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EXHIBIT 99.1
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF JULY 10, 2000
BY AND BETWEEN
GENELABS 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 Registration Statement and Prospectus........................................................3
Section 2.4 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, Warranties and Covenants 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.....................................................13
Section 4.6 Reporting Requirements......................................................................13
Section 4.7 Other Agreements............................................................................13
Section 4.8 Non-public Information......................................................................14
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, Draw Downs and Call Options..........................................15
Section 5.1 Conditions Precedent to the Obligation of
the Company to Sell the Shares..............................................................15
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close............................16
Section 5.3 Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down or Call Option and Purchase the Shares................................17
ARTICLE VI Draw Down Terms; Call Option................................................................17
Section 6.1 Draw Down Terms.............................................................................17
Section 6.2 Call Option.................................................................................19
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ARTICLE VII Termination................................................................................20
Section 7.1 Termination by Mutual Consent..............................................................20
Section 7.2 Other Termination..........................................................................20
Section 7.3 Effect of Termination......................................................................20
ARTICLE VIII Indemnification............................................................................21
Section 8.1 General Indemnity..........................................................................21
Section 8.2 Indemnification Procedures.................................................................22
ARTICLE IX Miscellaneous..............................................................................23
Section 9.1 Fees and Expenses..........................................................................23
Section 9.2 Specific Enforcement, Consent to Jurisdiction..............................................23
Section 9.3 Entire Agreement; Amendment................................................................24
Section 9.4 Notices....................................................................................24
Section 9.5 Waivers....................................................................................25
Section 9.6 Headings...................................................................................25
Section 9.7 Successors and Assigns.....................................................................25
Section 9.8 Governing Law..............................................................................26
Section 9.9 Survival...................................................................................26
Section 9.10 Counterparts...............................................................................26
Section 9.11 Publicity..................................................................................26
Section 9.12 Severability...............................................................................26
Section 9.13 Further Assurances.........................................................................26
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated
as of July 10, 2000 by and between Genelabs 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) "Commission" shall have the meaning assigned to such term
in Section 2.3 hereof.
(b) "Commission Documents" shall have the meaning assigned to
such term in Section 3.1(f) hereof.
(c) "Commission Filings" means the Company's Form 10-K405 for
the fiscal year ended December 31, 1999, as amended, its Form 10-Q for the
fiscal quarters ended September 30, 1999 and March 31, 2000, its Form 8-K dated
November 30, 1999, and all other filings made by the Company after the date
hereof pursuant to the Securities Exchange Act of 1934.
(d) "Draw Down" shall have the meaning assigned to such term
in Section 6.1(a) hereof.
(e) "Draw Down Amount" means the actual amount of a Draw Down
up to $16,000,000.
(f) "Draw Down Discount Percentage" means (i) 94% (the
"Initial Discount") if the Threshold Price is equal to or exceeds $4.00 but is
less than $6.00, (ii) the Initial Discount plus 0.125% for each $1.00 the
Threshold Price is equal to or exceeds $6.00 but is less than $14.00; (iii)
95.125% if the Threshold Price is equal to or exceeds $14.00; and (iv) 96.5% if
the Company's Market Capitalization equals or exceeds $1.0 billion. For purposes
of this Agreement, "Market Capitalization" shall be determined on the day
preceding the Draw Down Pricing Period and shall equal the product of (i) the
closing bid price on such date and (ii) the Company's outstanding shares of
Common Stock as determined by Bloomberg Financial LP using the DES and HP
Functions.
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(g) "Draw Down Exercise Date" shall have the meaning assigned
to such term in Section 5.1(a) hereof.
(h) "Draw Down Notice" shall have the meaning assigned to such
term in Section 6.1 (i) hereof.
(i) "Draw Down Pricing Period" shall mean a period of eighteen
(18) consecutive trading days starting with the first trading day specified in
Draw Down Notice or such other period of consecutive trading days as mutually
agreed upon by the Company and the Purchaser.
(j) "Effective Date" shall mean July 3, 2000.
(k) "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.
(l) "Material Change in Ownership" shall mean that, as of a
particular measurements date, the officers of the Company shall beneficially own
in the aggregate less than 2% of the outstanding Common Stock of the Company
that those officers and directors beneficially own as of the date hereof.
(m) "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, as supplemented
from time to time pursuant to Rule 424(b) of the Securities Act of 1933, as
amended (the "Securities Act").
(n) "Registration Statement" shall mean the registration
statement on Form S-3, Commission File Number 333-34630 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 that may be purchased hereunder.
