SECURITIES PURCHASE AGREEMENT
Among
MACROCHEM CORPORATION
and
THE INVESTORS SIGNATORY HERETO
Dated as of October 23, 2000
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October
23, 2000, among MacroChem Corporation, a Delaware corporation (the "Company"),
and the investors signatory hereto (each such investor is a "Purchaser" and all
such investors are, collectively, the "Purchasers").
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, severally and not jointly, desire to purchase from the Company,
shares of the Company's common stock, $.01 par value per share (the "Common
Stock"), and certain other securities of the Company as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally and not jointly, purchase an aggregate of
1,816,658 shares of Common Stock (the "Shares") for an aggregate purchase price
of $9,000,000 ($4.954152 per share (the "Per Share Price")). The closing of the
purchase and sale of the Shares (the "Closing") shall take place at the offices
of Morse, Zelnick, Rose & Lander LLP ("MZRL"), 450 Park Avenue, New York, New
York 10022, immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) At the Closing, the parties shall deliver or
shall cause to be delivered the following: (A) the Company shall deliver to
each Purchaser (1) a stock certificate representing the number of Shares
indicated below such Purchaser's name on the signature page of this Agreement,
registered in the name of such Purchaser, (2) a Common Stock purchase warrant,
in the form of Exhibit A, registered in the name of such Purchaser, pursuant to
which such Purchaser shall have the right to acquire shares of Common Stock
upon the terms and in such number as set forth therein (each an "Adjustable
Warrant"), (3) a Common Stock purchase warrant, in the form of Exhibit B,
registered in the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire the number of shares of Common Stock indicated
below such Purchaser's name on the signature page of this Agreement, upon the
terms and at the exercise price set forth therein (each, a "Closing Warrant"
and together with the Adjustable Warrants, the "Warrants"), (4) the legal
opinion of Ropes & Gray, outside counsel to the Company, substantially in the
form of Exhibit C, (5) an executed Registration Rights Agreement, dated the
date hereof, among the Company and the Purchasers, in the form of Exhibit D
(the "Registration Rights Agreement") and (6) the Transfer Agent Instructions,
in the form of Exhibit E, executed by the Company and delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); and (B) each Purchaser shall deliver: (1) the purchase price
indicated below such Purchaser's name on the signature page to this Agreement
in immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose and (2) an executed Registration Rights
Agreement.
1.2 CERTAIN DEFINED TERMS. For purposes of this Agreement, (i)
"Business Day" means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close; (ii) "Per Share Market Value" means on any
particular date (a) the closing bid price per share of the Common Stock on such
date on the Nasdaq or on any Subsequent Market on which the Common Stock is then
listed or quoted, as reported by Bloomberg Information Services, Inc. (or any
successor entity succeeding to its function of reporting prices), or if there is
no such price on such date, then the closing bid price on the Nasdaq or on such
Subsequent Market on the date nearest preceding such date, as reported by
Bloomberg Information Services, Inc. (or any successor entity succeeding to its
function of reporting prices), or (b) if the Common Stock is not then listed or
quoted on the Nasdaq or a 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 (c)
if the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) 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 Holders
of a majority of the applicable Warrant Shares; (iii) "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;
and (iv) "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
Nasdaq or 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
Common 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 of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then
Trading Day shall mean a Business Day.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to 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 Delaware, 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. The Company is duly
qualified to do business and is in good standing as a foreign corporation or
other entity 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, could not,
individually or in the aggregate, reasonably be expected to (x) adversely affect
the legality, validity or enforceability of the Securities (as defined below) or
any of this Agreement, the Registration Rights Agreement, the Transfer Agent
Instructions or the Warrants (collectively, the "Transaction Documents"), (y)
have or result in a material adverse effect on the results of operations,
assets, or condition (financial or otherwise) of the Company, or (z) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (x), (y) or (z), a "Material
Adverse Effect").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents 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 and no further action is required by the Company. Each of
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 to the extent that enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution contained in this Agreement may be limited by
federal or state securities laws on public policy relating thereto. The Company
is not in violation of any of the provisions of its certificate of incorporation
or by-laws.
