Exchange Agreement - ViroLogic Inc.
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of November 14, 2002,
between ViroLogic, Inc., a corporation organized under the laws of the State of
Delaware (the "COMPANY"), and each of the purchasers (individually, a
"PURCHASER" and collectively the "PURCHASERS") set forth on the execution pages
hereof (the "EXECUTION PAGES, and each an "EXECUTION PAGE").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. In connection with the Securities Purchase Agreement, dated as of
November 14, 2002, by and among the Company and the purchasers named therein
(the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms
and subject to the conditions contained therein, to issue and sell to such
purchasers (the "SERIES C PURCHASERS") (i) shares of its Series C Convertible
Preferred Stock, par value $.001 per share (the "PREFERRED SHARES"), that are
convertible into shares of the Company's common stock, par value $.001 per share
(the "COMMON STOCK"), and (ii) warrants (the "SERIES C WARRANTS") to acquire
additional shares of Common Stock. The rights, preferences and privileges of the
Preferred Shares, including the terms upon which such Preferred Shares are
convertible into shares of Common Stock, are set forth in the form of
Certificate of Designations, Preferences and Rights attached hereto as Exhibit A
(the "CERTIFICATE OF DESIGNATION").
C. In order to consummate the transactions contemplated by the
Securities Purchase Agreement, the Company requires the consent of the holders
of the Purchasers, each of which is a holder of either shares of the Company's
Series A Convertible Preferred Stock, par value $.001 per share (the "SERIES A
PREFERRED STOCK"), or shares of the Company's Series B Convertible Preferred
Stock, par value $.001 per share (the "SERIES B PREFERRED STOCK"), and, in order
to obtain such consent, the Company desires to (i) repurchase from the
Purchasers, and the Purchasers desire to sell to the Company, all of the Series
A Preferred Stock and/or Series B Preferred Stock owned by the Purchasers, in
exchange for promissory notes in the form attached hereto as Exhibit B (the
"NOTES"), which Notes shall, under certain circumstances, be automatically
converted into Preferred Shares, and (ii) with respect to the Purchasers that
are holders of Series B Preferred Stock, upon conversion of the Notes, issue to
such Purchasers, in exchange for the warrants (the "OLD WARRANTS") issued to
such Purchasers in connection with their acquisition of the Series B Preferred
Stock, new warrants, in the form attached hereto as Exhibit C (the "REPLACEMENT
WARRANTS"), to acquire additional shares of Common Stock. The shares of Common
Stock issuable upon conversion of the Preferred Shares pursuant to the
Certificate of Designation are referred to herein as the "CONVERSION SHARES" and
the shares of Common Stock issuable upon exercise of or otherwise pursuant to
the Replacement Warrants are referred to herein as the "WARRANT SHARES." The
Notes, the Preferred Shares, the Replacement
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Warrants, the Conversion Shares and the Warrant Shares are collectively referred
to herein as the "SECURITIES" and each of them may individually be referred to
herein as a "SECURITY."
D. In connection with the Closing (as defined herein) pursuant to this
Agreement, the Company is executing and delivering a Security Agreement, in the
form attached hereto as Exhibit D, in favor of the Collateral Agent (as defined
herein) for the benefit of all of the Purchasers, and an Intellectual Property
Security Agreement, in the form attached hereto as Exhibit E, in favor of the
Collateral Agent for the benefit of all of the Purchasers (collectively,
together with any other document securing the Notes, the "SECURITY DOCUMENTS"),
pursuant to which the Company has agreed to grant a security interest in all of
its properties and assets in order to secure its obligations under the Notes.
E. In connection with the Closing pursuant to this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit F (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws. This Agreement, the Certificate of
Designation, the Notes, the Replacement Warrants, the Security Documents and the
Registration Rights Agreement are collectively referred to herein as the
"TRANSACTION DOCUMENTS."
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. REPURCHASE OF PREFERRED STOCK; ISSUANCE OF NOTES.
(a) Repurchase of Preferred Stock. The repurchase of the Series A
Preferred Stock and the Series B Preferred Stock by the Company pursuant to this
Agreement shall take place in one closing, which is referred to herein as the
"CLOSING." On the Closing Date (as defined below), subject to the satisfaction
(or waiver) of the conditions set forth in Section 6 and Section 7 below, the
Company shall repurchase from each Purchaser, and each Purchaser agrees to sell
to the Company, all of the Series A Preferred Stock and/or Series B Preferred
Stock owned by such Purchaser, the amount of which is set forth on such
Purchaser's Execution Page attached hereto. The purchase price (the "PURCHASE
PRICE") per share of Series A Preferred Stock and Series B Preferred Stock shall
be equal to the applicable Redemption Amount (as defined in the Certificate of
Designations, Preferences and Rights of the Series A Preferred Stock (the
"SERIES A CERTIFICATE OF DESIGNATIONS") and the Certificate of Designations,
Preferences and Rights of the Series B Preferred Stock (the "SERIES B
CERTIFICATE OF DESIGNATIONS"), respectively) applicable to such shares on the
Closing Date. Upon the repurchase of the Series A Preferred Stock and the Series
B Preferred Stock pursuant to this Agreement, the shares so repurchased shall be
canceled, shall return to the status of authorized, but unissued preferred stock
of no designated series, and shall not be issuable by the Company as Series A
Preferred Stock or Series B Preferred Stock, respectively.
(b) Form of Payment. On the Closing Date, the Company shall pay the
applicable Purchase Price to each Purchaser by the issuance of a Note to such
Purchaser, and the Company shall deliver such Note against delivery of the share
certificates representing such Purchaser's shares of Series A Preferred Stock
and/or Series B Preferred Stock.
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(c) Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the repurchase of the Series A Preferred Stock and the Series B Preferred
Stock and issuance of the Notes pursuant to this Agreement at the Closing shall
be 12:00 noon, New York City time, on November 18, 2002, subject to a two
business day grace period at either party's option, but in any event not later
than November 20, 2002, or such other time as may be mutually agreed upon by the
Company and the Purchasers holding a majority of the shares of Series A
Preferred Stock and Series B Preferred Stock voting together (the "CLOSING
DATE"). The Closing shall occur at the offices of Drinker Biddle & Reath LLP at
One Logan Square, 18th & Cherry Streets, Philadelphia, PA 19103.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Each Purchaser severally, but not
jointly, represents and warrants to the Company as follows:
(a) Purchase for Own Account, Etc.. Such Purchaser is acquiring the
Securities for such Purchaser's own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Such Purchaser understands that Purchaser
must bear the economic risk of this investment indefinitely, unless the
Securities are registered pursuant to the Securities Act and any applicable
state securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering the
resale of any such Securities other than as contemplated by the Registration
Rights Agreement. Notwithstanding anything in this Section 2(a) to the contrary,
by making the representations herein, the Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements under
the Securities Act.
(b) Accredited Investor Status. Such Purchaser is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act; the Purchaser is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to,
investments in shares presenting an investment decision like that involved in
the acquisition of the Securities, including investments in securities issued by
the Company and investments in comparable companies; and the Purchaser has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to acquire the Securities.
(c) Reliance on Exemptions. Such Purchaser understands that the
Securities are being offered and issued to such Purchaser in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
(d) Information. Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and issuance of the Securities which
have been specifically requested by such
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Purchaser or its counsel. Such Purchaser and its counsel have been afforded the
opportunity to ask questions of the Company and have received what such
Purchaser believes to be satisfactory answers to any such inquiries. Neither
such inquiries nor any other investigation conducted by such Purchaser or its
counsel or any of its representatives shall modify, amend or affect such
Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. Such Purchaser understands that such Purchaser's
investment in the Securities involves a high degree of risk.
(e) Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Transfer or Resale. Such Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (b)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) ("RULE 144"); or (d) sold or
transferred in accordance with applicable securities laws to an affiliate of
such Purchaser who agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 2(f) and who is an Accredited
Investor; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws (other than pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement, provided such pledge is consistent
with applicable laws, rules and regulations.
