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EXHIBIT 4.1
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 17, 2000
BY AND BETWEEN
ECLIPSE SURGICAL TECHNOLOGIES, INC.
AND
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
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TABLE OF CONTENTS
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ARTICLE I Definitions.................................................................................1
Section 1.1 Definitions.................................................................................1
ARTICLE II Purchase and Sale of Common Stock...........................................................3
Section 2.1 Purchase and Sale of Stock..................................................................3
Section 2.2 The Shares..................................................................................3
Section 2.3 Purchase Price and Closing..................................................................3
ARTICLE III Representations and Warranties..............................................................3
Section 3.1 Representation and Warranties of the Company................................................3
Section 3.2 Representation and Warranties of the Purchaser.............................................10
ARTICLE IV Covenants..................................................................................12
Section 4.1 Securities.................................................................................12
Section 4.2 Registration and Listing...................................................................12
Section 4.3 Registration Statement.....................................................................12
Section 4.4 Compliance with Laws.......................................................................12
Section 4.5 Keeping of Records and Books of Account....................................................12
Section 4.6 Reporting Requirements.....................................................................13
Section 4.7 Other Agreements...........................................................................13
Section 4.8 Effective Registration Statement...........................................................13
Section 4.9 No Stop Orders.............................................................................13
Section 4.10 Amendments to the Registration Statement...................................................14
Section 4.11 Prospectus Delivery........................................................................14
ARTICLE V Conditions to Closing and Draw Downs.......................................................14
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell the Shares...................14
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close...........................15
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares.................................................16
ARTICLE VI Draw Down Terms; Call Option...............................................................17
Section 6.1 Draw Down Terms............................................................................17
Section 6.2 Purchaser's Call Option....................................................................19
ARTICLE VII Termination................................................................................20
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Section 7.1 Termination by Mutual Consent..............................................................20
Section 7.2 Other Termination..........................................................................20
Section 7.3 Effect of Termination......................................................................20
ARTICLE VIII Indemnification............................................................................20
Section 8.1 General Indemnity..........................................................................20
Section 8.2 Indemnification Procedures.................................................................21
ARTICLE IX Miscellaneous..............................................................................22
Section 9.1 Fees and Expenses..........................................................................22
Section 9.2 Specific Enforcement, Consent to Jurisdiction..............................................23
Section 9.3 Entire Agreement; Amendment................................................................23
Section 9.4 Notices....................................................................................23
Section 9.5 Waivers....................................................................................24
Section 9.6 Headings...................................................................................24
Section 9.7 Successors and Assigns.....................................................................24
Section 9.8 Governing Law..............................................................................25
Section 9.9 Survival...................................................................................25
Section 9.10 Counterparts...............................................................................25
Section 9.11 Publicity..................................................................................25
Section 9.12 Severability...............................................................................25
Section 9.13 Further Assurances.........................................................................25
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
August 17, 2000 by and between Eclipse Surgical Technologies, Inc., a California
corporation (the "Company") and Acqua Wellington North American Equities Fund,
Ltd., a company organized under the laws of the Commonwealth of The Bahamas (the
"Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
(a) "Call Option" shall have the meaning assigned to such term in
Section 6.2(a) hereof.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Commission Documents" shall have the meaning assigned to such
term in Section 3.1(f) hereof.
(d) "Commission Filings" means the Company's Form 10-K for the fiscal
year ended December 31, 1999, Registration Statement on Form S-1 No. 333-38758,
and all other filings made by the Company after the date hereof pursuant to the
Securities Exchange Act of 1934.
(e) "Draw Down" means the exercise by the Company of its right to
request the purchase of shares of Common Stock by the Purchaser.
(f) "Draw Down Amount" means the actual amount of a Draw Down up to
$6,750,000, or such other amount mutually agreed upon by the Purchaser and the
Company.
(g) "Draw Down Discount Price" means 93% of the VWAP of the Common
Stock on any trading day during the Draw Down Pricing Period if the Threshold
Price is set equal to or greater than $3.50 but less than $6.00; provided,
however, that for every $1.00 increase in the Threshold Price above $5.00, to a
maximum Threshold Price of $20.00, such draw down discount price shall be
increased by 0.15%, incrementally, up to a maximum draw down discount price of
95.25%.
(h) "Draw Down Notice" shall have the meaning assigned to such term in
Section 6.1(j) hereof.