(c) CAPITALIZATION. The number of authorized, issued and
outstanding shares of capital stock of the Company as of September 30, 2000 is
set forth in Schedule 2.1(c). No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the securities of the Company
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction Documents.
Except as a result of the purchase and sale of the Shares and the Warrants and
except as disclosed in Schedule 2.1(c), as of September 30, 2000 there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock.
(d) ISSUANCE OF THE SECURITIES. The Shares and the Underlying
Shares are duly authorized and, when issued and paid for in accordance with the
terms hereof and the Warrants, shall have been duly and validly issued, fully
paid and nonassessable, free and clear of all liens, encumbrances and rights of
first refusal of any kind (collectively, "Liens"). The Company has reserved a
number of duly authorized shares of Common Stock for issuance hereunder and upon
exercise of the Warrants that is not less than the sum of (i) the Shares to be
issued hereunder; (ii) the number of shares of Common Stock issuable upon
exercise of the Adjustable Warrants on the First Vesting Date (as defined in the
Adjustable Warrant), assuming for such purposes that, on the First Vesting Date,
(A) the Applicable Share Number (as defined in the Adjustable Warrant) equals
the entire number of Shares purchased hereunder and (B) the Adjustment Price (as
defined in the Adjustable Warrant) equals 60% of the Per Share Market Value on
the Trading Day immediately preceding the Closing Date, and (iii) the number of
shares of Common Stock issuable upon exercise in full of the Closing Warrants
(the number of shares of Common Stock contemplated in (i), (ii) and (iii), the
"Initial Minimum"). The shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as the "Underlying Shares." The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as, the
"Securities."
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's certificate of incorporation or bylaws
(each as amended through the date hereof), or (ii) subject to obtaining the
Required Approvals (as defined below), 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 (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company debt or
otherwise) or other understanding to which the Company is a party or by which
any property or asset of the Company 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 is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), as could not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect. The business of the Company is not being conducted in violation of any
law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, could not reasonably be
expected to have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. The Company is not
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, other than (i) the filings required pursuant to Section 3.10, (ii)
the filing with the Securities and Exchange Commission (the "Commission") of a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Shares and the Underlying Shares
by the Purchasers (the "Underlying Shares Registration Statement"), (iii) the
application(s) to the Nasdaq National Market ("NASDAQ") for the listing of the
Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed) in the
time and manner required thereby; (iv) applicable Blue Sky filings, if any, and
(v) in all other cases where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration could not reasonably be expected to have or result in, individually
or in the aggregate, a Material Adverse Effect (collectively, the "Required
Approvals").
(g) LITIGATION; PROCEEDINGS. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. The Company is not (i) in
default under or in violation of (and no event has occurred which has not been
waived which, with notice or lapse of time or both, would result in a default by
the Company under), nor has the Company received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or 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, (ii) in violation of any order of
any court, arbitrator or governmental body, or (iii) in violation of any
statute, rule or regulation of any governmental authority, except as could not
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has
filed all reports required to be filed by it under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents" and,
together with the Schedules to this Agreement, the "Disclosure Materials") 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. 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 material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required under the Exchange Act. The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the 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
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), 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. Since December 31, 1999, except as set forth on Schedule
2.1(j) or specifically disclosed in the SEC Documents, (a) there has been no
event, occurrence or development that has or that could reasonably be expected
to result in a Material Adverse Effect, (b) the Company has not incurred any
liabilities (contingent or otherwise) other than (x) liabilities incurred in the
ordinary course of business consistent with past practice and (y) liabilities of
a type not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans) with respect to its capital stock, or purchased or redeemed (or
made any agreements to purchase or redeem) any shares of its capital stock.