(g) Legends. Such Purchaser understands that the Notes and the
certificates for the Preferred Shares and the Replacement Warrants (to the
extent issued upon conversion of the Notes) and the Conversion Shares and the
Warrant Shares (until such time as the Conversion Shares and Warrant Shares have
been registered under the Securities Act (including registration pursuant to
Rule 416 thereunder) as contemplated by the Registration Rights Agreement or
otherwise may be sold by such Purchaser under Rule 144(k)), shall bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state of the United States or in any other
jurisdiction. The securities represented hereby may not be
offered, sold or transferred in the absence of an effective
registration statement for the securities under applicable
securities laws unless offered, sold or transferred pursuant to
an available exemption from the registration requirements of
those laws.
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The Company agrees that at any time the Registration Statement is
effective, and assuming compliance with the applicable provisions of the
Certificate of Designation or the Replacement Warrant, as applicable, the
Company shall instruct its transfer agent to issue (and provide such transfer
agent with any additional documentation that may be necessary to cause the
Conversion Shares and the Warrant Shares to be issued without the restrictive
legend above), in connection with the issuance of the Conversion Shares and
Warrant Shares, certificates representing such Conversion Shares and Warrant
Shares without the restrictive legend above, provided such Conversion Shares and
Warrant Shares are to be sold pursuant to the prospectus contained in the
Registration Statement. The parties acknowledge that the Company has certain
rights with respect to transfers of the Securities as set forth in the
Registration Rights Agreements.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement and the Security is sold pursuant to and as set forth in such
Registration Statement and in the Securities Act; (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Security may be made without registration under the
Securities Act; or (c) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance written notice to such Purchaser
the Company may require that the above legend be placed on any such Security
that cannot then be sold pursuant to an effective registration statement or
under Rule 144 and such Purchaser shall cooperate in the replacement of such
legend. Such legend shall thereafter be removed when such Security may again be
sold pursuant to an effective registration statement or under Rule 144.
(h) Authorization; Enforcement. This Agreement, the Security Documents
and the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Purchaser and are valid and binding
agreements of such Purchaser enforceable against such Purchaser in accordance
with their terms.
(i) Residency. Such Purchaser is a resident of the jurisdiction set
forth under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
(j) Ownership. Such Purchaser owns, beneficially and of record, good and
marketable title to that number of shares of Series A Preferred Stock and/or
Series B Preferred Stock as is set forth on such Purchaser's Execution Page
attached hereto.
The Purchasers' representations and warranties made in this Article 2
are made solely for the purpose of permitting the Company to make a
determination that the offer and issuance of the Securities pursuant to this
Agreement complies with applicable U.S. federal and state securities
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laws and not for any other purpose. Accordingly, the Company should not rely on
such representations and warranties for any other purpose.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a
Schedule of Exceptions executed and delivered by the Company to the Purchasers
at Closing (the "SCHEDULE OF EXCEPTIONS"), the Company represents and warrants
to each Purchaser as follows:
(a) Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries 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 by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
or under the Certificate of Designation, the Notes, the Replacement Warrants,
the Security Documents or the Registration Rights Agreement or (iii) the
business, operations, properties, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Replacement Warrants, the Security Documents and
the Registration Rights Agreement, to repurchase the Series A Preferred Stock
and the Series B Preferred Stock and issue the Notes in accordance with the
terms hereof and, subject to obtaining the Authorized Stock Approval and NASD
Rule Approval contemplated by Section 4(r) below, to issue the Preferred Shares
upon conversion of the Notes in accordance with the terms thereof, the
Replacement Warrants in exchange for the Old Warrants in accordance with the
terms hereof, the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation and the Warrant
Shares upon exercise of the Replacement Warrants in accordance with the terms of
such Replacement Warrants; (ii) the execution, delivery and performance of this
Agreement, the Notes, the Replacement Warrants, the Security Documents and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes and, subject to obtaining the Authorized Stock Approval
and NASD Rule Approval contemplated by Section 4(r) below, the issuance of the
Replacement Warrants and the issuance and reservation for issuance of the
Preferred Shares, the Conversion Shares and the Warrant Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or any committee of the
Board of Directors is required, and (iii) this Agreement constitutes, and, upon
execution and delivery by the Company of the Notes, the Replacement Warrants,
the Security Documents and the Registration Rights Agreement, such agreements
will constitute, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms.
(c) Stockholder Authorization. Neither the execution, delivery or
performance by the Company of this Agreement, the Notes, the Replacement
Warrants, the Security Documents or
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the Registration Rights Agreement nor the consummation by it of the transactions
contemplated hereby or thereby (including, without limitation, the issuance of
the Notes, the issuance of the Replacement Warrants or the issuance or
reservation for issuance of the Preferred Shares, the Conversion Shares or the
Warrant Shares) requires any consent or authorization of the Company's
stockholders, except for the Authorized Stock Approval and the NASD Rule
Approval contemplated by Section 4(r) below.
(d) Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Notes, Preferred Shares and the
Replacement Warrants) exercisable or exchangeable for, or convertible into, any
shares of capital stock and the number of shares to be reserved for issuance
upon conversion of the Notes and the Preferred Shares and exercise of the
Replacement Warrants is set forth on Schedule 3(d) of the Schedule of
Exceptions. All of such outstanding shares of capital stock have been, or upon
issuance in accordance with the terms of any such warrants, options or preferred
stock, will be, validly issued, fully paid and non-assessable. No shares of
capital stock of the Company (including the Notes, the Preferred Shares, the
Conversion Shares and the Warrant Shares) are subject to preemptive rights or
any other similar rights of the stockholders of the Company or any liens or
encumbrances. Except for the Securities and as set forth on Schedule 3(d) of the
Schedule of Exceptions, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, nor are any such
issuances or arrangements contemplated, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreements). Schedule 3(d) of the Schedule of
Exceptions sets forth all of the Company issued securities or instruments
containing antidilution or similar provisions that will be triggered by, and all
of the resulting adjustments that will be made to such securities and
instruments as a result of, the issuance of the Securities in accordance with
the terms of this Agreement, the Certificate of Designation, the Notes or the
Replacement Warrants. The Company has furnished to the Purchasers true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof ("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect
on the date hereof (the "BY-LAWS"), and all other instruments and agreements
governing securities convertible into or exercisable or exchangeable for capital
stock of the Company. The Certificate of Designation, in the form attached
hereto, will be duly filed prior to Closing with the Secretary of State of the
State of Delaware and, in the event of and upon the issuance of the Preferred
Shares in accordance with the terms of the Notes, each Purchaser shall be
entitled to the rights set forth therein.
(e) Issuance of Shares. The Preferred Shares are duly authorized and, in
the event of and upon issuance in accordance with the terms of the Notes, will
be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances (other than restrictions on transfer contained in
this Agreement and in the Registration Rights Agreements) and will not be
subject to preemptive rights, rights of first refusal or other similar rights of
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stockholders of the Company and will not impose personal liability on the
holders thereof. Upon obtaining the Authorized Stock Approval contemplated by
Section 4(r) below, the Conversion Shares shall be duly authorized and reserved
for issuance, and, upon conversion of the Preferred Shares in accordance with
the terms thereof, will be validly issued, fully paid and non-assessable, and
free from all taxes, liens, claims and encumbrances (other than restrictions on
transfer contained in this Agreement and in the Registration Rights Agreements)
and will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof. Upon obtaining the Authorized Stock Approval
contemplated by Section 4(r) below, the Warrant Shares shall be duly authorized
and reserved for issuance, and, upon exercise of the Replacement Warrants in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances (other
than restrictions on transfer contained in this Agreement and in the
Registration Rights Agreements) and will not be subject to preemptive rights,
rights of first refusal or other similar rights of stockholders of the Company
and will not impose personal liability upon the holder thereof.
