS
6.1 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.
6.2 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
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<PAGE> 39
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
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.
6.3 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.
6.4 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.
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<PAGE> 40
6.5 References. References herein to Sections are to Sections of this
Agreement, unless otherwise expressly provided.
6.6 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
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.
6.7 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.
6.8 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.
6.9 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.
39
<PAGE> 41
6.10 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.
6.11 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 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.
6.12 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.
6.13 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.
6.14 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
40
<PAGE> 42
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.
6.15 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 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.
6.16 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.
6.17 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:
<PAGE> 44
BROWN SIMPSON STRATEGIC
GROWTH FUND, LTD.
By:
---------------------------------
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By:
---------------------------------
Name:
Title:
1
<PAGE> 45
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> 46
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> 47
Exhibit A
[Form of Certificate of Designation]
<PAGE> 48
Exhibit B
[Form of Warrant]
1
<PAGE> 49
Exhibit C
[Registration Rights Agreement]
<PAGE> 50
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.
- --------------------------
(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.
1
<PAGE> 51
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.
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.
2
<PAGE> 1
EXHIBIT 5
Locke Liddell & Sapp LLP
100 Congress, Suite 300
Austin, Texas 78701
June 30, 1999
International Isotopes Inc.
3100 Jim Christian Road
Denton, Texas 76207-9987
Ladies and Gentlemen:
As legal counsel to International Isotopes Inc., a Texas corporation
(the "Company"), we have examined the Restated Articles of Incorporation and
Bylaws of the Company as well as such other documents and proceedings as we have
considered necessary for the purposes of this opinion. We have also examined and
are familiar with the Company's Registration Statement on Form S-3 (the
"Registration Statement") as filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), relating to 1,503,804
shares of the Company's Common Stock, par value $.01 per share (the "Common
Shares"), which may be offered or sold by the Selling Stockholders referred to
in the Registration Statement.
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that the Common Shares are legally
issued, fully paid and non-assessable.
We hereby consent to the inclusion of this opinion letter as an exhibit
to the Registration Statement and the reference to our Firm under the caption
"Legal Matters." In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
Locke Liddell & Sapp LLP
/s/ Locke Liddell & Sapp LLP
------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
International Isotopes Inc.
We consent to the use of our report incorporated by reference herein
and to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Dallas, Texas
July 8, 1999