(q) "Threshold Price" is the lowest VWAP at which the Company
will sell Shares during each 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 NASDAQ (or any successor thereto) 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 shall issue and sell to the
Purchaser and the Purchaser shall purchase from the Company up to $29,000,000
(the "Maximum Commitment") of the Company's common stock, no par value per share
(the "Common Stock"), consisting of (i) an initial purchase of 1,000,000 shares
of Common Stock for an aggregate purchase price of $4,000,000 (the "Initial
Purchase") and (ii) additional purchases based on Draw Downs in accordance with
Section 6.1 hereof and Call Options of up to the Draw Down Amount per Draw Down
Pricing Period in accordance with Section 6.2 hereof. In no event shall the
amount of Common Stock required to be purchased by the Purchaser exceed
$16,000,000 per Draw Down.
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 shares of its Common Stock to cover the Shares to be
issued in connection with all Draw Downs and all Call Options.
SECTION 2.3 Registration Statement and Prospectus. The Company
has prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act, the
Registration Statement, including a prospectus subject to completion relating to
5,000,000 shares of Common Stock. The Registration Statement was declared
effective on July 3, 2000.
SECTION 2.4 Purchase Price and Closing. In consideration of
and in express reliance upon the representations, warranties, covenants, 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, that number of
the Shares to be issued in connection with each Draw Down and the Initial
Purchase. The closing of the execution and delivery of this Agreement (the
"Closing") shall take place at the offices of Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, NY 10174 at 5:00 p.m. eastern time on
(i) July 10, 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
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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-K405,
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 and each such subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified 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 3.1(e), 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 when executed and
delivered shall constitute, 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 June 30, 2000 are
set forth on Schedule 3.1(c) attached hereto. 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 on Schedule
3.1(c) attached hereto, as of June 30, 2000, 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, 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,
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. 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. 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 Certificate of Incorporation as in
effect on the date hereof (the "Articles"), and the Company's Bylaws as in
effect on the date hereof (the "Bylaws").
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(d) Issuance of Shares. The Shares have been duly authorized
by all necessary corporate action and, when paid for or issued in accordance
with the terms hereof, the Shares shall be validly issued and outstanding, fully
paid and 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 therein do not (i) violate any provision of the
Company's Articles 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 Nasdaq 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, since
December 31, 1998, 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, 1998 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. As of its date, 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 applicable to such document, and, as of its date, after
giving effect to the information disclosed and incorporated by reference
therein, such Form 10-K did not contain any untrue statement of a material fact
or omit to state a material
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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. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied 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. Schedule 3.1(g) attached hereto sets 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 other than Genelabs Diagnostic, Inc., a Delaware corporation and
its 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 Change. Since December 31, 1999
through the date hereof, the Company has not experienced or suffered any
Material Adverse Effect, except continued losses from operations.
(i) No Undisclosed Liabilities. Neither the Company nor any of
its subsidiaries has any 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
and are not disclosed in the Commission Documents or Commission Filings, 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. The Commission Documents or the Commission
Filings set forth as of December 31, 1999 all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary 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. Neither the Company nor any subsidiary
is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries
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 that could not
reasonably be expected to cause a Material Adverse Effect. All 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 or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents 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, any subsidiary or any of their
respective properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the
subsidiaries 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 and
each of its subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, the failure to possess which, 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 or any subsidiary 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 or any subsidiary in connection with
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the transactions contemplated by this Agreement contain any untrue statement of
a material fact or omit to state a material fact 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 and each of its
subsidiaries 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. The Company and each of its
subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "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
or its subsidiaries 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. Neither the Company nor any
subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission (collectively, "Material Agreements") if the
Company or any subsidiary were registering securities under the Securities Act
immediately prior to the effectiveness of this Agreement. The Company and each
of its subsidiaries has in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements, have
received no notice of default and, to the best of the Company's knowledge are
not in default under any Material Agreement now in effect, the result of which
could reasonably be expected to cause a Material Adverse Effect.
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(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, any
subsidiary or any of their respective 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 hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, 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 were 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 the representations and warranties
of the Purchaser made hereby and the information relating to the Purchaser
furnished to the Company in writing by or on behalf of the Purchaser expressly
for use therein.
(iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not distribute any
offering material in connection with the offer 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, neither the Company nor
any subsidiary has any collective bargaining arrangements or agreements covering
any of its employees, except as set forth in the Commission Documents or the
Commission Filings. Each of the Company and its subsidiaries requires its
officers, employees and certain consultants to enter into agreements regarding
proprietary information, noncompetition, nonsolicitation, confidentiality, or
other similar agreements containing restrictive covenants. As of the date
hereof, except as disclosed in Schedule 3.1(v), no officer, consultant or key
employee of the
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Company or any subsidiary 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 or any
subsidiary.