(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(l) CERTAIN FEES. Except for certain fees payable to Leerink
Swann and Company, as set forth on Schedule 2.1(l), no fees or commissions will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. 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 that may
be due in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless the Purchasers, their employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) FORM S-3 ELIGIBILITY. The Company is eligible to register
its Common Stock for resale under Form S-3 promulgated under the Securities Act.
(o) LISTING AND MAINTENANCE REQUIREMENTS. Except as set forth
in the SEC Documents, the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from the NASDAQ 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 exchange, market or trading
facility. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(p) PATENTS AND TRADEMARKS. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights which are necessary
or material for use in connection with its business as described in the SEC
Documents, except where the failure to so have would not have a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Since December 31,
1999, the Company has not received a written notice that any Intellectual
Property Rights used by the Company violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another Person of any
of the Intellectual Property Rights.
(q) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
set forth on Schedule 6(b) to the Registration Rights Agreement, 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 have not been satisfied.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(r) REGULATORY PERMITS. The Company possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business as described in the SEC
Documents, except where the failure to possess such permits could not,
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect ("Material Permits"), and the Company has not received
any notice of proceedings relating to the revocation or modification of any
Material Permit.
(s) TITLE. Except as set forth on Schedule 2.1(s), the Company
has good and marketable title in fee simple to all real property owned by it
which is material to the business of the Company and good and marketable title
in all personal property owned by it which is material to the business of the
Company, free and clear of all Liens, except for Liens as 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. Any real property and
facilities held under lease by the Company are held by it under valid,
subsisting and enforceable leases with which the Company is in compliance and do
not prohibit the use made and proposed to be made of such property and buildings
by the Company.
(t) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the
SEC Documents, (i) there is no Action pending or, to the knowledge of the
Company, threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding could reasonably be expected to have or result in a
Material Adverse Effect; (ii) neither the Company, nor, to the knowledge of the
Company, any director or officer thereof, is or has been the subject of any
Action involving (A) a claim of violation of or liability under federal or state
securities laws or (B) a claim of breach of fiduciary duty; (iii) the Company
does not have pending before the Commission any request for confidential
treatment of information and the Company has no knowledge that any such request
will be made prior to the Effectiveness Date (as defined in the Registration
Rights Agreement); and (iv) there has not been, and to the knowledge of the
Company there is not pending or contemplated, any investigation by the
Commission involving the Company or, to the knowledge of the Company, any
current or former director or officer of the Company.
(u) LABOR RELATIONS. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(v) DISCLOSURE. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser hereby for itself and for no other Purchaser represents and warrants
to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
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 by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution contained in this Agreement may be limited by
federal or state securities laws on public policy relating thereto.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, the Registration Rights Agreement and the
Warrants, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute the
Securities.
(c) PURCHASER STATUS. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and at each exercise date
under its respective Warrants, it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives, has 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 Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that
it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and warranties and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made any 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 OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel reasonably satisfactory to the Company selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. Notwithstanding the foregoing,
the Company, without requiring a legal opinion as described in the immediately
preceding sentence, hereby consents to and agrees to register on the books of
the Company and with any transfer agent for the securities of the Company any
transfer of Securities by a Purchaser to an Affiliate of such Purchaser or to
one or more funds or managed accounts under common management with such
Purchaser, and any transfer among any such Affiliates or one or more funds or
managed accounts, provided that the transferee certifies to the Company that it
is an "accredited investor" as defined in Rule 501(a) under the Securities Act
and that it is acquiring the Securities solely for investment purposes (subject
to the qualifications hereof). 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 Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE 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 AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
Neither the Shares nor the Underlying Shares shall contain the
legend set forth above nor any other legend while an Underlying Shares
Registration Statement is effective under the Securities Act or the holder is
relying on Rule 144 promulgated under the Securities Act ("Rule 144") in
connection with the resale of such Underlying Shares, or in the event there is
not an effective Underlying Shares Registration Statement and Rule 144 is not
then available for resale of the Underlying Shares, at such time, as such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the date that such Underlying Shares Registration Statement is declared
effective by the Commission (the "Effective Date"). The Company agrees that,
following the Effective Date, it will, no later than three (3) Trading Days
following the delivery by a Purchaser to the Company of a certificate or
certificates representing Shares, deliver to such Purchaser an identical
certificate or certificates representing such Shares which shall be free from
such legend. The Company further agrees that if any Shares or Underlying Shares
are issued with a legend in accordance with this Section 3.1(b), it will, within
three (3) Trading Days after request therefor by a Purchaser, provide such
Purchaser with a certificate or certificates representing such Shares or
Underlying Shares, free from such legend at such time as such legend would not
have been required under this Section 3.1(b) had such issuance occurred on the
date of such request. The Company may not make any notation on its records or
give instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of Underlying Shares upon exercise of the Warrants will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon exercise of the Warrants, is
unconditional and absolute, subject to the limitations set forth in the
Warrants, regardless of the effect of any such dilution.