(f) No Conflicts. The execution, delivery and performance of this
Agreement, the Notes, the Replacement Warrants, the Security Documents and the
Registration Rights Agreement by the Company, the performance by the Company of
its obligations under the Notes, the Replacement Warrants and the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Notes, the issuance of the Replacement Warrants and the issuance and
reservation of the Preferred Shares, the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Certificate of Incorporation
or By-laws or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment (including, without limitation, the
triggering of any anti-dilution provisions), acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and state securities
laws and regulations and rules or regulations of any self-regulatory
organizations to which either the Company or its securities are subject)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected (except,
with respect to clause (ii), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
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Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Notes, the Replacement Warrants, the Security
Documents or the Registration Rights Agreement or to perform its obligations
under the Notes, the Replacement Warrants or the Certificate of Designation, in
each case in accordance with the terms hereof or thereof. The Company is not in
violation of the listing requirements of the Nasdaq National Market ("NNM") and
has received no notice regarding the potential delisting of the Common Stock by
the NNM.
(g) SEC Documents, Financial Statements. Since December 31, 2001, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Purchaser true and complete copies of the SEC Documents. To
the extent that any SEC Document is available under the SEC's EDGAR filing
system prior to the date hereof, such SEC Document shall be deemed to have been
delivered to each of the Purchasers. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings made prior to
the date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, 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 consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which liabilities and
obligations referred to in clauses (i) and (ii), individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.
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(h) Absence of Certain Changes. Since December 31, 2001, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
the SEC Documents filed prior to the date hereof.
(i) Absence of Litigation. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body, including, without limitation, the SEC or
NASDAQ, pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such. There are no
facts which, if known by a potential claimant or governmental authority, could
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(j) Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any Intangibles.
Except as set forth on Schedule 3(j) of the Schedule of Exceptions, neither the
Company nor any of its subsidiaries has received written notice of any pending
conflict with or infringement upon such third party Intangibles. Except as set
forth on Schedule 3(j) of the Schedule of Exceptions, the termination of the
Company's ownership of, or right to use, any single Intangible would not result
in a Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has entered into any consent agreement, indemnification agreement,
forbearance to sue or settlement agreement with respect to the validity of the
Company's or its subsidiaries' ownership or right to use its Intangibles and, to
the best knowledge of the Company, there is no reasonable basis for any such
claim to be successful. The Intangibles are valid and enforceable and no
registration relating thereto has lapsed, expired or been abandoned or canceled
or is the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and in good standing. The Company and its
subsidiaries have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Intangibles used
pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company or its
subsidiaries.
(k) Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any
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provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
(l) Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to any Purchaser pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
(m) Acknowledgment Regarding Repurchase of Preferred Stock and Issuance
of Notes. The Company acknowledges and agrees that none of the Purchasers is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the transactions contemplated
hereby, the relationship between the Company and the Purchasers is "arms-length"
and any statement made by any Purchaser or any of its representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser's acquisition of Securities and has not been
relied upon by the Company, its officers or directors in any way. The Company
further acknowledges that the Company's decision to enter into this Agreement
has been based solely on an independent evaluation by the Company and its
representatives.
(n) Listing. Upon obtaining the Authorized Stock Approval and the NASD
Rule Approval, the Company will secure the listing of the Conversion Shares and
the Warrant Shares upon each national securities exchange or automated quotation
system upon which shares of Common Stock are currently listed (subject to
official notice of issuance).
(o) Form S-3 Eligibility. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement). The Company has no basis to believe that its past or present
independent public auditors will withhold their consent to the inclusion, or
incorporation by reference, of their audit opinion concerning the Company's
financial statements which are included in the Registration Statement required
to be filed pursuant to the Registration Rights Agreement.
(p) No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(q) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of
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the Securities Act or any applicable stockholder approval provisions, including,
without limitation, Rule 4350(i) of the NASD or any similar rule.
(r) No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions or finder's fees or for
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby.
(s) Acknowledgment Regarding Securities. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase in certain
circumstances. The Company's executive officers have studied and fully
understand the nature of the Securities being sold hereunder. The Company
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with the Certificate of Designation is, other
than as set forth in the Certificate of Designation, absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders and the availability of remedies provided for in
the Transaction Documents relating to a failure or refusal to issue Conversion
Shares. Taking the foregoing into account, the Company's Board of Directors has
determined in its good faith business judgment that the issuance of the Notes
and Replacement Warrants hereunder and the Preferred Shares pursuant to the
Notes and the consummation of the other transactions contemplated hereby and
thereby are in the best interests of the Company and its stockholders. The
Company's Board of Directors and executive officers fully intend to honor their
obligations hereunder to issue Conversion Shares upon conversion of the
Preferred Shares regardless of the dilution that such issuance may have on the
ownership interests of other stockholders and the availability of remedies
provided for in the Transaction Documents relating to their failure or refusal
to issue Conversion Shares.
(t) Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to all
personal property owned by them that is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
(u) Tax Status. Except as set forth in the SEC Documents, the Company
and each of its subsidiaries has made or filed all foreign, U.S. federal, state
and local income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
any statute of limitations relating to the
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assessment or collection of any federal, state or local tax. None of the
Company's tax returns is presently being audited by any taxing authority.
(v) Key Employees. Each of the Company's directors, officers and any Key
Employee (as defined below) is currently serving the Company in the capacity
disclosed in the SEC Documents. No Key Employee, to the best of the knowledge of
the Company and its subsidiaries, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each Key Employee does not subject the Company or any of its subsidiaries to
any liability with respect to any of the foregoing matters. No Key Employee has,
to the knowledge of the Company and its subsidiaries, any intention to terminate
or limit his employment with, or services to, the Company or any of its
subsidiaries, nor, to the knowledge of the Company, is any such Key Employee
subject to any constraints which would cause such employee to be unable to
devote his full time and attention to such employment or services. "KEY
EMPLOYEE" means the persons listed on Schedule 3(v) of the Schedule of
Exceptions and any individual who assumes or performs any of the duties of a Key
Employee.
(w) Insurance. The Company and its subsidiaries have in force fire,
casualty, product liability and other insurance policies, with extended coverage
and in such amounts as are customarily carried by persons engaged in the same or
similar business as the Company and its subsidiaries. No default or event has
occurred that could give rise to a default under any such policy.
(x) Environmental Matters. There is no environmental litigation or other
environmental proceeding pending or threatened by any governmental regulatory
authority or others with respect to the current or any former business of the
Company or its subsidiaries or any partnership or joint venture currently or at
any time affiliated with the Company or its subsidiaries. No state of facts
exists as to environmental matters or Hazardous Substances (as defined below)
that involves the reasonable likelihood of a material capital expenditure by the
Company or its subsidiaries or that may otherwise have a Material Adverse
Effect. No Hazardous Substances have been treated, stored or disposed of, or
otherwise deposited, in or on the properties owned or leased by the Company or
its subsidiaries or by any partnership or joint venture currently or at any time
affiliated with the Company or its subsidiaries in violation of any applicable
environmental laws. The environmental compliance programs of the Company and its
subsidiaries comply in all respects with all environmental laws, whether
federal, state or local, currently in effect. As used herein, "HAZARDOUS
SUBSTANCES" means any substance, waste, contaminant, pollutant or material that
has been determined by any governmental authority to be capable of posing a risk
of injury to health, safety, property or the environment.
(y) Inventory. All inventory of the Company and its subsidiaries is
valued on the Company's consolidated books and records at the lower of standard
cost, which approximates actual cost, or the fair market value thereof. Except,
to the extent of the Company's reserves for obsolete or unmerchantable inventory
reflected in the Company's SEC Documents, all such inventory, after
consideration of reserves consisting of finished goods is of merchantable
quality and is saleable in the ordinary course of business consistent with past
practice.
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(z) Regulatory Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities which are material to conduct its
business, and neither the Company nor any of its subsidiaries has received any
written notice of any proceeding relating to the revocation or modification of
any such certificate, authorization or permit.
(aa) Subsidiaries. The business of the Company is and has been conducted
solely by and through the Company and not by or through any other person or
entity. The Company does not directly or indirectly own, control or have any
investment or other interest in any corporation, company, partnership, joint
venture, business trust or other entity.
4. COVENANTS.
(a) Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
(b) Form D: Blue Sky Laws. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to each Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date. Within four (4) trading days after the Closing Date, the Company
shall file a Form 8-K concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 8-K.