(w) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for the purposes substantially
as set forth in the Prospectus under "Use of Proceeds".
(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 or any of
its subsidiaries 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
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(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, Warranties and Covenants of the
Purchaser. The Purchaser hereby makes the following representations, warranties
and covenants to the Company:
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(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, or
when executed and delivered shall constitute, a valid and binding 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.
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(e) Selling Restrictions. The Purchaser has the right to sell
shares of the Company's Common Stock equal in number to the number of the Shares
to be purchased pursuant to this Agreement during the Draw Down Pricing Period.
The Purchaser covenants, however, that prior to and during the term of the Draw
Down Pricing 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.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which
covenants are for the benefit of the Purchaser and its permitted assignees (as
defined herein).
SECTION 4.1 Securities. The Company shall notify the
Commission and Nasdaq, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
reasonable efforts to 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 or any relevant market or system, if applicable, and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD or any relevant market or system.
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, and cause each subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could reasonably be expected to have a Material Adverse Effect.
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(b) 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 Shares
representing more than nineteen and nine-tenths percent (19.9%) of the issued
and outstanding shares of the Company's Common Stock on the date hereof.
SECTION 4.5 Keeping of Records and Books of Account. The
Company shall keep and cause each subsidiary to 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, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
SECTION 4.6 Reporting Requirements. Upon written 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. During the term of this
Agreement, the Company is restricted from entering in any other financing
agreement during any Draw Down Pricing Period ("Other Financing") without the
prior written consent of the Purchaser, which consent will not be unreasonably
withheld, conditioned or delayed or without terminating its agreement with the
Purchaser, except that the Company may (i) enter into a loan, credit or lease
facility with a bank or financing institution, (ii) establish an employee stock
option plan or agreement or finance the acquisition of other companies,
equipment, technologies or lines of business, (iii) issue shares of Common Stock
and/or Preferred Stock in connection with the Company's current option plans,
stock purchase plans, rights plans, currently outstanding warrants or options or
increase the number of shares available under any such plans and (iv) issue
shares of Common Stock and/or Preferred Stock in connection with the acquisition
of products, licenses or other assets and strategic partnerships or joint
ventures (the primary purpose of which is not to raise equity) (each a
"Permitted Transaction").
SECTION 4.8 Non-public Information. Neither the Company nor
any of its officers or agents shall disclose any material non-public information
about the Company to the Purchaser.
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
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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 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 of the Shares by the Purchaser, 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. Prior to the execution and
delivery of this Agreement, the Company will deliver to the Purchaser, without
charge, in such quantities as reasonably requested by the Purchaser, copies of
each form of Prospectus. As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in the
opinion of counsel for the Purchasers a prospectus is required by the Securities
Act to be delivered in connection with sales by the Purchaser, the Company will
expeditiously deliver to the Purchaser, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as the Purchaser may
reasonably request. 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.
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ARTICLE V
CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS
SECTION 5.1 Conditions Precedent to the Obligation of the
Company to Close this Agreement and 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 the Initial Purchase and 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 the date
of each Draw Down or Call Option request (the "Draw Down Exercise Date") as
though made at that time, except for representations and warranties that are
expressly made as of a particular date.
(b) Effective Registration Statement. The Registration
Statement registering the offer and sale of 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 be suspended by the Commission or the NASD (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 or
Call Option request, trading in securities generally as reported on NASDAQ shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by American Stock Exchange,
or on the New York Stock Exchange, 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 subsidiary,
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or any of the officers, directors or affiliates of the Company or any subsidiary
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(g) Compliance with Law. The Purchaser shall have complied
with all applicable federal, state and local governmental laws, rules,
regulations and ordinances in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 5.2 Conditions Precedent to the Obligation of the
Purchaser to Close this Agreement. 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 Suspension, Etc. Trading in the Company's Common Stock
shall not be suspended by the Commission or the NASD (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 the Closing, trading
in securities generally as reported on NASDAQ shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by the American Stock Exchange, or on the New York Stock
Exchange, 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
Purchaser, makes it impracticable or inadvisable to purchase the Shares.
(c) 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.
(d) 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 subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
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(e) Compliance with Law. The Company shall have complied with
all applicable federal, state and local governmental laws, rules, regulations
and ordinances in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby.