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(i) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive trading days following a Draw Down Notice, or such other period
mutually agreed upon by the Purchaser and the Company.
(j) "Effective Date" shall mean the date the Registration Statement of
the Company covering the Shares being subscribed for hereby is declared
effective.
(k) "Investment Period" shall have the meaning assigned to such term
in Section 7.1 hereof.
(l) "Material Adverse Effect" shall mean any effect on the business,
results of operations, assets or financial condition of the Company that is
material and adverse to the Company and its subsidiaries, taken as a whole
and/or any condition, circumstance, or situation that would prohibit the Company
from entering into and performing any of its obligations under this Agreement in
any material respect.
(m) "Prospectus" as used in this Agreement means the prospectus in the
form included in the Registration Statement, or, if the prospectus included in
the Registration Statement omits information in reliance on Rule 430A under the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), and such information
is included in a prospectus filed with the Commission pursuant to Rule 424(b)
under the Securities Act, the term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b).
(n) "Registration Statement" shall mean the registration statement on
Form S-3, Commission File Number 333-38758 under the Securities Act, filed with
the Securities and Exchange Commission for the registration of the Shares, as
such Registration Statement may be amended from time to time.
(o) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(p) "Shares" shall mean the shares of Common Stock of the Company
being purchased hereunder.
(q) "Threshold Price" is the lowest price which the Company may set in
the Draw Down Notice to sell Shares during a Draw Down Pricing Period (not
taking into account the Draw Down Discount Price during such Draw Down Pricing
Period).
(r) "VWAP" shall mean the daily volume weighted average price (based
on a trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the Company on
the Nasdaq National Market as reported by Bloomberg Financial LP using the AQR
function.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchaser and the Purchaser agrees to purchase from the Company up to
$20,000,000 of the Company's common stock, no par value per share (the "Common
Stock"), based on Draw Downs of up to $6,750,000 per Draw Down and up to an
additional $10,000,000 of Common Stock based on Call Options of up to $6,750,000
per Draw Down Pricing Period that the Company may grant to the Purchaser in the
Company's sole discretion. In no event shall the amount of Common Stock
purchased by the Purchaser exceed $6,750,000 per Draw Down or per Call Option
unless otherwise mutually agreed upon by the Purchaser and the Company.
SECTION 2.2 The Shares. The Company has authorized and has reserved
and covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs.
SECTION 2.3 Purchase Price and Closing. The Company agrees to issue
and sell to the Purchaser and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser, agrees to purchase that number of the Shares to be
issued in connection with each Draw Down. The closing of the execution and
delivery of this Agreement shall take place at the offices of Parker Chapin LLP,
The Chrysler Building, 405 Lexington Avenue, New York, NY 10174 (the "Closing")
at 10:00 a.m., eastern time, on (i) August 17, 2000, or (ii) such other time and
place or on such date as the Purchaser and the Company may agree upon (the
"Closing Date"). Each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to this Agreement at or
prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of California and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial
statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the
"Form 10-Q"), or on Schedule 3.1(g) attached hereto. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or
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property owned by it makes such qualification necessary except for any
jurisdiction in which the failure to be so qualified will not have a Material
Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Section 4.4(b), no further consent or authorization of the Company or its Board
of Directors or stockholders is required. This Agreement has been duly executed
and delivered by the Company. This Agreement constitutes, or shall constitute
when executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth in
the Registration Statement or in its latest Form 10-K. All of the outstanding
shares of the Company's Common Stock have been duly and validly authorized, and
are fully paid and non-assessable. Except as set forth in this Agreement or as
set forth in the Registration Statement, the Commission Documents or the
Commission Filings, as of the date hereof, no shares of Common Stock are
entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement, the Registration Statement, the
Commission Documents or the Commission Filings, as of the date hereof, there are
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities or
as described in the Registration Statement, the Commission Documents or the
Commission Filings, as of the date hereof, the Company is not a party to any
agreement granting registration rights to any person with respect to any of its
equity or debt securities. Except as set forth in the Registration Statement,
the Commission Documents or the Commission Filings, as of the date hereof, the
Company is not a party to, and it has no knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of the Company. Except
as set forth in the Registration Statement, the Commission Documents or the
Commission Filings, the offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable federal and state securities laws, and no
stockholder has a right of rescission or damages with respect thereto which
would have a Material Adverse Effect. The Company has furnished or made
available to the Purchaser true and correct copies of the Company's Articles of
Incorporation as in effect on the date hereof (the "Charter"), and the Company's
Bylaws as in effect on the date hereof (the "Bylaws").