(c) Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file (within applicable extension
periods) all reports required to be filed with the SEC pursuant to the Exchange
Act, and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination. In addition, the Company
shall take all actions reasonably necessary to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
(d) Purchaser Waivers. In connection with the transactions contemplated
hereby and by the Securities Purchase Agreement and the other Transaction
Documents, each Purchaser hereby:
(i) approves (A) the designation of the "Series C Convertible
Preferred Stock," which will be pari-passu in some circumstances with the Series
A Preferred Stock and the Series B Preferred Stock, and (B) the issuance and
sale to the Series C Purchasers of the Preferred Shares and the Series C
Warrants in accordance with the terms of the Securities Purchase Agreement;
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(ii) waives its right, pursuant to Section 4(e) of that certain
Securities Purchase Agreement dated June 29, 2001 by and among the Company and
certain purchasers of the Company's Series A Preferred Stock (the "SERIES A
SECURITIES PURCHASE AGREEMENT") and Securities Purchase Agreement dated March
22, 2002 by and among the Company and certain purchasers of the Company's Series
B Preferred Stock (the "SERIES B SECURITIES PURCHASE AGREEMENT"), as applicable,
to participate in the issuance to the Series C Purchasers of the Preferred
Shares and the Series C Warrants in accordance with the terms of the Securities
Purchase Agreement (including all notices and notice periods required thereby);
(iii) waives compliance by the Company with Section 4(m) of the
Series A Securities Purchase Agreement and the Series B Securities Purchase
Agreement, as applicable, to the extent necessary to comply with the terms of
this Agreement and the Preferred Shares; and
(iv) as required by the terms of that certain First Registration
Rights Agreement and Second Registration Rights Agreement, each dated June 29,
2001 by and among the Company and the purchasers of Series A Preferred Stock,
and that certain Registration Rights Agreement dated March 22, 2002 by and among
the Company and the purchasers of the Series B Preferred Stock, as applicable,
(A) consents to the registration rights granted to the Series C Purchasers
pursuant to the Registration Rights Agreement; (B) consents to the filing of the
Registration Statements and all amendments or supplements thereto, and any
subsequent filings, contemplated by the Registration Rights Agreement; and (C)
waives all rights to notice and all rights to include shares to be registered
under such Registration Statements (except to the extent provided in the
Registration Rights Agreement), and any other rights triggered by the actions
consented to hereby.
(e) Participation Right. Subject to the terms and conditions specified
in this Section 4(e), for so long as the Notes remain outstanding, the
Purchasers shall have a right to participate with respect to the issuance or
possible issuance of (i) future equity or equity-linked securities, or (ii) debt
which is convertible into equity or in which there is an equity component
("ADDITIONAL SECURITIES") on the same terms and conditions as offered by the
Company to the other purchasers of such Additional Securities. Each time the
Company proposes to offer any Additional Securities, the Company shall make an
offering of such Additional Securities to each Purchaser in accordance with the
following provisions:
(i) the Company shall deliver a notice (the "NOTICE") to the
Purchasers stating (i) its bona fide intention to offer such Additional
Securities, (ii) the number of such Additional Securities to be offered, (iii)
the price and terms, if any, upon which it proposes to offer such Additional
Securities, and (iv) the anticipated closing date of the sale of such Additional
Securities.
(ii) by written notification received by the Company, within
twenty (20) days after giving of the Notice, any Purchaser may elect to purchase
or obtain, at the price and on the terms specified in the Notice, up to that
portion of such Additional Securities which equals the proportion that the
number of shares of Common Stock that such Purchaser would have the right to
acquire assuming the full conversion of such Purchaser's Notes into Preferred
Shares and the full conversion of such Preferred Shares into Conversion Shares
bears to the total number of shares of Common Stock then outstanding (assuming
in each case full conversion and exercise of
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all convertible or exercisable securities then outstanding). The Company shall
promptly, in writing, inform each Purchaser which elects to purchase all of the
Additional Shares available to it ("FULLY-EXERCISING PURCHASER") of any other
Purchaser's failure to do likewise. During the five-day period commencing after
such information is given, each Fully-Exercising Purchaser shall be entitled to
obtain that portion of the Additional Securities for which the Purchasers were
entitled to subscribe but which were not subscribed for by the Purchasers which
is equal to the proportion that the number of shares of Common Stock that such
Fully-Exercising Purchaser would have the right to acquire assuming the full
conversion of such Purchaser's Notes into Preferred Shares and the full
conversion of such Preferred Shares into Conversion Shares bears to the total
number of shares of Common Stock that all Fully-Exercising Purchasers who wish
to purchase some of the unsubscribed shares would have the right to acquire
assuming the full conversion of such Purchasers' Notes into Preferred Shares and
the full conversion of such Preferred Shares into Conversion Shares;
(iii) if all Additional Securities which the Purchasers are
entitled to obtain pursuant to subsection 4(e)(ii) are not elected to be
obtained as provided in subsection 4(e)(ii) hereof, the Company may, during the
75-day period following the expiration of the period provided in subsection
4(e)(ii) hereof, offer the remaining unsubscribed portion of such Additional
Securities to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than, those specified in the Notice. If the
Company does not consummate the sale of such Additional Securities within such
period, the right provided hereunder shall be deemed to be revived and such
Additional Securities shall not be offered or sold unless first reoffered to the
Purchasers in accordance herewith;
(iv) the participation right in this Section 4(e) shall not be
applicable to (i) the issuance or sale of shares of Common Stock (or options
therefor) to employees, officers, directors, or consultants of the Company for
the primary purpose of soliciting or retaining their employment or service
pursuant to a stock option plan (or similar equity incentive plan) approved by
the Board of Directors, (ii) the issuance of securities in connection with a
bona fide underwritten public offering at an offering price per share (prior to
underwriter's commissions and discounts) of not less than 200% of the Conversion
Price (as such term is defined in the Certificate of Designation) (as adjusted
to reflect any stock dividends, distributions, combinations, reclassifications
and other similar transactions effected by the Corporation in respect to its
Common Stock) that results in total proceeds to the Company of at least
$40,000,000, (iii) the issuance or sale of the Preferred Shares, (iv) the
issuance of securities in connection with mergers, acquisitions, strategic
business partnerships or joint ventures (including, without limitation, such
transactions with major pharmaceutical labs or life sciences companies), the
primary purpose of which, in the reasonable judgment of the Board of Directors,
is not to raise additional capital, (v) the issuance of securities pursuant to
any equipment financing from a bank or similar financial or lending institution
approved by the Board of Directors, or (vi) any issuance of securities as to
which the holders of a majority of the then outstanding Notes shall have
executed a written waiver of the rights contained in this Section 4(e).
(v) the participation right set forth in this Section 4(e) may
not be assigned or transferred, except that such right is assignable by each
Purchaser to any wholly-owned
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subsidiary or parent of, or to any corporation or entity that is, within the
meaning of the Securities Act, controlling, controlled by or under common
control with, any such Purchaser.
(f) Expenses. The Company shall pay to SDS Capital Partners ("SDS
CAPITAL") at the Closing, reimbursement for the out-of-pocket expenses
reasonably incurred by SDS Capital's advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
SDS Capital's advisors' reasonable due diligence and attorneys' fees and
expenses (the "EXPENSES"); provided, however, that in lieu of such payment SDS
Capital (or its affiliates) shall be permitted to deduct all Expenses from the
purchase price payable by SDS Capital (or its affiliates) hereunder. In
addition, from time to time thereafter, upon SDS Capital's written request, the
Company shall pay to SDS Capital such additional Expenses, if any, not covered
by such payment, in each case to the extent reasonably incurred by SDS Capital's
agents prior to the Closing in connection with the negotiation, preparation,
execution and delivery of this Agreement.
(g) Financial Information. The Company shall send the following reports
to each Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K. To the extent that any of the
foregoing documents is available under the SEC's EDGAR filing system, such
documents shall be deemed to have been delivered to each of the Purchasers.