3.3 FURNISHING OF INFORMATION. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to receive Underlying Shares free of all
restrictive legends and to subsequently sell Underlying Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice having
a similar effect. 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 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, 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 Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for the
purposes of the rules and regulations of NASDAQ.
3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be,
if a notice of exercise were to be delivered on such date, precluded from
issuing the sum of (i) 200% of the number of Underlying Shares then issuable
upon exercise in full of the Adjustable Warrants and (ii) the number of
Underlying Shares issuable upon exercise in full of the Closing Warrants (the
"Current Required Minimum") due to the unavailability of a sufficient number of
authorized but unissued or reserved shares of Common Stock, then the Board of
Directors of the Company shall promptly (and in any case, within 30 Business
Days from such date) prepare and mail to the stockholders of the Company proxy
materials requesting authorization to amend the Company's certificate of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as reasonably requested
by the Purchasers in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its issuance,
exercise and reservation of shares obligations as set forth in this Agreement
and the Warrants (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments other than the
Warrants and (y) the Current Required Minimum, shall be a reasonable number). In
connection therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval to carry out such resolutions
(and hold a special meeting of the stockholders no later than the earlier to
occur of the 60th day after delivery of the proxy materials relating to such
meeting and the 90th day after request by a holder of Warrants to issue the
number of Underlying Shares in accordance with the terms hereof) and (c) within
five Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's certificate of incorporation to evidence
such increase. Management of the Company shall also use its best efforts,
including voting of all shares of Common Stock held by management in favor of
all resolutions to increase the authorized stock of the Company hereunder.
3.6 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company shall
(i) as soon as possible after Closing, prepare and file with NASDAQ (and such
other national securities exchange, market, trading or quotation facility on
which the Common Stock is then traded) an additional shares listing application
covering a number of shares of Common Stock which is not less than the Initial
Minimum, (ii) take all steps necessary to cause such shares of Common Stock to
be approved for listing in the NASDAQ (as well as on any such other national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed) as soon as possible thereafter, and (iii) provide
to the Purchasers evidence of such listing, and the Company shall maintain the
listing of its Common Stock thereon. If the number of Underlying Shares issuable
upon exercise of the then unexercised portion of the Warrants exceeds 85% of the
number of Underlying Shares previously listed on account thereof with NASDAQ
(and any such other required exchanges) then the Company shall take the
necessary actions to immediately list a number of Underlying Shares equals to no
less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon exercise in full of the Warrants in accordance with this
Agreement and the Warrants, respectively, in such amount as may be required to
fulfill its obligations in full under the Transaction Documents, which reserve
shall equal no less than the then Current Required Minimum.
3.7 EXERCISE PROCEDURES. The Transfer Agent Instructions and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the exercise of the Warrants, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the Purchasers to exercise their Warrants.
3.8 EXERCISE OBLIGATIONS. The Company shall honor exercises of the
Warrants and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Warrants.