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(d) Issuance of Shares. The Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid for
and issued in accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid and non-assessable, and the Purchaser shall
be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter 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
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission, or
the Nasdaq National Market subsequent to the Closing, and, any registration
statement which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
in the Registration Statement, or the Commission Documents or the Commission
Filings or on Schedule 3.1(f) attached hereto, as of the date hereof, the
Company has timely 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 material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since December 31, 1999 and prior to the Closing Date. The Company
has not provided to the Purchaser any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. The Form 10-K for the year ended December 31,
1999 complied in all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder and
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other federal, state and local laws, rules and regulations applicable to such
documents, and the said Form 10-K did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the Commission Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached
hereto set forth each subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. Except as set forth in the Commission Documents or
the Commission Filings, none of such subsidiaries is a "significant subsidiary"
as defined in Regulation S-X.
(h) No Material Adverse Effect. Since December 31, 1999, the Company
has not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed in the Commission
Documents or the Commission Filings, the Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries respective businesses since December 31, 1999 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.
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(k) Indebtedness. Schedule 3.1(k) sets forth as of March 31, 2000 all
outstanding secured and unsecured Indebtedness of the Company, or for which the
Company has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP. The Company is not in default with
respect to any Indebtedness.
(l) Title to Assets. The Company has good and marketable title to all
of its real and personal property reflected in the Commission Documents, free of
any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the Commission Documents and the
Commission Filings or such that could not reasonably be expected to cause a
Material Adverse Effect. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or
thereto. Except as set forth in the Commission Documents or the Commission
Filings, there is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened, against or involving the
Company, or any of its properties or assets which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company has been and is
presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except as set forth
in the Commission Documents or the Commission Filings or such that do not cause
a Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) Certain Fees. No brokers, finders or financial advisory fees or
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement.
(p) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omits to state a material fact
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necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(q) Operation of Business. The Company owns or possesses all patents,
trademarks, service marks, trade names, copyrights, licenses and authorizations
as set forth in the Commission Documents or the Commission Filings and all
rights with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others, except
to the extent set forth in the Commission Documents or that a Material Adverse
Effect could not reasonably be expected to result from such conflict.
(r) Environmental Compliance. Except as disclosed in the Commission
Filings, the Company has obtained all material approvals, authorization,
certificates, consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other person, that
are required under any Environmental Laws. "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, to the best of the Company's
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
that violate or could reasonably be expected to violate any Environmental Law
after the Closing or that could reasonably be expected to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(s) Material Agreements. Except as set forth in the Commission
Documents, the Company is not a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to a
registration statement on Form S-3 or applicable form (collectively, "Material
Agreements") if the Company was registering securities under the Securities Act.
The Company has in all material respects performed all the obligations required
to be performed to date under the Material Agreements, has received no notice of
default and, to the best of the Company's knowledge is not in default under any
Material Agreement now in effect, the result of which could reasonably be
expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, or
any of its customers (excluding agreements related to the purchase or lease of
the Company's products) or suppliers on the one hand, and (b) on the other
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hand, any officer, employee, consultant or director of the Company, or any
person who would be covered by Item 404(a) of Regulation S-K or any corporation
or other entity controlled by such officer, employee, consultant, director or
person.
(u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or suspending the use of any
Prospectus.
(ii) The Company meets the requirements for the use of Form S-3
under the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be when any post-effective
amendment thereto became effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Securities Act, complied in all material respects with the provisions of the
Securities Act and did not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they made) not misleading, except that
this representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to the Purchaser furnished to the Company
in writing by or on behalf of the Purchaser through you expressly for use
therein.
(iii) The Company has not distributed and, prior to the
completion of the distribution of the Shares, will not distribute any offering
material in connection with the offering and sale of the Shares other than the
Registration Statement, the Prospectus or other materials, if any, permitted by
the Securities Act.