(h) Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
Preferred Shares to provide for the full conversion of the Notes and issuance of
the Preferred Shares in connection therewith and, subject to obtaining the
Authorized Stock Approval contemplated by Section 4(r) below, a sufficient
number of shares of Common Stock to provide for the full conversion of the
Preferred Shares issuable upon conversion of the Notes and issuance of the
Conversion Shares in connection therewith and the full exercise of the
Replacement Warrants and issuance of the Warrant Shares in connection therewith,
in each case to the extent required by the Certificate of Designation and the
Replacement Warrants.
(i) Listing. The Company shall file an application for the listing of
the Conversion Shares and the Warrant Shares promptly, but in any event within
three (3) business days following, the date on which the Company obtains the
Authorized Stock Approval and the NASD Rule Approval. From the time that such
application has been approved and thereafter, the Company shall maintain, so
long as any Purchaser (or any of their affiliates) own any Securities, the
listing of all Conversion Shares and the Warrant Shares from time to time
issuable upon conversion of the Preferred Shares and exercise of the Replacement
Warrants on each national securities exchange or automated quotation system on
which shares of Common Stock are currently listed. The Company will use its best
efforts to continue the listing and trading of its Common Stock on the NNM, the
New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX") or the
Nasdaq SmallCap Market (the "SMALLCAP") and will comply in all material respects
with the reporting, filing and other obligations under the bylaws or rules of
the NASD and such exchanges, as applicable. The Company shall promptly provide
to each holder of Preferred Shares and/or Replacement Warrants copies of any
notices it receives regarding the
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continued eligibility of the Common Stock for trading on the NNM or, if
applicable, any securities exchange or automated quotation system on which
securities of the same class or series issued by the Company are then listed or
quoted, if any.
(j) Corporate Existence. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Certificate of Designation, the Notes, the Replacement Warrants, the Security
Documents and the agreements and instruments entered into in connection herewith
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to effect
the conversion of all Preferred Shares and exercise in full of all Replacement
Warrants outstanding as of the date of such transaction and (ii) is a publicly
traded corporation whose common stock is listed for trading on the NNM,
SmallCap, NYSE or AMEX. Notwithstanding the foregoing, the Company covenants and
agrees that it will not engage in any merger, consolidation or sale of all or
substantially all of its assets at any time prior to the effectiveness of the
Registration Statement required to be filed pursuant to the Registration Rights
Agreement without (A) providing each Purchaser with written notice of such
transaction at least 60 days prior to the consummation of such transaction and
(B) obtaining the written consent of the Purchasers holding a
majority-in-interest of the then outstanding Preferred Shares held by such
Purchasers on or before the 10th day after the delivery of such notice by the
Company.
(k) No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
(l) Legal Compliance. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(m) Redemptions and Dividends. So long as any Purchaser beneficially
owns any Notes or Preferred Shares, the Company shall not, without first
obtaining the written approval of the Purchasers holding a majority-in-interest
of the Notes then outstanding or the holders of a majority of the Preferred
Shares then outstanding, as applicable, repurchase, redeem, or declare or pay
any cash dividend or distribution on, any shares of capital stock of the
Company; provided, however, that the foregoing shall not prohibit the Company
from repurchasing, redeeming or declaring or paying cash dividends or
distributions on shares of the Series A Preferred Stock and Series C Convertible
Preferred Stock provided that any such repurchases, redemptions, dividends and
distributions are made solely in accordance with the terms of such Series A
Preferred Stock and Series C Convertible Preferred Stock as in effect on the
date hereof.
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(n) Information. The Company will furnish to each Purchaser, so long as
it holds any Securities:
(i) concurrently with the filing with the SEC of its annual
reports on Form 10-K, a certificate of the President, a Vice President or a
senior financial officer of the Company stating that, based upon such
examination or investigation and review of this Agreement as in the opinion of
the signer is necessary to enable the signer to express an informed opinion with
respect thereto, neither the Company nor any of its subsidiaries is or has
during such period been in default in the performance or observance of any of
the terms, covenants or conditions hereof, or, if the Company or any of its
subsidiaries shall be or shall have been in default, specifying all such
defaults, and the nature and period of existence thereof, and what action the
Company or such subsidiary has taken, is taking or proposes to take with respect
thereto; and
(ii) the information the Company must deliver to any holder or to
any prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144A of the SEC or any similar rule
then in effect.
The Company will keep at its principal executive office a true copy of
this Agreement (as at the time in effect), and cause the same to be available
for inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
(o) Inspection of Properties and Books. So long as any Purchaser shall
hold any Securities, such Purchaser and its representatives and agents
(collectively, the "INSPECTORS") shall have the right, at such Purchaser's
expense, to visit and inspect any of the properties of the Company and of its
subsidiaries, to examine the books of account and records of the Company and of
its subsidiaries, to make or be provided with copies and extracts therefrom, to
discuss the affairs, finances and accounts of the Company and of its
subsidiaries with, and to be advised as to the same by, its and their officers,
employees and independent public accountants (and by this provision the Company
authorizes such accountants to discuss such affairs, finances and accounts,
whether or not a representative of the Company is present) all at such
reasonable times and intervals and to such reasonable extent as such Purchaser
may desire; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to such Purchaser) of any such information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement filed pursuant to the Registration Rights Agreement, (b)
the release of such information is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (c) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information to any Inspector until and
unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 4(o). Each Purchaser agrees
that it shall, upon learning that disclosure of such information is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the information
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deemed confidential. Notwithstanding the foregoing, the Company shall be
permitted to withhold from disclosure under this paragraph any material
protected by attorney-client privilege.
(p) Waivers and Consents. Prior to the effectiveness any Registration
Statement filed in accordance with Section 2(a)(ii) of the Registration Rights
Agreement, the Company shall have obtained proper waivers from the stockholders
and warrant holders referred to on Schedule 3(f) of the Schedule of Exceptions
to this Agreement.
(q) Confidential Agreement. Each Purchaser will hold in confidence all
information concerning this Agreement and the placement of shares hereunder
until the earlier of such time as (i) the Company has made a public announcement
concerning the Agreement and the placement of shares hereunder or (ii) this
Agreement is terminated.
(r) Stockholder Approval. The Company shall call a meeting of its
stockholders to be held as promptly as practicable (but in any event no later
than 90 days after the Closing Date) for the purpose of voting upon and
approving (i) the increase in the number of authorized shares of the Company's
Common Stock to a number sufficient to provide for (A) the issuance and
conversion of all of the Preferred Shares issuable by the Company to the
Purchasers upon conversion of the Notes, (B) the exercise of the Replacement
Warrants issued by the Company to the Purchasers pursuant hereto, and (C) the
conversion or exercise of all other outstanding securities of the Company that
are convertible into or exercisable for shares of Common Stock (the "AUTHORIZED
STOCK APPROVAL"), (ii) to approve the conversion of the Notes into Preferred
Shares and the issuance of the Replacement Warrants, in accordance with Rule
4350(i) of the NASD or any similar rule (the "NASD RULE APPROVAL"), and (iii) to
amend the Certificate of Designation to include (a) the right of the Company to
pay any premium payments due thereunder in either cash or shares of Common Stock
at the Company's election and (b) the same anti-dilution protections as are
currently afforded to the Company's Series A Preferred Stock pursuant to Article
XI, Section G of the Series A Certificate of Designations (the "SERIES C
AMENDMENT APPROVAL" and, together with the Authorized Stock Approval and the
NASD Rule Approval, the "STOCKHOLDER APPROVAL"). The Company shall recommend to
its stockholders approval of such matters. The Company shall use its best
efforts to solicit from its stockholders proxies in favor of such matters
sufficient to obtain the Stockholder Approval (including any such approval
required by the NASD), and shall vote such proxies, and shall use its best
efforts to cause all "affiliates" (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) of the Company to vote any shares of Common
Stock beneficially owned by such persons or entities, in favor of such matters.