3.9 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its (or its subsidiaries, if any) equity or
equity-equivalent securities including the issuance of any debt or other
instrument at any time over the life thereof convertible into or exchangeable
for Common Stock, in any transaction intended to be exempt or not subject to
registration under the Securities Act (collectively, a "Subsequent Placement")
for a period of 240 days after the Effective Date, provided, that such 240 day
period shall be extended for the number of Trading Days during such period (A)
in which trading in the Common Stock is suspended by any securities exchange or
market or quotation system on which the Common Stock is then listed, or (B)
during which the Underlying Shares Registration Statement is not effective, or
(C) during which the prospectus included in the Underlying Shares Registration
Statement may not be used by the holders thereof for the resale of Underlying
Shares, unless (A) the Company delivers to each of the Purchasers a written
notice (the "Subsequent Placement Notice") of its intention to effect such
Subsequent Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Placement shall be effected, and attached to which shall be a term sheet or
similar document relating thereto and (B) such Purchaser shall not have notified
the Company by 6:30 p.m. (New York City time) on the seventh Trading Day after
its receipt of the Subsequent Placement Notice of its willingness to provide (or
to cause its sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on the same terms set forth
in the Subsequent Placement Notice. If the Purchasers shall fail to notify the
Company of their intention to enter into such negotiations within such time
period, the Company may effect the Subsequent Placement substantially upon the
terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; provided, that the Company shall provide the
Purchasers with a second Subsequent Placement Notice, and the Purchasers shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within forty-five Trading Days after the date of the
initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro-rata portion of the aggregate number of Shares
purchased by such Purchaser under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an aggregate amount in
excess of the amount set forth in the Subsequent Placement Notice. The right of
first refusal set forth in this Section shall not apply to (i) the issuance of
any Common Stock, or options or warrants to purchase Common Stock, to employees,
officers or directors of, or consultants to, the Company pursuant to any stock
option or stock purchase plan or agreements approved by the Company's Board of
Directors, (ii) shares of Common Stock issuable upon exercise of any currently
outstanding warrants and upon conversion of any currently outstanding
convertible securities of the Company, in each case disclosed in Schedule
2.1(c), but not with respect to any amendment or modification thereto, (iii)
shares of Common Stock issuable upon exercise of the Warrants in accordance with
their respective terms, (iv) the issuance of the warrants referred to on
Schedule 2.1(l), and (v) the issuance of Shares of Common Stock in connection
with a strategic partnership or other business transaction, other than a
transaction in which the principal purpose is to raise capital.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Section 6(c) of
the Registration Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i) - (iv) of
Section 3.9 (a), the Company shall not, for a period of not less than 90 Trading
Days after the Effective Date, without the prior written consent of the
Purchasers (i) issue or sell any of its equity or equity-equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii) register
any securities of the Company. Any days after the Effective Date that a
Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 Trading Day period.
3.10 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) on the Closing Date issue a press release reasonably acceptable to the
Purchasers disclosing the transactions contemplated hereby, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions contemplated hereby
within ten Business Days after the Closing Date, and (iii) timely file with the
Commission a Form D promulgated under the Securities Act as required under
Regulation D promulgated under the Securities Act and provide a copy thereof to
the Purchasers promptly after the filing thereof. The Company shall, no less
than two Business Days prior to the filing of any disclosure required by clauses
(ii) and (iii) above, provide a copy thereof to the Purchasers. Such filings
will not be made without the consent of the Purchasers, which consent shall not
be unreasonably withheld or delayed. The Company and the Purchasers shall
consult with each other in issuing any other press releases or otherwise making
public statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications 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, filing or other communication.
3.11 USE OF PROCEEDS. Except as set forth on Schedule 3.11, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not for the satisfaction of any portion of the Company's
debt (other than payment of trade payables in the ordinary course of the
Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
3.12 REIMBURSEMENT. If any Purchaser, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement 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 Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
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
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the negligence or
willful misconduct of the applicable Purchaser or entity in connection with the
transactions contemplated by this Agreement.
3.13 PUT OPTION.
(a) For a period of ten Business Days commencing on the 210th
day following the Effective Date, the Company shall have the right, upon notice
to the Purchasers (a "Put Notice"), to sell to each Purchaser a number of
additional shares of Common Stock determined by dividing $3.5 million by 105% of
the average closing bid price of the Common Stock for the five trading days
prior to the Second Closing (which number shall be subject to equitable
adjustment for stock splits, recombinations and similar events (in each instance
the "Second Closing Shares"). The closing of the purchase and sale of the Second
Closing Shares contemplated by this provision (the "Second Closing") shall take
place at the offices of MZRL, 450 Park Avenue, New York, New York 10022 on the
thirtieth Business Day following receipt of the Put Notice, or such earlier date
agreed to in writing by the Purchasers and the Company.
(b) At the Second Closing, the parties shall deliver or shall
cause to be delivered the following: (A) the Company shall deliver to each
Purchaser (1) a stock certificate representing Second Closing Shares, registered
in the name of such Purchaser, (2) a Securities Purchase Agreement in
substantially the form of this Agreement (the "Second Closing Purchase
Agreement"), (3) a Common Stock purchase warrant, in substantially the form of
Exhibit A, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire shares of Common Stock upon the terms
and in such number as set forth therein (each a "Second Closing Adjustable
Warrant"), (4) a Common Stock purchase warrant, in substantially the form of
Exhibit B, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire 20% of the number of Second Closing
Shares at the exercise price set forth therein (each, a "Second Closing Warrant"
and together with the Second Closing Adjustable Warrants, the "Warrants"), (5)
the legal opinion of Ropes & Gray, outside counsel to the Company, substantially
in the form of Exhibit C, (6) an executed Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, substantially in the form
of Exhibit D (the "Second Closing Registration Rights Agreement") and (7) the
Transfer Agent Instructions, substantially in the form of Exhibit E, executed by
the Company and delivered to and acknowledged by the Company's transfer agent
(the "Transfer Agent Instructions"); and (B) each Purchaser shall deliver: (1)
the purchase price indicated below such Purchaser's name on the signature page
to this Agreement in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose, (2) an executed Second
Closing Registration Rights Agreement, and (3) an executed Second Closing
Purchase Agreement.
(c) The obligation of each Purchaser to acquire Second Closing
Shares on the Second Closing Date is subject to the satisfaction by the Company
or waiver by such Purchaser, at or before the Second Closing Date, of each of
the following conditions:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company contained in the
Second Closing Purchase Agreement shall be true and correct in all material
respects as of the Second Closing Date (any representations given herein as of
a recent practicable date shall be given as of a reasonable practicable date in
the Second Purchase Agreement);
(ii) 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 the Transaction Documents;
(iii) NO SUSPENSIONS OF TRADING IN COMMON STOCK;
LISTING. The trading in the Common Stock shall not have been suspended by the
Commission or on the Nasdaq Stock Market (except for any suspensions of trading
of not more than one Trading Day solely to permit dissemination of material
information regarding the Company) at any time since the Closing Date, and the
Common Stock shall have been at all times since the Closing Date listed for
trading on The Nasdaq Stock Market;
(iv) CLOSING THRESHOLD. For the thirty Trading Days
immediately preceding each of (a) the date that the Put Notice is delivered and
(b) the Second Closing Date, the average daily trading volume of the Common
Stock on the NASDAQ Stock Market as reported by Bloomberg LP, shall be at least
100,000 shares and the average of the Per Share Market Value for the thirty
Trading Day period immediately preceding each of (a) the date that the Put
Notice is delivered and (b) the Second Closing Date shall be at least $6.35
(subject to adjustment in the event of stock splits and similar events); and
(v) Adverse Changes. Since the date of execution of
this Agreement, no event or series of events which reasonable could be expected
to have or result in a Material Adverse Effect shall have occurred.