(v) Employees. As of the date hereof, the Company has no collective
bargaining arrangements or agreements covering any of its employees, except as
set forth in the Commission Documents or the Commission Filings. As of the date
hereof, except as set forth in Schedule 3.1(v) attached hereto, the Commission
Documents or the Commission Filings, the Company has no employment contract,
agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company. As of the date hereof,
since December 31, 1999, except as disclosed in Schedule 3.1(v) attached hereto,
the Registration Statement, the Commission Documents or the Commission Filings,
no officer, consultant or key employee of the Company whose termination, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, has terminated or, to the knowledge of the Company, has
any present intention of terminating his or her employment or engagement with
the Company.
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(w) Use of Proceeds. The proceeds from the sale of the Shares will be
used by the Company for general corporate purposes.
(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company which is or would have
a Material Adverse Effect. The execution and delivery of this Agreement and the
issue and sale of the Shares will not involve any transaction which is subject
to the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986,
as amended, provided that, if any of the Purchaser, or any person or entity that
owns a beneficial interest in any of the Purchaser, is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a "party in interest" (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 3.1(y), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or by any trade or business, whether or not
incorporated, which, together with the Company, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
SECTION 3.2 Representation and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement constitutes a
valid and binding
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obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (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 material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The 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 Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) Sale Restriction. The Purchaser has the right to sell shares of
the Company's Common Stock equal in number to the number of Shares to be
purchased pursuant to this Agreement during the Investment Period. The Purchaser
covenants, however, that prior to and during the Investment Period, neither the
Purchaser nor any of its affiliates nor any entity managed by the Purchaser will
ever be in a net short position with respect to shares of the Common Stock of
the Company in any accounts directly or indirectly managed by the Purchaser or
any affiliate of the Purchaser or any entity managed by the Purchaser in excess
of the number of Shares the Purchaser is obligated to purchase during the
Investment Period.
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ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees.
SECTION 4.1 Securities. The Company shall notify the Commission and
the Nasdaq National Market, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares to the Purchaser or subsequent holders.
SECTION 4.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock and the
listing of the Shares purchased by Purchaser hereunder on the Nasdaq National
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Nasdaq National Market.
SECTION 4.3 Registration Statement. Before the Purchaser shall be
obligated to accept a Draw Down request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover
the Shares to be issued in connection with this Agreement.
SECTION 4.4 Compliance with Laws.
(a) The Company shall comply with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
(b) Unless the Company obtains the requisite approval of its
shareholders or waiver of such approval in accordance with the applicable rules
of Nasdaq, the Company will not be obligated to issue and the Purchaser will not
be obligated to purchase any shares of the Company's Common Stock which would
result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued and outstanding shares of the
Company's Common Stock.
SECTION 4.5 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation,
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depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.
SECTION 4.6 Reporting Requirements. Upon request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon
as available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within 90 days after the end of each fiscal year of
the Company.
SECTION 4.7 Other Agreements. The Company is restricted from entering
into any other financing agreement during a Draw Down Pricing Period (an "Other
Financing"), the primary purpose of which would be obtain equity financing for
the Company, without the prior written consent of the Purchaser. Subject to
Section 6.1(l) hereof, if the Purchaser consents to the Company entering into an
Other Financing, the Company shall have the right to close such Other Financing
on the scheduled closing date (as represented to the Purchaser) with a third
party; provided that all of the terms and conditions of such closing are similar
in all material respects to those provided to the Purchaser prior to the
Purchaser giving its consent to such Other Financing.
SECTION 4.8 Effective Registration Statement. If, at the time this
Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become effective as
soon as reasonably practicable and will advise the Purchaser promptly and, if
requested by the Purchaser, will confirm such advice in writing, when it
receives notice that the Registration Statement or such post-effective amendment
has become effective.
SECTION 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any
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<PAGE> 17
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make commercially reasonable
efforts to obtain the withdrawal of such order at the earliest possible time.
SECTION 4.10 Amendments to the Registration Statement. The Company
will not (i) file any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus of which the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
sales by any Purchaser or dealer, file any information, documents or reports
pursuant to the Exchange Act without delivering a copy of such information,
documents or reports to the Purchaser, promptly following such filing.
SECTION 4.11 Prospectus Delivery. The Company shall file a prospectus
supplement to its Registration Statement on the first business day immediately
following the end of each Draw Down Pricing Period, and will deliver to the
Purchaser, without charge, in such quantities as reasonably requested by the
Purchaser, copies of each form of Prospectus and prospectus supplement on each
Settlement Date. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and, subject to the
provisions of Section 4.10 above, file with the Commission an appropriate
supplement or amendment thereto, and will expeditiously furnish to the Purchaser
a reasonable number of copies thereof.