In the event and upon obtaining the Authorized Stock Approval and the NASD Rule
Approval, the Company shall take all such corporate action as shall be necessary
to reserve the Conversion Shares for issuance upon conversion of the Preferred
Shares in accordance with the terms thereof, the Warrant Shares for issuance
upon exercise of the Replacement Warrants in accordance with the terms thereof
and such number of additional shares of Common Stock as shall be issuable upon
the conversion or exercise of all other outstanding securities of the Company
that are convertible into or exercisable for shares of Common Stock. In the
event and upon obtaining the Series C Amendment Approval, (x) the Company shall
prepare and, subject to the approval of the holders of Preferred Shares in
accordance with the Certificate of Designation, file an amendment to the
Certificate of Designation to include such additional provisions, and (y)
provided that the stockholders have
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approved all of the amendments described in clause (ii) of this Section 4(r),
the Purchasers shall, in their capacity as holders of Preferred Shares, consent
to such amendment.
(s) Warrant Exchange. In the event that the Authorized Stock Approval
and the NASD Rule Approval are obtained as contemplated by Section 4(r) above
(the date on which such approvals are obtained, the "APPROVAL DATE"), the
Company shall issue to each Purchaser who, prior to the consummation of the
repurchase pursuant hereto, was a holder of Series B Preferred Stock, in
exchange for delivery of such Purchaser's Old Warrant for cancellation, a
Replacement Warrant, dated the Approval Date, representing the right to purchase
a number of shares of Common Stock equal to the product obtained by multiplying
(i) the number of shares issuable upon full exercise of the Old Warrant by (ii)
a fraction, the numerator of which is $2.508 and the denominator of which is the
"Exercise Price" of the Series C Warrants in effect on the Approval Date, and
otherwise in the form attached hereto as Exhibit B, which exchange shall be
conducted in the manner set forth in this Section 4(s). Promptly following the
Approval Date, but in any event within two business days thereafter, the Company
shall send written notice to the Purchasers who are entitled to participate in
the exchange pursuant to this Section 4(s) of such approvals, and each such
Purchaser shall deliver to the Company such Purchaser's Old Warrant (or evidence
of the loss, theft, destruction or mutilation thereof in accordance with Section
7(c) of the Old Warrant) for cancellation by the Company. Promptly upon receipt
of an Old Warrant (or evidence of the loss, theft, destruction or mutilation
thereof) from any given Purchaser, the Company shall promptly, but in any event
within two business days following such receipt, issue to such Purchaser the
Replacement Warrant to which such Purchaser is entitled pursuant to this Section
4(s).
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue certificates
(subject to the legend and other provisions hereof and in the Notes, the
Certificate of Designation and the Replacement Warrants), registered in the name
of each Purchaser or its nominee, for the Preferred Shares, the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
such Purchaser to the Company upon conversion of the Notes or the Preferred
Shares or exercise of the Replacement Warrants, as applicable. To the extent and
during the periods provided in Sections 2(f) and 2(g) of this Agreement, all
such certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 5, the Registration Rights Agreement
and stop transfer instructions to give effect to Section 2(f) hereof in the case
of the transfer of the Conversion Shares or Warrant Shares prior to registration
of the Conversion Shares or Warrant Shares under the Securities Act or without
an exemption therefrom, will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
each Purchaser's obligations and agreement set forth in Section 2(g) hereof to
resell the Securities pursuant to an effective registration statement or under
an exemption from the registration requirements of applicable securities law.
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(c) If any Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities have been sold or transferred pursuant to an
exemption from registration, or any Purchaser provides the Company with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that such Securities may be sold under Rule 144(k), the Company shall
permit the transfer and, in the case of the Conversion Shares and the Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to repurchase the Series B
Preferred Stock and issue the Notes to each Purchaser hereunder is subject to
the satisfaction, at or before the Closing, of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) Each Purchaser shall have executed such Purchaser's Execution Page
to this Agreement and the Registration Rights Agreement and delivered the same
to the Company.
(b) Each Purchaser shall have delivered the share certificate(s)
representing such Purchaser's shares of Series B Preferred Stock being
repurchased at the Closing in accordance with Section 1(a) above.
(c) The representations and warranties of each Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and such Purchaser shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Purchaser
at or prior to the Closing Date.
(d) 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 or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE. The obligation of
each Purchaser hereunder to have its shares of Series B Preferred Stock
repurchased in exchange for a Note at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that such conditions are for such Purchaser's sole benefit
and may be waived by such Purchaser at any time in such Purchaser's sole
discretion:
(a) The Company shall have executed this Agreement, the Notes, the
Security Documents (together with any other documents necessary to perfect the
security interests created
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thereby or otherwise contemplated therein) and the Registration Rights
Agreement, and delivered executed original copies of the same to such Purchaser.
(b) The Certificate of Designation shall have been filed and accepted
for filing with the Secretary of State of the State of Delaware and a copy
thereof certified by the Secretary of State of Delaware shall have been
delivered to such Purchaser.
(c) The Company shall have delivered to such Purchaser duly executed
Notes (each in such denominations as such Purchaser shall request) representing
the aggregate Purchase Price to be paid by the Company to such Purchaser at the
Closing in accordance with Section 1(b) above.
(d) The Common Stock shall be authorized for quotation and listed on the
NNM and trading in the Common Stock (or the NNM generally) shall not have been
suspended by the SEC or the NNM.
(e) The representations and warranties of the Company in this Agreement
and in the other Transaction Documents shall be true and correct as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement or any other Transaction Document to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. The Company shall
have delivered for the benefit of the Purchasers, a certificate, executed by the
Chief Executive Officer of the Company after reasonable investigation, dated as
of the Closing Date to the foregoing effect and as to such other matters as may
reasonably be requested by such Purchaser.
(f) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(g) Each Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit G
attached hereto.
(h) Each Purchaser shall have received a copy of resolutions, duly
adopted by the Board of Directors of the Company, which shall be in full force
and effect at the time of the Closing, authorizing the consummation by the
Company of the transactions contemplated hereby and by the Notes, the
Replacement Warrants, the Security Documents and the Registration Rights
Agreement, certified as such by the Secretary or Assistant Secretary of the
Company.
(i) On or prior to the Closing Date, the Company shall have entered into
the following agreements with Pfizer Inc. (or one of its affiliates): (i) Master
Services Agreement, (ii) Non-Exclusive License Agreement and (iii) Stock
Purchase Agreement, and shall have consummated the transactions contemplated by
the Stock Purchase Agreement.
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(j) On or prior to the Closing Date, the Company shall have entered into
the Securities Purchase Agreement with the Series C Purchasers and shall have
consummated the transactions contemplated thereby.
8. COLLATERAL AGENCY PROVISIONS.
(a) Appointment of Collateral Agent. The Purchasers hereby appoint SDS
Merchant Fund, LP, to act as collateral agent (the "COLLATERAL AGENT") and SDS
Merchant Fund, LP, agrees to act as Collateral Agent for the Purchasers, as
contemplated herein and in the Security Documents.
(b) Collateral Agent Authorized to Enter into Collateral Documents. Each
of the Purchasers authorizes the Collateral Agent to enter into the Security
Documents on its behalf.
(c) Amendment to Security Documents. The Purchasers holding a majority
of the total outstanding principal balance of the Notes (the "REQUIRED HOLDERS")
shall have the right to direct the Collateral Agent, from time to time, to
consent to any amendment, modification or supplement to or waiver of any
provision of any Security Document and to release any Collateral (as defined in
the Security Documents) from any lien or security interest held by the
Collateral Agent; provided, however, that (i) no such direction shall require
the Collateral Agent to consent to the modification of any provision or portion
thereof which (in the sole judgment of the Collateral Agent) is intended to
benefit the Collateral Agent, (ii) the Collateral Agent shall have the right to
decline to follow any such direction if the Collateral Agent shall determine in
good faith that the directed action is not permitted by the terms of any
Security Document or may not lawfully be taken and (iii) no such direction shall
waive or modify any provision of any Security Document the waiver or
modification of which requires the consent of all Purchasers unless all
Purchasers consent thereto. The Collateral Agent may rely on any such direction
given to it by the Required Holders and shall be fully protected in relying
thereon, and shall under no circumstances be liable, except in circumstances
involving the Collateral Agent's gross negligence or willful misconduct as shall
have been determined in a final nonappealable judgment of a court of competent
jurisdiction, to any holder of the Notes or any other person or entity for
taking or refraining from taking action in accordance with any direction or
otherwise in accordance with any of the Security Documents.