3.14 ADDITIONAL SHARE ISSUANCES. In the event that on or before the
240th day following the Effective Date, the Company effects a Subsequent
Placement at a per share price less than the lesser of (a) the Per Share Market
Value on the date of such Subsequent Placement or (b) the Per Share Price,
then, and upon the closing of such Subsequent Placement the Company shall issue
to each Purchaser a number of additional shares of Common Stock determined in
accordance with the following formula:
Additional Shares to be issued = (N+X -1) Multiplied by (Z)
----
(N+M
Where:
N = total shares outstanding prior to dilutive issuance
M = additional shares that the consideration received by the Company in the
dilutive issuance would have purchased using the original deal price
X = number of shares issued in the dilutive issuance
Z = the number of shares of Common Stock purchased by such Purchaser
The Per Share Price and the number of shares of Common Stock purchased
by such Purchaser shall be proportionately adjusted by reason of any
recapitalization, combination, stock split, stock dividend or the like with
respect to the Common Stock.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. At the Closing the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to MZRL
$25,000 for the preparation and negotiation of the Transaction Documents (with a
credit for any retainer amounts paid on account thereof). At the Second Closing,
if any, the Company shall reimburse the Purchasers for their legal fees and
expenses incurred in connection with the preparation and negotiation of the
Transaction Documents by paying to MZRL $5,000 for the preparation and
negotiation of the Transaction Documents (with a credit for any retainer amounts
paid on account thereof). The amount contemplated by the immediately preceding
sentence shall be deducted from the Purchase Price and paid by the Purchaser to
MZRL and shall not be delivered to the Company at the Closing. Other than the
amount contemplated herein and except as otherwise 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. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together
with the Exhibits and Schedules thereto and Transfer Agent Instructions, 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, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
4.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: MacroChem Corporation
110 Hartwell Avenue
Lexington, MA 02421
Attn: Chief Financial Officer
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110-2624
Attn: Dwight W. Quayle, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages hereto
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 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.
4.5 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.
4.6 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 the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and exercise of the
Warrants for a period of five years.
4.10 EXECUTION. 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) with the same force and effect as if such facsimile signature page
were an original thereof.
4.11 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.
4.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
4.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
MACROCHEM CORPORATION
By:/s/Kenneth L. Rice, Jr.
Name: Kenneth L. Rice, Jr.
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
<PAGE>
BAY HARBOR INVESTMENTS, INC.
By:/s/Kenneth L. Henderson
Name: Kenneth L. Henderson
Title: Attorney-In-Fact
Purchase Price for Shares: $4,500,000
Number of Shares to be acquired: 908,329
Warrant Shares subject to Closing
Warrant: 181,666
Address for Notice:
Bay Harbor Investments, Inc.
c/o Gonzalez-Ruiz & Aleman (BVI) Limited
Wickhams Cay I, Vanterpool Plaza
P.O. Box 873
Road Town, Tortolla. B.V.I.
With a copy to:
Morse, Zelnick, Rose & Lander LLP
450 Park Avenue
New York, New York 10022
Fax No.: 212-838-9190
Attn: Kenneth S. Rose, Esq.
And
Cavallo Capital Corp.
660 Madison Avenue
New York, NY 10021
Fax No: 212-651-9010
Attn: Mr. Mor Sagi
<PAGE>
STRONG RIVER INVESTMENTS, INC.
By:/s/Kenneth L. Henderson
Name: Kenneth L. Henderson
Title: Attorney-In-Fact
Purchase Price for Shares: $4,500,000
Number of Shares to be acquired: 908,329
Warrant Shares subject to Closing
Warrant: 181,666
Address for Notice:
Strong River Investments, Inc.
c/o Gonzalez-Ruiz & Aleman (BVI) Limited
Wickhams Cay I, Vanterpool Plaza
P.O. Box 873
Road Town, Tortolla. B.V.I.
With a copy to:
Morse, Zelnick, Rose & Lander LLP
450 Park Avenue
New York, New York 10022
Fax No.: 212-838-9190
Attn: Kenneth S. Rose, Esq.
And
Cavallo Capital Corp.
660 Madison Avenue
New York, NY 10021
Fax No: 212-651-9010
Attn: Mr. Mor Sagi