ARTICLE V
CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS
SECTION 5.1 Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Shares to the Purchaser is subject to the satisfaction or waiver, at or before
each Draw Down, of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of each Draw Down request as
though made at that time, except for representations and warranties that are
expressly made as of a particular date.
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<PAGE> 18
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to each Settlement Date, as applicable.
(c) Performance by the Purchaser. The 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 the Purchaser at or prior to each Settlement Date.
(d) No Injunction. No statute, 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.
(e) No Suspension, Etc. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq National Market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to Closing), and, at any time prior
to each Draw Down request, trading in securities generally as reported on the
Nasdaq National Market shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by the Nasdaq National Market, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of the Company, makes it impracticable or inadvisable to issue the
Shares.
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
SECTION 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) 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 to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(b) 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> 19
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(c) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(d) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of Exhibit A hereto, and such other certificates and documents as the
Purchaser or its counsel shall reasonably require incident to the Closing.
SECTION 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Call Option and Purchase the Shares. The obligation
hereunder of the Purchaser to accept a Draw Down request and to acquire and pay
for the Shares is subject to the satisfaction or waiver, at or before each Draw
Down or Call Option request (the"Draw Down Exercise Date"), of each of the
conditions set forth below. The conditions are for the Purchaser's sole benefit
and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Draw Down Exercise
Date as though made at that time, except for representations and warranties that
speak as of a particular date.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to the Closing Date or each Settlement Date, as applicable.
(c) No Suspension. Trading in the Company's Common Stock shall not
have been suspended by the Commission or the Nasdaq National Market (except for
any suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down request), and, at any
time prior to such request, trading in securities generally as reported by the
Nasdaq National Market shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by the Nasdaq National Market.
(d) 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 to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit B.
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<PAGE> 20
(e) 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.
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(g) Material Adverse Effect. No Material Adverse Effect shall have
occurred.
ARTICLE VI
DRAW DOWN TERMS; CALL OPTION
SECTION 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue a Draw Down Notice
with respect to a draw down (a "Draw Down") during each Draw Down Pricing Period
of (i) up to $2,000,000 if the Threshold Price is set equal to or greater than
$3.50 but less than $5.00, (ii) up to $3,000,000 if the Threshold Price is set
equal to or greater than $5.00 but less than $6.00 and (iii) up to an additional
$250,000 for every $1.00 increase of the Threshold Price above $5.00 up to
$20.00 for a maximum Draw Down Amount of $6,750,000; provided, that the Company
may, in its sole discretion, issue a Draw Down Notice with respect to any Draw
Down Amount at any Threshold Price or any Draw Down Discount Price pursuant to
terms mutually agreed upon by the Purchaser and the Company, which Draw Down the
Purchaser will be obligated to accept. Prior to issuing any Draw Down Notice,
the Company shall have Shares registered under the Registration Statement which
are valued at an amount equal to or in excess of the Draw Down Amount.
(b) The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each trading day of the
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction based on the length of the Draw
Down Pricing Period) of the Draw Down Amount divided by (y) the applicable Draw
Down Discount Price.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period.
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(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Draw Down Pricing Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days between Draw
Downs, unless otherwise mutually agreed upon by the Purchaser and the Company.
(f) There shall be a maximum of twelve (12) monthly Draw Downs during
the term of this Agreement.
(g) Intentionally Omitted.
(h) Each Draw Down will expire on the last trading day of each Draw
Down Pricing Period.
(i) If the VWAP on a given trading day is less than the Threshold
Price, then the total amount of the Draw Down for the relevant Draw Down Pricing
Period will be reduced by 1/20th (or such other fraction based on the length of
the Draw Down Pricing Period). Notwithstanding anything in the foregoing to the
contrary, for each trading day during the Draw Down Pricing Period that the VWAP
is less than the Threshold Price, the Purchaser may elect in its sole discretion
to purchase Shares at the Threshold Price at the end of the Draw Down Pricing
Period. At no time shall the Threshold Price be set below $3.50, unless mutually
agreed upon by the Company and the Purchaser. If trading in the Company's Common
Stock is suspended for any reason for more than three (3) hours in any trading
day, at the Purchaser's option, the price of the Common Stock shall be deemed to
be below the Threshold Price for that trading day and the Draw Down for the
relevant Draw Down Pricing Period shall be reduced by 1/20th (or such other
fraction based on the length of the Draw Down Pricing Period).