(d) Duties of Collateral Agent.
(i) Powers. The Collateral Agent shall have and may exercise such
powers under the Security Documents as are specifically delegated to the
Collateral Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto. The Collateral Agent shall not have any
implied duties or any obligations to take any action under the Security
Documents except any action specifically provided by the Security Documents to
be taken by the Collateral Agent.
(ii) Reliance on Instructions of Required Holders. The Collateral
Agent shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the written instructions
of the Required Holders and such instructions shall be binding upon all the
Purchasers; provided that the Collateral Agent shall not be required to take
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any action which the Collateral Agent in good faith believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Security Documents and applicable law.
(iii) Action Without Instructions After Event of Default. Absent
written instructions from the Required Holders at a time when an Event of
Default shall have occurred and be continuing, the Collateral Agent may take,
but shall have no obligation to take, any and all actions under the Security
Documents or any of them or otherwise as it shall deem to be in the best
interests of the Purchasers; provided, however, that in the absence of written
instructions from the Required Holders, the Collateral Agent shall not exercise
remedies available to it under any Security Document with respect to the
Collateral or any part thereof (other than preserving, collecting and protecting
the Collateral and the proceeds thereof).
(iv) Independent Right of Each Purchaser to Instruct Collateral
Agent. The right of each Purchaser to instruct the Collateral Agent is the
separate and individual property of such Purchaser and may be exercised as such
Purchaser sees fit in its sole discretion and with no liability to any other
such Purchaser for the exercise or non-exercise thereof. Without limiting the
foregoing, the Required Holders shall not be liable under any circumstances to
any other Purchaser for any action taken or omitted to be taken hereunder by the
Collateral Agent upon written instructions from the Required Holders.
(v) Relationship Between Collateral Agent and Purchasers. The
relationship between the Collateral Agent and the Purchasers is and shall be
only to the extent explicitly provided for herein that of agent and principal
and nothing herein contained shall be construed to constitute the Collateral
Agent a trustee for any Purchaser or to impose on the Collateral Agent duties
and obligations other than those expressly provided for herein. Without limiting
the generality of the foregoing, neither the Collateral Agent nor any of its
directors, officers, employees, partners or agents shall:
(A) be responsible to the other Purchasers for any
recitals, representations or warranties contained in, or for the execution,
validity, genuineness, perfection, effectiveness or enforceability of, the
Security Documents (it being expressly understood that any determination of the
foregoing is the responsibility of each Purchaser),
(B) be responsible to the other Purchasers for the
validity, genuineness, perfection, effectiveness, enforceability, existence,
value or enforcement of any security interest in the Collateral (it being
expressly understood that any determination of the foregoing is the
responsibility of each Purchaser),
(C) be under any duty to inquire into or pass upon any of
the foregoing matters, or to make any inquiry concerning the performance by any
person or entity of its or their obligations under any Security Document (it
being expressly understood that any determination of the foregoing is the
responsibility of each Purchaser),
(D) be deemed to have knowledge of the occurrence of an
Event of Default (as defined in the Notes), or any event, condition or
circumstance the occurrence of
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which would, with the giving of notice or the passage of time or both,
constitute an Event of Default,
(E) be responsible or liable to the Purchasers for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located regardless of the cause thereof unless the same
shall happen solely through the gross negligence or willful misconduct of the
Collateral Agent as shall have been determined in a final nonappealable judgment
of a court of competent jurisdiction,
(F) have any liability to the Purchasers for any error or
omission or action or failure to act of any kind made in the settlement,
collection or payment in connection with any of the Security Documents or any of
the Collateral or any instrument received in payment therefor or for any damage
resulting therefrom other than as a sole result of its own gross negligence or
willful misconduct as shall have been determined in a final nonappealable
judgment of a court of competent jurisdiction, or
(G) in any event, be liable to the Purchasers as such for
any action taken or omitted by it, absent, in each case described in this
subsection, its gross negligence or willful misconduct as shall have been
determined in a final nonappealable judgment of a court of competent
jurisdiction.
(e) Standard of Care. Each Purchaser agrees with all other Purchasers
and the Collateral Agent that nothing contained in this Agreement shall be
construed to give rise to, nor shall such Purchaser have, any claims whatsoever
against the Collateral Agent on account of any act or omission to act in
connection with the exercise of any right or remedy of the Collateral Agent with
respect to the Security Documents or the Collateral in the absence of gross
negligence or willful misconduct of the Collateral Agent as shall have been
determined in a final nonappealable judgment of a court of competent
jurisdiction.
(f) Collateral In Possession of Collateral Agent. The Collateral Agent
shall be at liberty to place any of the Collateral, this Agreement, the Security
Documents and any other instruments, documents or deeds delivered to it pursuant
to or in connection with any of such documents in any safe deposit box, safe or
receptacle selected by it or with any bank, any company whose business includes
undertaking the safe custody of documents or any firm of lawyers of good repute
and the Collateral Agent shall not be responsible for any loss thereby incurred
unless such loss is solely the result of the Collateral Agent's gross negligence
or willful misconduct as shall have been determined in a final nonappealable
judgment of a court of competent jurisdiction. The Collateral Agent's books and
records shall at all times show that the Collateral is held by the Collateral
Agent subject to the pledge and lien of the Security Documents.
(g) Agents, Officers and Employees of Collateral Agent. The Collateral
Agent may execute any of its duties under the Security Documents by or through
its agents, officers or employees. Neither the Collateral Agent nor any of its
agents, officers or employees shall be liable for any action taken or omitted to
be taken by it or them in good faith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss unless any of
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the foregoing shall happen through its or their gross negligence or willful
misconduct as shall have been determined in a final nonappealable judgment of a
court of competent jurisdiction.
(h) Appointment of Co-Agent. Whenever the Collateral Agent shall deem it
necessary or prudent in order either to conform to any law of any jurisdiction
in which all or any part of the Collateral shall be situated or to make any
claim or bring any suit with respect to the Collateral or the Security
Documents, or in the event that the Collateral Agent shall have been requested
to do so by or on behalf of the Required Holders, the Collateral Agent shall
execute and deliver a supplemental agreement and all other instruments and
agreements necessary or proper to constitute a bank or trust company, or one or
more other persons or entities approved by the Collateral Agent, either to act
as co-agent or co-agents with respect to all or any part of the Collateral or
with respect to the Security Documents, jointly with the Collateral Agent or any
successor or successors, or to act as separate agent or agents of any such
property, in any such case with such powers as may be provided in such
supplemental agreement, and to vest in such bank, trust company or other persons
or entities as such co-agent or separate agent, as the case may be, any
property, title, right or power of the Collateral Agent deemed necessary or
advisable by the Required Holders or the Collateral Agent.
(i) Reliance on Certain Documents. The Collateral Agent shall be
entitled to rely on any communication, instrument or document believed by it to
be genuine and correct and to have been signed or sent by the proper person or
entity, and with respect to all legal matters shall be entitled to rely on the
advice of legal advisors selected by it concerning all matters relating to the
Security Documents and its duties hereunder and thereunder and otherwise shall
rely on such experts as it deems necessary or desirable, and shall not be liable
to any Purchaser or any other person or entity for the consequences of such
reliance in the absence of gross negligence or willful misconduct as shall have
been determined in a final nonappealable judgment of a court of competent
jurisdiction.
(j) Collateral Agent May Have Separate Relationship with Parties. The
Collateral Agent (or any affiliate of the Collateral Agent) may, notwithstanding
the fact that it is the Collateral Agent, act as a lender to the Company and
lend money to, and generally engage in any kind of business with such party in
the same manner and to the same effect as though it were not the Collateral
Agent; and such business shall not constitute a breach of any obligation of the
Collateral Agent to the other Purchasers.