(f) 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 form and substance satisfactory to counsel to the Purchaser, 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 consummate the Initial Purchase or to
accept a Draw Down or Call Option request and to acquire and pay for the Shares
is subject to the satisfaction or waiver, at or before each Draw Down Exercise
Date or the consummation of the Initial Purchase, as the case may be, 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 prior to the Closing Date and shall thereafter be 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 NASD (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 on NASDAQ shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by the American Stock Exchange.
(d) Material Adverse Effect; Material Change in Ownership. No
Material Adverse Effect and no Material Change in Ownership 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 up to (i) $7,000,000 (the "Initial Amount") if the
Threshold Price is equal to or
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exceeds $4.00 but is less than $6.00; and (ii) the Initial Amount plus an
additional $1,000,000 per each $1.00 the Threshold Price is equal to or exceeds
$6.00 or such other amount, and under such terms, mutually agreed upon by the
Purchaser and the Company (a "Draw Down") during any Draw Down Pricing Period,
which Draw Down the Purchaser will be obligated to accept. Prior to issuing any
Draw Down Notice, the Company shall have Shares representing at least the Draw
Down Amount registered under the Registration Statement.
(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) 1/18th (or such other fraction based upon the agreed upon Draw
Down Pricing Period) of the Draw Down Amount divided by (y) the applicable Draw
Down Discount Percentage multiplied by the VWAP for such day.
(c) Only one Draw Down shall be allowed in each Draw Down
Pricing Period.
(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 (or such
other number of trading days mutually agreed upon by the Purchaser and the
Company) between Draw Downs.
(f) There shall be a maximum of fifteen (15) Draw Downs during
the term of this Agreement.
(g) Each Draw Down will expire on the last trading day of each
Draw Down Pricing Period.
(h) For each trading day during the Draw Down Pricing Period
that the VWAP is at or above the Threshold Price, one-eighteenth (1/18th) (or
such other fraction based upon the agreed upon Draw Down Pricing Period) of the
Draw Down Amount shall be allocated to purchase Shares at a price equal to the
product of (x) the Draw Down Discount Percentage times (y) the VWAP for such
day. 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
allocate 1/18th (or such other fraction based upon the agreed upon Draw Down
Pricing Period) of the Draw Down Amount to purchase Shares at the end of such
Draw Down Pricing Period at a price equal to the product of (A) the Draw Down
Discount Percentage times (B) the Threshold Price. At no time shall the
Threshold Price be set below $4.00 unless 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.
(i) 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"). In addition to
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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.
(j) On each Settlement Date, the Company shall deliver the
Shares purchased by the Purchaser to the Purchaser or its designees via DWAC,
and upon receipt of the Shares, the Purchaser shall cause payment therefor to be
made to the Company's designated account by wire transfer of immediately
available funds provided that the Shares are received by the Purchaser no later
than 1:00 p.m. (eastern time) or next day available funds if the Shares are
received thereafter.
(k) If during any Draw Down Pricing Period, the Company with
the consent of the Purchaser as provided in Section 4.7 hereof shall issue any
shares of Common Stock (other than shares of Common Stock issued under this
Agreement or in connection with a Permitted Transaction), the Purchaser may in
its sole discretion (i) purchase up to the same number of shares of Common Stock
at the price and on such terms as the Company issued Shares of Common Stock
during such Draw Down Pricing Period, (ii) purchase up to the Draw Down Amount
of shares of Common Stock at the applicable Draw Down Discount Percentage times
the VWAP for such Draw Down Pricing Period, 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.
(l) 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 (l) 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, which piggyback registration rights may
be exercised by the Purchaser with respect to three separate registration
statements filed by the Company.
SECTION 6.2 Call Option.
(a) The Company may, in its sole discretion, grant to the
Purchaser the option to exercise multiple call options of up to the Draw Down
Amount (a "Call Option") during each Draw Down Pricing Period; provided, that no
Call Option shall exceed 50% of the Draw Down Amount on any trading day during a
Draw Down Pricing Period. The total amount of Call Options granted by the
Company and exercised by the Purchaser shall not exceed $25,000,000 in the
aggregate. For each trading day during a Draw Down Pricing Period, the Purchaser
may
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exercise a Call Option by providing notice to the Company of the exercise of the
Call Option (the "Call Option Notice").
(b) The number of shares of Common Stock to be issued in
connection with each Call Option shall be equal to the quotient of (i) the
amount of the Call Option exercised and (ii) the product of the applicable Draw
Down Discount Percentage and the greater of (A) the VWAP for the Common Stock
and (B) the Threshold Price, in each case on the day the Purchaser issues its
Call Option Notice.
(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, 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 a Call Option by 6:00 p.m.
(eastern time) on the last day of the applicable Draw 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 the earlier of (i) eighteen (18) months from the Effective
Date or (ii) such date that the Purchaser has funded in the aggregate the
Maximum Commitment. This Agreement may be terminated at any time by mutual
written consent of the parties.
SECTION 7.2 Other Termination. The Purchaser may terminate
this Agreement upon (x) one (1) day's notice if the Company issues convertible
debentures or enters an equity financing facility as set forth in Section 4.7
without the Purchaser's prior written consent, or (y) one (1) day's notice if an
event resulting in a Material Adverse Effect or a Material Change of Control in
Ownership has occurred. Each of the parties hereto may terminate this Agreement
if the other party has breached a material covenant to this Agreement.
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.
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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 reasonable 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 or
the Prospectus relating to the shares being sold to the Purchaser, 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, provided that the
Company shall not be liable under this Section 8.1(a) to the extent that a court
of competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchasers expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to the Prospectus, the
foregoing indemnity shall not inure to the benefit of the Purchasers or any such
person from whom the person asserting any loss, claim, damage, liability or
expense purchased Common Stock, if copies of the Prospectus were timely
delivered to the Purchasers pursuant hereto and a copy of the Prospectus (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of the Purchasers
or any such person to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Common Stock to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense.
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 the Purchaser 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 the Registration Statement or any Prospectus in
reliance upon, and in conformity with, written
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information furnished by the Purchaser to the Company for inclusion in the
Registration Statement or Prospectus.
(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
reasonable attorneys fees) to which the Company and any director or officer of
the Company and each 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 (ii) the omission or alleged
omission to state in the Registration Statement or any Prospectus 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 Registration Statement or Prospectus, 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 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 to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes
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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 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. Except as set forth in Article
VIII, the Company shall pay (i) 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 (exclusive of
disbursements and out-of-pocket expenses and reasonably itemized) incurred by
the Purchaser up to $40,000 in connection with the preparation, negotiation,
execution and delivery of this Agreement, (ii) all reasonable fees and expenses
incurred by the Purchaser in connection with any amendments, modifications or
waivers of this Agreement or incurred in connection with the enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and
expenses, and (iii) all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
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 or
thereof, 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
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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:
If to the Company: Genelabs Technologies, Inc.
505 Penobscot Drive
Redwood City, California 94063
Tel. No.: (650) 369-9500
Fax No.: (650) 366-8748
Attention: James A.D. Smith
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<PAGE> 28
Skadden, Arps, Slate, Meagher & Flom LLP
With copies to: 525 University Avenue
Suite 220
Palo Alto, California 94301
Tel. No.: (650) 470-4500
Fax No.: (650) 470-4570
Attention: Gregory C. Smith, Esq.
If to the Purchaser: Acqua Wellington North American Equities Fund, Ltd.
c/o Mees Pierson 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: Director
With copies to: Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 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 prior 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 written consent of the
Company, which consent will not be unreasonably withheld. This Agreement shall
be binding upon and inure to the benefit of the parties and their successors and
assigns. 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.
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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 9.14 shall
survive the termination of this Agreement.
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. Prior to the Closing, neither the
Company nor the Purchaser shall 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. In the
event the Company is required by law, based upon an opinion of the Company's
counsel, to issue a press release or otherwise make a public statement or
announcement with respect to this Agreement prior to the Closing, the Company
shall consult with the Purchaser on the form and substance of such press
release. Promptly after the Closing, each party may issue a press release or
otherwise make a public statement or announcement with respect to this Agreement
or the transactions contemplated hereby or the existence of this Agreement;
provided, that prior to issuing any such press release, making any such public
statement or announcement, the party wishing to make such release, statement or
announcement obtains the prior consent of the other party, which consent shall
not be unreasonably withheld or delayed.
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 instruments documents
and other writings as may be reasonably
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necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
SECTION 9.14 Confidentiality. Each of the Company and the
Purchaser agrees to maintain the confidentiality of all of the terms of this
Agreement and the transactions contemplated hereby, until such time as that
confidential information is released to the public generally other than as a
result of any disclosure by Purchaser.
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<PAGE> 31
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.
GENELABS TECHNOLOGIES, INC.
By:
-----------------------------------------------------
Name: James A.D. Smith
Title: President and Chief Executive Officer
ACQUA WELLINGTON NORTH AMERICAN
EQUITIES FUND, LTD.
By:
-----------------------------------------------------
Name: Rhonda McDeigan Eldridge
Title: Director