(j) The Company must inform the Purchaser via facsimile transmission
as to the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first trading day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit C. In addition to
the Draw Down Amount, the Company shall set the Threshold Price with each Draw
Down Notice and shall designate the first trading day of the Draw Down Pricing
Period.
(k) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the account designated by the Company by wire
transfer of immediately available funds provided that the Shares are received no
later than 1:00 p.m., eastern time or next day available funds if the Shares are
received thereafter.
(l) If during any Draw Down Pricing Period, the Company shall enter
into any Other Financing the primary purpose of which is to raise financing for
the Company, the Purchaser may in its sole discretion (i) purchase the Draw Down
Amount of shares of Common Stock and/or exercise Call Options granted during
such Draw Down Pricing Period at the price at
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which the Company issued shares of Common Stock in the Other Financing during
such Draw Down Pricing Period, (ii) purchase the Draw Down Amount of shares of
Common Stock and/or exercise Call Options granted during such Draw Down Pricing
Period at the applicable Draw Down Discount Price, or (iii) elect not to
purchase any Shares during such Draw Down Pricing Period. The Purchaser shall
notify the Company of its election on the business day preceding the Settlement
Date.
(m) If on the Settlement Date, the Company fails to deliver the Shares
to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay, in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (m) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such shares of Common Stock and piggyback registration rights if the Company
files a separate registration statement.
SECTION 6.2 Purchaser's Call Option.
(a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options of up to $6,750,000 (a "Call Option"). For each trading day during a
Draw Down Pricing Period, the Purchaser may exercise a Call Option by providing
notice to the Company of the exercise of a Call Option (the"Call Option
Notice"). The total amount of Call Options exercised by the Purchaser shall not
exceed $10,000,000 in the aggregate.
(b) The number of shares of Common Stock to be issued in connection
with each Call Option shall equal the quotient of (i) the amount of the Call
Option exercised and (ii) the applicable Draw Down Discount Price of the greater
of (A) the VWAP for the Common Stock on the day the Purchaser issues its Call
Option Notice and (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to this
Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to the
Company no later than 6:00 p.m. (eastern time) on the day such Call Option is
exercised. If the Purchaser does not exercise any unexercised Call Option by
6:00 p.m. (eastern time) on the last day of the applicable Draw
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Down Pricing Period, the Purchaser's Call Options with respect to that Draw Down
Pricing Period shall terminate.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination by Mutual Consent. The term of this Agreement
shall be fifteen (15) months from the date of execution of this Agreement (the
"Investment Period"). This Agreement may be terminated at any time by mutual
consent of the parties.
SECTION 7.2 Other Termination. The Company shall inform the Purchaser,
and the Purchaser shall have the right to terminate this Agreement within the
subsequent thirty (30) days (the "Event Period"), if (x) the Company enters into
any equity financing which provides for (i) the issuance of Common Stock or
securities convertible, exercisable or exchangeable into Common Stock at a
discount to the then current market price of the Common Stock or (ii) a
mechanism for the reset of the purchase price of the Common Stock to below the
then current market price of the Common Stock, or (y) an event resulting in a
Material Adverse Effect has occurred. The Purchaser may terminate this Agreement
upon one (1) day's notice during the Event Period.
SECTION 7.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.9.
Nothing in this Section 7.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and
hold harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorney's fees) to which the Purchaser and each person, if any, who controls
the Purchaser may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained, or incorporated by reference, in
the Registration Statement relating to Common Stock being sold to
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the Purchaser (including the any prospectus supplement filed in connection with
the transactions contemplated hereunder (the "Prospectus Supplement") which are
a part of it), or any amendment or supplement to it, or (ii) the omission or
alleged omission to state in that Registration Statement or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
The Company will reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by or the controlling person in investigating, defending against, or
preparing to defend against any such claim, action, suit or proceeding, except
that the Company will not be liable to the extent a claim or action which
results in a loss, claim, damage, liability or expense arises out of, or is
based upon, an untrue statement, alleged untrue statement, omission or alleged
omission, included in any Prospectus or Prospectus Supplement or any amendment
or supplement to the Prospectus or Prospectus Supplement in reliance upon, and
in conformity with, written information furnished by the Purchaser to the
Company for inclusion in the Prospectus or Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Company and each director, officer and person, if
any, who controls the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus or Prospectus Supplement or any amendment or supplement to it or (ii)
the omission or alleged omission to state in any Prospectus or Prospectus
Supplement or any amendment or supplement to it a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, the untrue statement, alleged untrue
statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by the Purchaser to the Company
for inclusion in the Prospectus or Prospectus Supplement or an amendment or
supplement to it, and the Purchaser will reimburse the Company and each such
director, officer or controlling person promptly upon demand for any legal or
other costs or expenses reasonably incurred by the Company or the other person
in investigating, defending against, or preparing to defend against any such
claim, action, suit or proceeding.