(k) Indemnification of Collateral Agent. The Company (and, to the extent
that the Company fails to do so, each of the Purchasers, ratably on the basis of
the respective principal amounts of the Notes outstanding at the time of the
occurrence giving rise to the below liabilities, losses, etc.), agrees to
indemnify the Collateral Agent for any and all liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Collateral Agent in its capacity as the Collateral Agent, in any way
relating to or arising out of the Security Documents or the transactions
contemplated hereby or thereby or the enforcement of any of the terms hereof or
thereof, provided that neither the Company nor any Purchaser shall be liable for
any of the foregoing to the extent they arise from gross negligence or willful
misconduct on the part of the Collateral Agent as shall have been determined in
a final nonappealable judgment of a court of competent jurisdiction. This
Section 8(k) shall survive the termination of this
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Agreement. Prior to taking any action hereunder as Collateral Agent, the
Collateral Agent may require each Purchaser to deposit with it sufficient sums
as it determines in good faith is necessary to protect the Collateral Agent for
costs and expenses associated with taking such action, and the Collateral Agent
shall have no liability hereunder for failure to take such action unless the
Purchasers promptly deposit such sums.
(l) Resignation. The Collateral Agent at any time may resign, upon 30
days' prior written notice, by an instrument addressed and delivered to the
Purchasers and the Company and may be removed at any time with or without cause
upon 30 days' prior written notice, by an instrument in writing duly executed by
duly authorized signatories of the Required Holders. The Required Holders shall
also have the right to appoint a successor to the Collateral Agent upon any such
resignation or removal, by instrument of substitution complying with the
requirements of applicable law, or, in the absence of any such requirement,
without any formality other than appointment and designation in writing, a copy
of which instrument or writing shall be sent to each Purchaser. Upon the making
of such appointment and delivery to such successor Collateral Agent of the
Collateral then held by the retiring Collateral Agent, such successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties conferred hereby and by the Security Documents upon the
Collateral Agent named herein, and one or more such appointments and
designations shall not exhaust the right to appoint and designate further
successor Collateral Agents hereunder. The retiring Collateral Agent shall not
be discharged from its duties and obligations hereunder until, and the retiring
Collateral Agent shall be so discharged when, all the Collateral held by the
retiring Collateral Agent has been delivered to the successor Collateral Agent
and such successor Collateral Agent shall execute, acknowledge and deliver to
each holder of the Notes and to the Company an instrument accepting such
appointment. If no successor shall be appointed and approved on or prior to the
date of any such resignation, the resigning Collateral Agent may apply to any
court of competent jurisdiction to appoint a successor to act until a successor
shall have been appointed by the Required Holders as above provided.
(m) Rights with Respect to Collateral.
(i) Each Purchaser agrees with all other Purchasers (A) that it
shall not, and shall not attempt to, exercise any rights with respect to its
security interest in the Collateral, whether pursuant to any other agreement or
otherwise (other than pursuant to this Agreement), or take or institute any
action against the Collateral Agent or any of the other Purchasers in respect of
the Collateral or its rights hereunder (other than any such action arising from
the breach of this Agreement) and (B) that such Purchaser has no other rights
with respect to the Collateral other than as set forth in this Agreement and the
Security Documents.
(ii) Each Purchaser agrees with all other Purchasers and the
Collateral Agent that nothing contained in this Section 8 shall be construed to
give rise to, nor shall such Purchaser have, any claims whatsoever against any
other Purchaser or the Collateral Agent on account of any act or omission to act
in connection with the exercise of any right or remedy of the Collateral Agent
or any other Purchaser with respect to the Collateral in the absence of gross
negligence or willful misconduct of such other Purchaser or Collateral Agent, as
applicable, as shall have been determined in a final nonappealable judgment of a
court of competent jurisdiction.
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9. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and the
Purchasers irrevocably consent to the jurisdiction of the United States federal
courts and the state courts located in the State of Delaware in any suit or
proceeding based on or arising under this Agreement and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company irrevocably waives the defense of an inconvenient forum to
the maintenance of such suit or proceeding. The Company further agrees that
service of process upon the Company mailed by first class mail shall be deemed
in every respect effective service of process upon the Company in any such suit
or proceeding. Nothing herein shall affect the right of any Purchaser to serve
process in any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
Execution Page shall not affect the validity or enforceability of this
Agreement.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the Purchasers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each
Purchaser.
(f) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally, by responsible overnight carrier or
by confirmed facsimile, and shall be effective five
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(5) days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by responsible overnight carrier or
confirmed facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
ViroLogic, Inc.
270 East Grand Avenue
South San Francisco, California 94080
Telephone: (650) 635-1100
Attn: Chief Executive Officer
with a copy simultaneously transmitted by like means to
(which transmittal shall not constitute notice hereunder):
Cooley Godward LLP
4401 Eastgate Mall
San Diego, California 92121
Telephone: (858) 550-6000
If to any Purchaser, to such address set forth under such Purchaser's
name on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor any Purchaser shall assign
this Agreement or any rights or obligations hereunder. Notwithstanding the
foregoing, any Purchaser may assign its rights hereunder to any of its
"affiliates," as that term is defined under the Exchange Act, without the
consent of the Company or to any other person or entity with the consent of the
Company, which consent shall not be unreasonably withheld. This provision shall
not limit a Purchaser's right to transfer the Securities pursuant to the terms
of the Notes, the Replacement Warrants, the Certificate of Designation and this
Agreement or to assign such Purchaser's rights hereunder or thereunder to any
such transferee. In addition, and notwithstanding anything to the contrary
contained in this Agreement, the Registration Rights Agreement, the Notes, the
Replacement Warrants or the Security Documents, the Securities may be pledged
and all rights of any Purchaser under this Agreement or any other agreement or
document related to the transactions contemplated hereby may be assigned,
without further consent of the Company, to a bona fide pledgee in connection
with such Purchaser's margin or brokerage account.
(h) Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person; provided that Section 4(f) may be enforced by SDS Capital.
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(i) Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 9 hereof shall
survive the Closing notwithstanding any due diligence investigation conducted by
or on behalf of any Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies any Purchaser may have under applicable U.S. federal or state
securities laws.
(j) Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC or NASD filings
with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release and filing prior to its release and shall
be provided with a copy thereof).
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have occurred
on or before November 22, 2002, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
(m) Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Certificate
of Designation, the Notes, the Replacement Warrants, the Security Documents and
the Registration Rights Agreement. As such, the language used herein and therein
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party to this Agreement.
(n) Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that each
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
(o) Additional Acknowledgement. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, the Certificate of Designation, the Notes, the Replacement Warrants,
the Security Documents and
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the Registration Rights Agreement, that it has independently determined to enter
into the transactions contemplated hereby and thereby, that it is not relying on
any advice from or evaluation by any other Purchaser, and that it is not acting
in concert with any other Purchaser in making its purchase of securities
hereunder. The Purchasers and, to its knowledge, the Company agree that the
Purchasers have not taken any actions that would deem such Purchasers to be
members of a "group" for purposes of Section 13(d) of the Exchange Act.
(p) Indemnification by Company.
(i) From and after the Closing, the Company shall hold harmless
and indemnify each of the Purchasers from and against, and shall compensate and
reimburse each of the Purchasers for, any damages which are directly or
indirectly suffered or incurred by any of the Purchasers or to which any of the
Purchasers may otherwise become subject (regardless of whether or not such
damages relate to any third-party claim) and which arise from or as a result of,
or are directly or indirectly connected with any inaccuracy in or breach of any
of the Company's representations, warranties or covenants set forth herein.
(ii) In the event of the assertion or commencement by any person
of any claim or legal proceeding with respect to which any Purchaser may have
indemnification rights pursuant to Section 9(p)(i), such Purchaser shall
promptly notify the Company thereof in writing, but the failure to so notify the
Company will not limit any Purchaser's rights to indemnification hereunder,
except to the extent the Company demonstrates that the defense of such action is
prejudiced by the failure to so give such notice.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
VIROLOGIC, INC.
By: /s/ WILLIAM D. YOUNG
---------------------------------
Name: William D. Young
-------------------------------
Title: Chairman & CEO
------------------------------
PURCHASER:
[PURCHASER]
By:
-------------------------------------
Name:
Title:
RESIDENCE:
ADDRESS:
AGGREGATE REPURCHASE
Number of Shares of Series A Preferred Stock being Repurchased:
Number of Shares of Series B Preferred Stock being Repurchased:
Principal Amount of Notes to be Issued:
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