SECTION 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume
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the defense against the claim, action, suit or proceeding with counsel
satisfactory to it. After an indemnifying party notifies an indemnified party
that the indemnifying party wishes to assume the defense of a claim, action,
suit or proceeding the indemnifying party will not be liable for any legal or
other expenses incurred by the indemnified party in connection with the defense
against the claim, action, suit or proceeding except that if, in the opinion of
counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding
the indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Paragraph (a) or (b) or Section 8.1,
will cooperate in all reasonable respects with the indemnifying party in the
defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent. No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result of
the loss or liability, (i) in the proportion which is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and by the
indemnified party on the other from the sale of stock which is the subject of
the claim, action, suit or proceeding which resulted in the loss or liability or
(ii) if that allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits of the sale of
stock, but also the relative fault of the indemnifying party and the indemnified
party with respect to the statements or omissions which are the subject of the
claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Fees and Expenses.
(a) The Company shall pay all reasonable fees and expenses related to
the transactions contemplated by this Agreement; provided, that the Company
shall pay, at the Closing, all reasonable attorneys fees and expenses, inclusive
of disbursements and out-of-pocket expenses, incurred by the Purchaser up to
$40,000 in connection with the preparation, negotiation, execution and delivery
of this Agreement. In addition, the Company shall pay all reasonable fees and
expenses (including, without limitation, all reasonable attorneys' fees and
expenses) incurred by the Purchaser in connection with (i) any amendments,
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modifications or waivers of this Agreement or (ii) the enforcement of this
Agreement due to the Company's default under, or breach of, this Agreement.
(b) If by the eighth (8th) month anniversary of this Agreement, the
Company has not requested Draw Downs in an aggregate amount of $2,000,000, the
Company shall pay the Purchaser, an amount equal to $200,000 in cash.
SECTION 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
SECTION 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
SECTION 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
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If to the Company: Eclipse Surgical Technologies, Inc.
1049 Kiel Court
Sunnyvale, California 94089
Tel. No.: (408) 548-2100
Fax No.: (408) 548-2171
Attention: Ian Johnston
With copies to: Gibson, Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, California 90067
Tel. No.: (310) 557-8022
Fax No.: (310) 557-8005
Attention: Robert K. Montgomery, Esq.
If to the Purchaser: Acqua Wellington North American
Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Montague Sterling Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No: (242) 394-2700
Fax No.: (242) 394-9667
Attention: Anthony L.M. Inder Rieden
With copies to: Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Tel. No: (212) 704-6000
Fax No: (212)704-6288
Attention: Christopher S. Auguste
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
SECTION 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
SECTION 9.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
SECTION 9.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, which consent
will not
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be unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. The parties hereto may
not amend this Agreement or any rights or obligations hereunder without the
prior written consent of the Company and each Purchaser to be affected by the
amendment. After Closing, the assignment by a party to this Agreement of any
rights hereunder shall not affect the obligations of such party under this
Agreement.
SECTION 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
SECTION 9.9 Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the covenants contained
in Article IV shall survive the execution and delivery hereof and the Closing
until the termination of this Agreement, and the agreements and covenants set
forth in Article VIII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder.
SECTION 9.10 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
SECTION 9.11 Publicity. The Company shall not issue any press release
or otherwise make any public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior consent of the Purchaser.
SECTION 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
SECTION 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
ECLIPSE SURGICAL TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
Title:
ACQUA WELLINGTON NORTH AMERICAN EQUITIES
FUND, LTD.
By:
-----------------------------------
Name:
Title:
