UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934
(Amendment No.___)*
NOVAVAX, INC.
--------------------------------------------------------------------------------
(Name of Subject Company)
Common Stock, $.01 value
--------------------------------------------------------------------------------
(Title of Class Of Securities)
670002104
--------------------------------------------------------------------------------
(CUSIP Number)
Linda Crouch-McCreadie, Esq.
Baker, Donelson, Bearman & Caldwell
207 Mockingbird Lane, Suite 300
Johnson City, Tennessee 37602
(423) 928-0181
--------------------------------------------------------------------------------
(Name, Address and Telephone Numbers of Person
Authorized to Receive Notices and Communications)
February 18, 2003
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of ss.ss.240.13d-1(e), 240.13d- 1(f) or 240.13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
--------------------------------------------------------------------------------
CUSIP No. 670002104 Page 2
--------------------------------------------------------------------------------
1. Names of Reporting Persons. S.S. or SJ Strategic Investments, LLC
I.R.S. Identification Nos. of Above 30-0060195
Persons
--------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member (a)
of a Group (See Instructions) (b) X
--------------------------------------------------------------------------------
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds (See Instructions) WC, OO
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e)
--------------------------------------------------------------------------------
6. Citizenship or Place of Organization Tennessee
--------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power 5,757,000
Beneficially ------------------------------------------------------
Owned by Each 8. Shared Voting 0
Reporting Person Power
with ------------------------------------------------------
9. Sole Dispositive 5,757,000
Power
------------------------------------------------------
10. Shared Dispositive 0
Power
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned
by Each Reporting Person 5,757,000
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in
Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount 19.4%
in Row (11)
--------------------------------------------------------------------------------
14. Type of Reporting Person (See OO
Instructions)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CUSIP No. 670002104 Page 3
--------------------------------------------------------------------------------
1. Names of Reporting Persons. S.S. or John M. Gregory
I.R.S. Identification Nos. of Above
Persons
--------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member (a)
of a Group (See Instructions) (b) X
--------------------------------------------------------------------------------
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds (See Instructions) PF, OO
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e)
--------------------------------------------------------------------------------
6. Citizenship or Place of Organization United States of America
--------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power 5,757,000
Beneficially ------------------------------------------------------
Owned by Each 8. Shared Voting 0
Reporting Person Power
with ------------------------------------------------------
9. Sole Dispositive 5,757,000
Power
------------------------------------------------------
10. Shared Dispositive 0
Power
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned 5,757,000
by Each Reporting Person
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in
Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount 19.4%
in Row (11)
--------------------------------------------------------------------------------
14. Type of Reporting Person (See IN
Instructions)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CUSIP No. 670002104 Page 4
--------------------------------------------------------------------------------
1. Names of Reporting Persons. S.S. or Joan P. Gregory
I.R.S. Identification Nos. of Above
Persons
--------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member (a)
of a Group (See Instructions) (b) X
--------------------------------------------------------------------------------
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds (See Instructions) PF, OO
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e)
--------------------------------------------------------------------------------
6. Citizenship or Place of Organization United States of America
--------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power 0
Beneficially ------------------------------------------------------
Owned by Each 8. Shared Voting 0
Reporting Person Power
with ------------------------------------------------------
9. Sole Dispositive 0
Power
------------------------------------------------------
10. Shared Dispositive 0
Power
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned
by Each Reporting Person 5,757,000
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in
Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount 19.4%
in Row (11)
--------------------------------------------------------------------------------
14. Type of Reporting Person (See IN
Instructions)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CUSIP No. 670002104 Page 5
--------------------------------------------------------------------------------
1. Names of Reporting Persons. S.S. or Susan Gregory
I.R.S. Identification Nos. of Above
Persons
--------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member (a)
of a Group (See Instructions) (b) X
--------------------------------------------------------------------------------
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds (See Instructions) OO
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e)
--------------------------------------------------------------------------------
6. Citizenship or Place of Organization United States of America
--------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power 0
Beneficially ------------------------------------------------------
Owned by Each 8. Shared Voting 0
Reporting Person Power
with ------------------------------------------------------
9. Sole Dispositive 0
Power
------------------------------------------------------
10. Shared Dispositive 0
Power
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned
by Each Reporting Person 5,757,000
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in
Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount 19.4%
in Row (11)
--------------------------------------------------------------------------------
14. Type of Reporting Person (See IN
Instructions)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CUSIP No. 670002104 Page 6
--------------------------------------------------------------------------------
1. Names of Reporting Persons. S.S. or James M. Gregory
I.R.S. Identification Nos. of Above
Persons
--------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member (a)
of a Group (See Instructions) (b) X
--------------------------------------------------------------------------------
3. SEC Use Only
--------------------------------------------------------------------------------
4. Source of Funds (See Instructions) OO
--------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e)
--------------------------------------------------------------------------------
6. Citizenship or Place of Organization United States of America
--------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power 0
Beneficially ------------------------------------------------------
Owned by Each 8. Shared Voting 0
Reporting Person Power
with ------------------------------------------------------
9. Sole Dispositive 0
Power
------------------------------------------------------
10. Shared Dispositive 0
Power
--------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned
by Each Reporting Person 5,757,000
--------------------------------------------------------------------------------
12. Check if the Aggregate Amount in
Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13. Percent of Class Represented by Amount 19.4%
in Row (11)
--------------------------------------------------------------------------------
14. Type of Reporting Person (See IN
Instructions)
--------------------------------------------------------------------------------
Item 1. Security and Issuer.
-------------------
The title and class of equity securities to which this statement relates is
the Common Stock, $.01 value (the "Common Stock"), of Novavax, Inc. (the
"Issuer"). The Issuer's principal executive offices are located at 8320 Guilford
Road, Columbia, Maryland 21046.
Item 2. Identity and Background.
-----------------------
(a) This report is being filed by SJ Strategic Investments, LLC, John M.
Gregory and Joan P. Gregory, husband and wife, Susan Gregory and James
M. Gregory (collectively, the "Reporting Persons"). SJ Strategic
Investments, LLC ("SJSI")is a Tennessee limited liability company
which has a principal business of engaging in investment activities.
The members of SJSI are John M. Gregory, Joan P. Gregory, Susan
Gregory and James M. Gregory. Susan Gregory and James M. Gregory are
the children of John M. Gregory and Joan P. Gregory.
(b) The address for the Reporting Persons and the principal business
office for SJSI is:
SJ Strategic Investments LLC
340 Edgemont Avenue, Suite 500
Bristol, TN 37620.
(c) John M. Gregory is the Managing Member of SJSI. Joan P. Gregory is a
homemaker and is not presently employed in any other capacity. Susan
Gregory is the Chief Investment Officer for SJSI. James M. Gregory is
a full-time student.
(d)and(e) None of the Reporting Persons has, during the last five years,
(i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or
finding any violation of such laws.
(f) John M. Gregory, Joan P. Gregory, Susan Gregory and James M. Gregory
are citizens of the United States of America.
7 of 10
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
Prior to the event requiring reporting on Schedule 13D, John M. and Joan P.
Gregory acquired 1,007,000 shares of the Issuer's Common Stock at purchase
prices ranging from $1.84 to $4.18 per share. On February 14, 2003, John M. and
Joan P. Gregory transferred all of their holdings of the Issuer's Common Stock
to SJSI, a family-owned entity controlled by Mr. Gregory. On February 18, 2003,
SJSI acquired 4,750,000 shares of Common Stock from the Issuer at an aggregate
purchase price of $16,625,000 pursuant to that certain Common Stock Purchase
Agreement by and between the Issuer and SJSI dated February 17, 2003 (the "Stock
Purchase Agreement"). SJSI funded the purchase with its working capital.
Item 4. Purpose of Transaction.
----------------------
The Reporting Persons have acquired the shares of Common Stock for
investment purposes and may acquire additional shares, or dispose of some or all
of the shares of Common Stock, from time to time, depending upon price and
market conditions, evaluation of alternative investments and other factors. The
Reporting Persons intend to review on a continuing basis their investment in the
Common Stock, the Issuer's business affairs and financial condition, as well as
conditions in the securities markets and general economic and industry
conditions.
None of the Reporting Persons has any plan or proposal which relates to or
which would result in:
(a) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer;
(b) The sale or transfer of a material amount of assets of the Issuer;
(c) Any change in the present Board of Directors or management of the
Issuer, including any plans or proposals to change the number or terms
of Directors or to fill any existing vacancies on the Board;
(d) Any material change in the present capitalization or dividend policy
of the Issuer;
(e) Any other material change in the Issuer's business or corporate
structure;
(f) Changes in the Issuer's Articles of Incorporation, Bylaws or other
actions which may impede the acquisition or control of the Issuer by
any person;
(g) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted
in an interdealer quotation system of a registered national securities
association;
(h) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Exchange Act; or
(i) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of Issuer.
--------------------------------
(a) The calculations in this Item are based upon 29,722,050 shares of
Common Stock issued and outstanding as of February 17, 2003 (based on
disclosures made by the Issuer in the Stock Purchase Agreement). As of
the date hereof, the Reporting Persons beneficially owned 5,757,000
shares or 19.4% of the outstanding shares of Common Stock of the
Issuer. The foregoing calculation is made pursuant to Rule 13d-3
promulgated under the Act.
(b) SJSI has the sole power to vote or direct the vote of 5,757,000 shares
and the sole power to dispose or direct the disposition of 5,757,000
shares. Because John M. Gregory controls all of the voting interests
of SJSI with respect to the securities, he may be deemed to have the
sole power to vote and direct the vote of 5,757,000 shares and the
sole power to dispose and direct the disposition of 5,757,000 shares.
Neither Joan P. Gregory, Susan Gregory nor James M. Gregory presently
have the power to dispose, direct the disposition, vote or direct the
vote of shares of Common Stock held by SJSI. However, they may be
deemed to indirectly beneficially own shares of Common Stock of the
Issuer held by SJSI due to their financial interests in SJSI.
8 of 10
(c) During the 60 day period ended as of the date hereof, John M. and Joan
P. Gregory have engaged in the following transactions, with all
transactions having been made in the open market for cash:
Transaction Date No. of Shares Price Per Share
----------- ---- ------------- ---------------
Purchase 02/11/03 57,070 $ 2.94
Purchase 02/12/03 640,830 $ 2.98
On February 18, 2003, SJSI purchased 4,750,000 shares of Common Stock
at a purchase price of $3.50 per share directly from the Issuer at the
office of its counsel in Wellesley, Massachusetts, pursuant to the
Stock Purchase Agreement. None of the other Reporting Persons have
made transactions in the Issuer's securities during the 60 day period
ended as of the date hereof, except for the transfer of 1,007,000
shares of Common Stock from John M. and Joan P. Gregory to SJSI which
took place on February 14, 2003.
(d) The Reporting Persons affirm that no other person has the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of the Issuer's Common Stock
beneficially owned by the Reporting Persons.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
----------------------------------------------------------------------
to Securities of the Issuer.
----------------------------
Other than the Stock Purchase Agreement, the Reporting Persons do not have
any contract, arrangement, understandings or relationships with respect to
securities of the Issuer.
Pursuant to the Stock Purchase Agreement, the Issuer has agreed to file an
initial shelf registration statement (the "Shelf Registration Statement") with
the Securities and Exchange Commission (the "Commission") within 45 days of the
closing of the transaction and has agreed to use its best efforts to have the
Shelf Registration Statement declared effective as soon as practicable (but in
any event within 90 days after filing). The Issuer has agreed to use its best
efforts to keep the Shelf Registration Statement effective for the period set
forth in the Stock Purchase Agreement.
Item 7. Material to be Filed as Exhibits.
---------------------------------
Exhibit Description
------- -----------
1 Joint Filing Agreement
2 Common Stock Purchase Agreement by and between Novavax, Inc.
and SJ Strategic Investments, LLC, dated February 17, 2003.
9 of 10
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 26, 2003
SJ Strategic Investments, LLC
By: /s/ John M. Gregory
--------------------------------------
John M. Gregory
Its: Managing Member
/s/ John M. Gregory
--------------------------------------
John M. Gregory
/s/ Joan P. Gregory
--------------------------------------
Joan P. Gregory
/s/ Susan Gregory
--------------------------------------
Susan Gregory
/s/ James M. Gregory
--------------------------------------
James M. Gregory
10 of 10
EXHIBIT INDEX
Exhibit Description
------- -----------
1 Joint Filing Agreement
2 Common Stock Purchase Agreement by and between Novavax, Inc.
and SJ Strategic Investments, LLC, dated February 17, 2003.
EXHIBIT 1
JOINT FILING AGREEMENT
SJ Strategic Investments, LLC, a Tennessee limited liability company, John
M. Gregory, Joan P. Gregory, Susan Gregory and James M. Gregory (the "Filing
Persons"), hereby agree to file jointly a Schedule 13D and any amendments
thereto relating to the aggregate ownership by each of the Filing Persons of any
voting equity security of a class which is registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, as required by Rule 13d-1 and
Rule 13d-2 promulgated under the Securities Exchange Act of 1934. Each of the
Filing Persons agrees that the information set forth in such Schedule 13D and
any amendments thereto with respect to such Filing Person will be true, complete
and correct as of the date of such Schedule 13D or such amendment, to the best
of such Filing Person's knowledge and belief, after reasonable inquiry. Each of
the Filing Persons makes no representation as to the accuracy or adequacy of the
information set forth in the Schedule 13D or any amendments thereto with respect
to any other Filing Person. Each of the Filing Persons shall promptly notify the
other Filing Persons if any of the information set forth in the Schedule 13D or
any amendments thereto shall become inaccurate in any material respect or if
said person learns of information that would require an amendment to the
Schedule 13D.
IN WITNESS WHEREOF, the undersigned have set their hands this 26th day of
February, 2003.
SJ Strategic Investments, LLC
By:/s/ John M. Gregory
------------------------------------
John M. Gregory
Its: Managing Member
/s/ John M. Gregory
------------------------------------
John M. Gregory
/s/ Joan P. Gregory
------------------------------------
Joan P. Gregory
/s/ Susan Gregory
------------------------------------
Susan Gregory
/s/ James M. Gregory
------------------------------------
James M. Gregory
EXHIBIT 2
NOVAVAX, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 17, 2003, by and among Novavax, Inc., a Delaware corporation
(the "Company"), and the parties listed on the Schedule of Investors separately
delivered to the Investors (the "Schedule of Investors") (each hereinafter
individually referred to as an "Investor" and collectively referred to as the
"Investors").
1. AGREEMENT TO PURCHASE AND SELL STOCK.
-------------------------------------
1.1 Authorization. As of the Closing (as defined below) the Company will
have authorized the issuance, pursuant to the terms and conditions of this
Agreement, of up to 4,750,000 shares of the Company's Common Stock, $.01 par
value (the "Common Stock").
1.2 Agreement to Purchase and Sell. The Company agrees to sell to each
Investor at the Closing, and each Investor agrees, severally and not jointly, to
purchase from the Company at the Closing, the number of shares of Common Stock
set forth beside such Investor's name on the Schedule of Investors, at a price
of $3.50 per share, and in the aggregate amount for such Investor as set forth
on the Schedule of Investors. The shares of Common Stock purchased and sold
pursuant to this Agreement will be collectively hereinafter referred to as the
"Purchased Shares."
2. CLOSING.
--------
2.1 The Closing. The purchase and sale of the Purchased Shares will take
place at the offices of White & McNamara, P.C., 65 William Street, Suite 250,
Wellesley, Massachusetts, at 8:00 a.m., Eastern Standard Time, on February 18,
2003, or at such other time and place as the Company and Investors who have
agreed to purchase a majority of the Purchased Shares listed on the Schedule of
Investors mutually agree upon (which time and place are referred to in this
Agreement as the "Closing"), provided that the closing may not be delayed for
more than five business days without the consent of all Investors. At the
Closing, the Investor will purchase the number of Purchased Shares shown on the
Schedule of Investors against delivery to the Investor (or its designated
custodian) by the Company of a certificate representing such Purchased Shares
and/or a copy of the Company's irrevocable instructions to its transfer agent to
prepare and issue such certificate, with delivery of such certificate to occur
within three (3) business days thereafter. The full purchase price for such
Purchased Shares shall be paid at Closing by wire transfer of funds to the
Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
--------------------------------------------------
The Company hereby represents and warrants to Investor that, except as set
forth in the Disclosure Schedule and Schedule of Exceptions (the "Disclosure
Schedule") separately delivered by the Company to the Investors, the statements
in the following paragraphs of this Section 3 are all true and correct:
1
3.1 Organization, Good Standing and Qualification. Each of the Company and
its subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction under which it is incorporated, and
has all requisite corporate power and authority to conduct its business as
currently conducted and to execute, deliver and perform all of its obligations
under this Agreement and to consummate the transactions contemplated hereby.
Each of the Company and its subsidiary is qualified to do business as a foreign
corporation in each jurisdiction where failure to be so qualified could,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, assets, financial condition, results of
operations, or assets of the Company and its subsidiary, taken as a whole (the
"Business") (such effect referred to as a "Material Adverse Effect"). For
purposes of this Agreement, "Material Adverse Effect" shall not include any
effect attributable to changes in the trading prices for the Company's Common
Stock.
3.2 Capitalization. Immediately before the Closing, the capitalization of
the Company will consist of the following:
(a) Preferred Stock. A total of 2,000,000 authorized shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock"), none of
which are issued and outstanding.
(b) Common Stock. A total of 50,000,000 authorized shares of Common
Stock, of which approximately 25,222,110 shares were issued and 24,972,050
shares were outstanding as of December 31, 2002.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
approximately 3,712,396 shares of Common Stock issuable upon exercise of
options outstanding under the Company's 1995 Stock Option Plan and 300,000
shares of Common Stock issuable upon exercise of options outstanding under
the 1995 Director Stock Option Plan, each as of December 31, 2002, (ii)
approximately 1,411,771 additional shares of Common Stock reserved for
issuance under the Company's 1995 Stock Option Plan, (iii) approximately
4,748,309 additional shares of Common Stock reserved for issuance upon the
conversion of convertible notes issued to King Pharmaceuticals, Inc. and
(iv) warrants to purchase an aggregate of approximately 70,000 shares of
Common Stock, there are not outstanding any options, warrants, rights or
agreements for the purchase or acquisition from the Company of any shares
of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of the Company's capital stock.
All of such outstanding shares of capital stock have been duly authorized
and validly issued and are fully paid and nonassessable and all of such
options, warrants and other rights to acquire Common Stock have been duly
authorized by the Company. None of the outstanding shares of capital stock
and options, warrants and other rights to acquire Common Stock has been
issued in violation of the preemptive rights of any security holder of the
Company.
3.3 Fielding. Except for Fielding Pharmaceutical Company ("Fielding"), the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, trust, joint venture, association, or
other entity. All of the outstanding shares of capital stock of, or other equity
interests in, Fielding have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company free and clear
2
of all pledges, claims, liens, charges, encumbrances or security interests of
any kind or nature whatsoever, and free of any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other equity interests.
3.4 Due Authorization; No Violation. All corporate action on the part of
the Company and its officers, directors and stockholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Agreement and the transactions contemplated hereby,
and the authorization, issuance, reservation for issuance and delivery of all of
the Purchased Shares being sold under this Agreement, has been taken or will be
taken prior to the Closing, and this Agreement constitutes a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and (ii)
the effect of rules of law governing the availability of equitable remedies.
Neither the execution, delivery or performance by the Company of this Agreement
nor the consummation by the Company of the transactions contemplated hereby will
(i) conflict with or result in a breach of any provision of the Amended and
Restated Certificate of Incorporation of the Company, as amended to date (the
"Charter") or the Company's Bylaws or the comparable organizational documents of
Fielding, (ii) conflict with, result in a violation or breach of, or cause a
default (or give rise to any right of termination, cancellation or
acceleration), or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or Fielding, under any of the terms, conditions or provisions of any
agreement, instrument or obligation to which the Company or Fielding is a party,
which default could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or (iii) violate any law, statute, rule or
regulation or judgment, order, writ, injunction or decree of any governmental
authority, in each case under this clause (iii) applicable to the Company or
Fielding or any of their respective properties or assets and which, individually
or in the aggregate, could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The business and operations of the
Company and Fielding have been conducted in accordance with all applicable laws,
rules and regulations of all governmental authorities, except for such
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.5 Valid Issuance of Stock. The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions (other than those arising under federal or state securities laws as
a result of the private placement of the Purchased Shares to the Investors) and
are not subject to preemptive or other similar rights of any stockholder of the
Company.
3.6 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company or
Fielding is required in connection with the valid execution and delivery of this
Agreement, the offer, sale and issuance of the Purchased Shares, or the
consummation of the transactions contemplated by this Agreement, except for
qualifications or filings under the Securities Act of 1933, as amended (the
"Act") and the applicable rules and regulations (the "Rules and Regulations") of
the Securities and Exchange
3
Commission (the "Commission") under the Act, and all other applicable securities
laws as may be required in connection with the transactions contemplated by this
Agreement. All such qualifications will be effective on the Closing, and all
such filings will be made within the time prescribed by law.
3.7 Absence of Changes. After the respective dates as of which information
is given in the Company's Proxy Statement for the annual meeting of stockholders
held on May 8, 2002, the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2002, June 30, 2002 and September 30, 2002, and the Company's
Reports on Form 8-K filed on June 26, 2002, August 7, 2002 and September 9,
2002, respectively (such documents, together with the Disclosure Schedule,
referred to collectively as the "Disclosure Documents"), there has not been (i)
any Material Adverse Effect on the Business, (ii) any transaction that is
material to the Company and Fielding, taken as a whole, (iii) any obligation,
direct or contingent, that is material to the Company and Fielding, taken as a
whole, incurred by the Company or Fielding, (iv) any change in the outstanding
indebtedness of the Company or Fielding that is material, (v) any dividend
declared, paid or made on the capital stock of the Company, (vi) any loss or
damage (whether or not insured) to the property of the Company or Fielding which
has been sustained which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or (vii) any other event which could
reasonably be expected to adversely affect the validity or enforceability of, or
the authority or the ability of the Company to perform its obligations under,
this Agreement.
3.8 Litigation. Except as disclosed in the Disclosure Documents, there is
no action, suit, proceeding, claim, arbitration or investigation ("Action")
pending (or, to the Company's knowledge, currently threatened) against the
Company or Fielding, or their respective activities, properties or assets, which
(i) is reasonably likely to prevent the consummation of the transactions
contemplated hereby or (ii) if adversely resolved against the Company or
Fielding could adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement, or could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
3.9 NASDAQ Listing. The Company's Common Stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and is listed on The Nasdaq Stock Market, Inc. National Market (the
"Nasdaq National Market"). The Company will use its best efforts to comply with
all requirements of the National Association of Securities Dealers, Inc. with
respect to the issuance of the Purchased Shares and the listing thereof on the
Nasdaq National Market; provided, however, that the Company makes no
representations that it will continue to meet all of the requirements for
listing of the Common Stock on the Nasdaq National Market. The Company shall use
its best efforts to take such actions as may be necessary, and as soon as
practicable and in no event later than 30 days after the Closing Date, to file
with Nasdaq any necessary application or other document required by Nasdaq in
order to list the Purchased Shares on the market on which they are traded and to
pay any required listing fees within the required time.
3.10 Commission Filings. The Company has filed in a timely manner all
reports and other information required to be filed ("Filings") with the
Commission pursuant to
4
the Exchange Act during the preceding twelve calendar months. On their
respective dates of filing, to the Company's knowledge the Filings complied in
all material respects with the requirements of the Exchange Act, and the
published rules and regulations of the Commission promulgated thereunder. To the
Company's knowledge, on their respective dates of filing, the Filings did not
include any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and all financial statements contained in the
Filings fairly present, in all material respects, the financial position of the
Company on the dates of such statements and the results of operations for the
periods covered thereby in accordance with generally accepted accounting
principles consistently applied throughout the periods involved and prior
periods, except as otherwise indicated in the notes to such financial
statements, subject in the case of unaudited financial statements, to normal
year-end audit adjustments.
3.11 Disclosure. To the Company's knowledge, the representations and
warranties made by the Company in this Agreement (including the Disclosure
Schedule) and the Filings when read together do not contain any untrue statement
of a material fact and do not omit to state a material fact necessary to make
the statements herein as a whole not misleading.
3.12 Governmental Permits, Etc. The Company and Fielding possesses all
licenses, franchises, governmental approvals, permits or other governmental
authorizations (collectively, "Authorizations") relating to the operation of the
Business, except for those Authorizations the failure of which to possess could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company and Fielding are in compliance with the terms of all
Authorizations and all laws, ordinances, regulations and decrees which are
applicable to the Business, except for such non-compliance which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.13 Insurance. The Company and Fielding are covered by, and will continue
to be covered by, insurance with companies the Company believes to be
responsible and in such amounts and covering such risks as it believes to be
adequate for the conduct of the Business and the value of the Company's and
Fielding's properties and as is customary for companies engaged in similar
businesses in similar industries, all of which insurance is in full force and
effect. The Company has no knowledge that any such carrier has grounds or
intends to cancel or fail to renew such policies on terms acceptable to the
Company.
3.14 Intellectual Property. The Company or Fielding owns or possesses the
patents, patent rights, licenses, inventions, copyrights, trademarks, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other rights or interests
in items of intellectual property that are material to the Business as operated
by the Company and Fielding, and as expected to be operated by the Company and
Fielding in the next 12 months with respect to the Company's ESTRASORB and
ANDROSORB product candidates (collectively, the "Patent and Proprietary
Rights"); neither the Company nor Fielding has received notice of any asserted
infringement of or material conflict with the rights of others with respect to
any of the Patent and Proprietary Rights. To the Company's knowledge, neither
the Company nor Fielding infringes upon the proprietary rights of others in any
material respect.
5
3.15 Financial Statements. The financial statements of the Company and the
related notes thereto included in the Disclosure Documents present fairly, in
all material respects and in accordance with generally accepted accounting
principles, the financial position of the Company as of the dates indicated, and
the results of its operations and cash flows for the periods therein specified
(except that the unaudited financial statements do not contain all notes
required by generally accepted accounting principles and are subject to normal
year-end audit adjustments). Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified ("GAAP"), subject in the case of unaudited financial statements, to
normal year-end audit adjustments. Except as set forth in the financial
statements included in the Disclosure Documents, neither the Company nor
Fielding has any material liabilities of any nature (whether accrued, absolute,
contingent or otherwise) that are required by GAAP to be included in such
financial statements other than liabilities arising after the date of the most
recent balance sheet included in such financial statements which were incurred
in the ordinary course of business consistent with past practice.
3.16 Internal Accounting Controls. The Company has reviewed and evaluated
the effectiveness of the Company's disclosure controls and procedures, as
defined in Rules 240.13a-14 (c) and 15d-14 (c) promulgated under the Exchange
Act. Based on that review and evaluation, the Company has concluded that the
Company's current disclosure controls and procedures, as designed and
implemented are reasonably adequate to ensure that the Company's Chief Executive
Officer and Chief Financial Officer are provided with material information
relating to the Company required to be disclosed in the reports the Company
files or submits under the Exchange Act. As a result of such review and in light
of the matter described in Section 3.16 of the Disclosure Schedule, the Company
has made additional or expanded internal control changes in the Company's
internal controls.
3.17 Title. The Company or Fielding has good and marketable title in fee
simple to all real property and personal property owned by them which is
material to the business of the Company and Fielding, taken as a whole, in each
case free and clear of all liens and encumbrances, except for liens that 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 or
Fielding or for equipment leases or operating leases entered into in the
ordinary course of the Company's or Fielding's business. Any real property and
facilities held under lease by the Company or Fielding are held by it under
valid, subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and facilities by the Company or Fielding.
3.18. Form S-3. The Company meets the requirements for the use of Form S-3
for the registration of the resale of the Purchased Shares and will use its best
efforts to maintain S-3 status with the Commission during the Registration
Period (as defined in Section 7.2(a)). The Company does not know of any current
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 Section 7.1(d)).
3.19. Tax Matters. The Company and Fielding have filed all federal, state
and local income and franchise and other tax returns required to be filed and
have paid all taxes due,
6
and no tax deficiency has been determined adversely to the Company or Fielding
which, individually or in the aggregate, has had (nor does the Company or
Fielding have any knowledge of any tax deficiency which, if determined adversely
to the Company or Fielding, could, individually or in the aggregate, reasonably
be expected to have) a Material Adverse Effect.
3.20. Investment Company. The Company is not an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the rules
and regulations of the Commission thereunder.
3.21. No General Solicitation; No Integration. No form of general
solicitation or general advertising was used by the Company or, to its
knowledge, any other person acting on behalf of the Company, in respect of the
Purchased Shares or in connection with the offer and sale of the Purchased
Shares. The Company has not sold, offered to sell, solicited offers to buy or
otherwise negotiated in respect of any "security" (as defined in the Act) that
is or could be integrated with the sale of the Purchased Shares in a manner that
would require the registration of the Purchased Shares under the Act.
3.22. No Registration. Assuming the accuracy of the representations and
warranties made by, and compliance with the covenants of, the Investors in
Section 4 hereof, no registration of the Purchased Shares under the Act is
required in connection with the sale of the Purchased Shares to the Investors as
contemplated by this Agreement.
3.23. FDA Matters and Clinical Trials.
(a) Neither the Company nor Fielding has received any notices or
correspondence from any federal, state, local or foreign regulatory body that
regulates the types of matters subject to the jurisdiction of the U.S. Food and
Drug Administration ("Health Authorities") which have not been resolved
requiring or threatening the termination, suspension or modification of any
animal studies, preclinical tests or clinical trials conducted by or on behalf
of the Company or Fielding or in which the Company or Fielding has participated
that are described in the Disclosure Documents or the results of which are
referred to in the Disclosure Documents. To the knowledge of the Company, the
currently pending clinical trials, studies and other preclinical tests conducted
by or on behalf of the Company or Fielding and that are described in the
Disclosure Documents or the results of which are referred to in the Disclosure
Documents, are being conducted in accordance with experimental protocols,
procedures and controls generally used by qualified experts in the preclinical
or clinical study of new drugs.
(b) The Company has no knowledge of any adverse event that has resulted
from any of such studies, tests or trials that was not disclosed as required to
any Health Authority.
3.24. Material Contracts. All material contracts of the Company and
Fielding that are required by applicable rules and regulations of the Commission
to be filed as exhibits to the Filings ("Material Contracts") have been so filed
and, except for the Material Contracts that have been terminated or are no
longer in effect in accordance with their terms, are valid, subsisting, in full
force and effect and binding upon the Company or Fielding and, to the Company's
knowledge, the other parties thereto (subject to the exceptions set forth in the
first
7
sentence of Section 3.4 above), and the Company or Fielding has paid in full or
accrued all amounts due thereunder and have satisfied in full or provided for
all of its liabilities and obligations thereunder in all material respects.
Neither the Company nor Fielding has received notice of a default and is not in
default under, or with respect to, any Material Contract. To the knowledge of
the Company, no other party to any Material Contract is in default thereunder,
nor does any condition exist that with notice or lapse of time or both would
constitute a default by such other party thereunder.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS.
-----------------------------------------------------------------
Each Investor hereby severally and not jointly represents and warrants to,
and agrees with, the Company, that:
4.1 Authorization. All action (corporate or otherwise) on the part of the
Investor and its officers, directors and stockholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Investor under, this Agreement has been taken or will be taken prior to
the Closing, and this Agreement constitutes a valid and legally binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
4.2 Purchase for Own Account. The Purchased Shares to be purchased by such
Investor hereunder will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the public resale or
distribution thereof within the meaning of the Act, and such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the Act. If not an individual, such
Investor also represents that such Investor has not been formed for the specific
purpose of acquiring Purchased Shares.
4.3 Disclosure of Information. The Investor has received and/or had full
access to a copy of the Disclosure Documents and has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Purchased Shares to be
purchased by the Investor under this Agreement. Investor further has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Purchased Shares and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Investor or to which the Investor had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3. In connection with its decision to
purchase the Purchased Shares, the Investor has relied solely on the Disclosure
Documents, the representations, warranties and agreements of the Company set
forth in this Agreement, as well as any investigation of the Company completed
by the Investor or its advisors; and the Investor has not relied on any oral
statement made by the Company.
4.4 Investment Experience. Such Investor understands that the purchase of
the Purchased Shares involves substantial risk. Such Investor: (i) has
experience as an investor
8
in securities of companies in the development stage and acknowledges that such
Investor is able to fend for itself, can bear the economic risk of such
Investor's investment in the Purchased Shares and has such knowledge and
experience in financial or business matters that such Investor is capable of
evaluating the merits and risks of this investment in the Purchased Shares and
protecting its own interests in connection with this investment, and/or (ii) has
a preexisting personal or business relationship with the Company or one or more
of its officers or directors.
4.5 Accredited Investor Status. Such Investor is an "accredited investor"
within the meaning of Regulation D promulgated under the Act.
4.6 Restricted Securities. Such Investor understands that the Purchased
Shares are characterized as "restricted securities" under the Act inasmuch as
they are being acquired from the Company in a transaction not involving a public
offering and that under the Act and the Rules and Regulations such securities
may be resold without registration under the Act only in certain limited
circumstances. In this connection, such Investor represents that such Investor
is familiar with Rule 144 of the Commission and understands the resale
limitations imposed thereby and by the Act and understands that the Shelf
Registration Statement (as defined in Section 7.2(a)) and any other registration
statement contemplated by this Agreement to effect the registration of the
Purchased Shares for purposes of resale thereunder may never become effective
under the Act.
4.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, such Investor further agrees not to make any
disposition of all or any portion of the Purchased Shares unless and until:
(a) there is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in
accordance with such registration statement and the provisions of Section 7
of this Agreement; or
(b) (i) such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (ii) such Investor
shall have furnished the Company, at the expense of such Investor or its
transferee, with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such
securities under the Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be required: (i) for any
routine transfer of any Purchased Shares in compliance with Rule 144 or Rule
144A (except that an opinion of counsel may be required for other than routine
Rule 144 transactions), or (ii) for any transfer of Purchased Shares by an
Investor that is a partnership, limited liability corporation ("LLC") or a
corporation to (A) a partner of such partnership, member of such LLC or
stockholder of such corporation on a basis proportionate to their ownership
interests in such partnership, LLC or corporation, or (B) the estate of any such
partner, member or stockholder, or (iii) for the transfer by gift, will or
intestate succession by any Investor to his or her spouse or lineal descendants
or ancestors or any trust for any of the foregoing; provided, that in each of
the foregoing cases
9
the transferee agrees in writing to be subject to the terms of this Agreement to
the same extent as if the transferee were an original Investor hereunder.
4.8 Legends. It is understood that the certificates evidencing the
Purchased Shares will bear the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF, AND MAY HAVE CERTAIN REGISTRATION RIGHTS PURSUANT TO, THE
PROVISIONS OF A PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER,
WHICH MAY RESTRICT THE TRANSFER OF SUCH SHARES IN CERTAIN CIRCUMSTANCES. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S
PRINCIPAL OFFICE.
The legends set forth in (a) and (b) above shall, upon the request of an
Investor, be promptly removed by the Company from any certificate evidencing
Purchased Shares upon delivery to the Company of an opinion of counsel to the
Investor, reasonably satisfactory to the Company, that the legended security can
be freely transferred in a public sale without a registration statement being in
effect under the Act and in compliance with exemption requirements under
applicable state securities laws and that such transfer will not jeopardize the
exemption or exemptions from registration pursuant to which the Company issued
the Purchased Shares; provided, however, that no such opinion shall be required
in connection with routine sales of Purchased Shares pursuant to the Shelf
Registration Statement (as defined below) (provided that customary forms of
brokers' and sellers' representation letters are provided in connection with
such sales) or routine requests for legend removal where the Purchased Shares
can be sold by an Investor pursuant to the provisions of Rule 144. In connection
with any such opinion, the Investor shall provide such certifications as may be
reasonably be deemed necessary for the delivery of such opinion.
4.9 Resale Restrictions. Except as provided in Section 4.7, the Investor
will not, prior to the effectiveness of the Shelf Registration Statement (as
defined below), directly or indirectly offer, sell, contract or grant an option
to sell, pledge, encumber, or otherwise dispose of or otherwise transfer, or
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of (whether any such
transaction described above is to be settled by delivery of Common Stock or such
other
10
securities, in cash or otherwise) (a "Disposition"), any Purchased Shares (other
than to donees, stockholders or partners of the Investor who agree to be
similarly bound), and after the effective date of the Shelf Registration
Statement the Investor will not make any Disposition of Purchased Shares in
violation of the Act.
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING.
------------------------------------------------
5.1 Closing. The obligations of each Investor under Section 2 of this
Agreement to purchase the Purchased Shares at the Closing are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions, and the Company shall use its best efforts to cause such conditions
to be satisfied on or before the Closing:
5.1.1 Representations and Warranties True. Each of the representations
and warranties of the Company contained in Section 3 qualified as to
materiality shall be true and correct and those not so qualified shall be
true and correct in all material respects on and as of the Closing with the
same effect as though such representations and warranties had been made on
and as of the Closing.
5.1.2 Performance. The Company shall have performed and complied in
all material respects with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied
with by it on or before the Closing and shall have obtained all approvals,
consents and qualifications necessary to complete the purchase and sale
described herein.
5.1.3 Compliance Certificate. The Company shall have delivered to the
Investors at the Closing a certificate signed on its behalf by its
President, Chief Executive Officer, or Chief Financial Officer certifying
that the conditions specified in Sections 5.1.1 and 5.1.2 have been
fulfilled.
5.1.4 Registration; Securities Exemptions. The offer and sale of the
Purchased Shares to the Investors pursuant to this Agreement shall be
exempt from the registration requirements under the Act and applicable
state securities laws, and the rules thereunder (the "Law").
5.1.5 No Material Change. There shall have been no Material Adverse
Effect on the on the Business from the date of this Agreement.
5.1.6 Opinion of Counsel. The Investors shall have received an opinion
of counsel to the Company substantially in the form of Exhibit A attached
hereto.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
---------------------------------------------------
6.1. Closing. The obligations of the Company under this Agreement to sell
the Purchased Shares to the Investors at the Closing are subject to the
fulfillment or waiver, on or before the Closing, of the following conditions,
and each Investor shall use its best efforts to cause such conditions to be
satisfied on or before the Closing:
11
6.1.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 4 qualified as to
materiality shall be true and correct and those not so qualified shall be
true and correct in all material respects on and as of the Closing with the
same effect as though such representations and warranties had been made on
and as of the Closing.
6.1.2 Payment of Purchase Price. The Investor shall have delivered to
the Company the purchase price for the Purchased Shares specified for such
Investor on the Schedule of Investors, in accordance with the provisions of
Section 2, subject to the Company's delivery of certificates for such
shares.
7. REGISTRATION RIGHTS.
--------------------
7.1 Definitions. For purposes of this Agreement:
(a) Form S-3. The term "Form S-3" means such form under the Act as is
in effect on the date hereof or any successor registration form under the
Act subsequently adopted by the Commission that permits inclusion or
incorporation of substantial information by reference to other documents
filed by the Company with the Commission.
(b) Holder. The term "Holders" shall mean holders of Registrable
Securities that have registration rights pursuant to this Agreement.
(c) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement.
(d) Registrable Securities. The term "Registrable Securities" means:
(1) all of the Purchased Shares, (2) any additional shares issued pursuant
to Section 7.2(a) and (3) any shares of Common Stock of the Company issued
or issuable, from time to time, upon any reclassification, share
combination, share subdivision, stock split, share dividend, or similar
transaction or event, or otherwise as a distribution on, in exchange for or
with respect to any of the foregoing; provided, however, that the term
"Registrable Securities" shall exclude in all events (and such securities
shall not constitute "Registrable Securities") (i) any Registrable
Securities sold or transferred by a person in a transaction in which the
registration rights granted under this Agreement are not assigned in
accordance with the provisions of this Agreement, (ii) any Registrable
Securities sold in a public offering pursuant to a registration statement
filed with the Commission or sold pursuant to Rule 144 promulgated under
the Act ("Rule 144") or (iii) as to any Holder, the Registrable Securities
held by such Holder if all of such Registrable Securities can be publicly
sold without restriction (including, without limitation, as to volume, but
by complying with the manner of sale and Form 144 filing requirements, if
applicable) within a three-month period pursuant to Rule 144.
(e) Prospectus: The term "Prospectus" shall mean the prospectus
included in any Shelf Registration Statement (including, without
limitation, a prospectus that discloses information previously omitted from
a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Act), as amended or
supplemented by any prospectus supplement (including, without limitation,
any prospectus
12
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Shelf Registration Statement), and
all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
(f) Shelf Registration Statement. See Section 7.2(a).
7.2 Form S-3 Shelf Registration.
(a) Registration. The Company shall prepare and file with the
Commission within 45 days following the Closing and use its best efforts
(i) to have declared effective as soon as practicable thereafter (but in
any event within 90 days after filing), a registration statement on Form
S-3 (or, if the Company is not then eligible to use Form S-3, then another
appropriate form) providing for the resale by the Holders of all of the
Registrable Securities (the "Shelf Registration Statement"), and (ii) to
provide a transfer agent and registrar for all securities registered
pursuant to the Shelf Registration Statement. The Shelf Registration
Statement may include securities other than those held by Holders. The
Company shall use its best efforts to keep the Shelf Registration Statement
continuously effective (subject to Section 7.2(b)), pursuant to the Act and
the Rules and Regulations promulgated thereunder, until the earliest to
occur of (i) the second anniversary of the Closing Date, (ii) as to a
particular Holder, the date on which the Holder may sell all Registrable
Securities then held by the Holder without restriction (including, without
limitation, as to volume, but by complying with the manner of sale and Form
144 filing requirements, if applicable) within a three-month period
pursuant to Rule 144 and (iii) as to a particular Holder, such time as all
Registrable Securities held by such Holder have been sold (A) pursuant to
the Shelf Registration Statement, (B) to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction,
and/or (C) in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof so
that all transfer restrictions and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale (such
period, the "Registration Period"). In the event that the Shelf
Registration Statement shall cease to be effective during the Registration
Period, the Company shall promptly prepare and file a new registration
statement covering all Registrable Securities and shall use its best
efforts to have such registration statement declared effective as soon as
practicable. Any such registration statement shall be considered a "Shelf
Registration Statement" hereunder.
(b) Liquidated Damages. In the event that the Shelf Registration
Statement (i) is not reviewed by the Commission or, if it has been selected
for review, that the Company is not using all commercially reasonable
efforts to have the Shelf Registration Statement declared effective, and
(ii) has not been declared effective prior to the six-month anniversary of
the Closing, then the Company (i) shall immediately pay to the Investor
$100,000 in cash (such payment, the "Liquidated Damages"), by wire transfer
to an account or accounts and in such respective percentages as the
Investor instructs the Company in writing. The Company and the Investor
agree that, in the event that under the circumstances described above, the
Shelf Registration Statement is not declared effective within six months of
the Closing, it would be impracticable or extremely difficult to fix or
determine the Investor's actual damages. Therefore, the Company and the
Investor each agree that the amount of the Liquidated Damages has been
agreed upon as liquidated damages after negotiation as to the parties'
reasonable
13
estimate of the Investor's damages. The Company and the Investor agree that
the amount of Liquidated Damages is reasonable in light of the
circumstances existing at the execution of this Agreement. The Company and
the Investor each acknowledge that the payment of such Liquidated Damages
is not intended as a forfeiture or penalty. If the Company fails to
immediately pay to the Investor any amounts due under this Section 7.2(b),
then in addition to any amounts paid or payable pursuant to this Section,
the Company shall also pay all reasonable costs and expenses (including
reasonable legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to enforce
or collect payment, together with interest on such payment at the maximum
rate permitted by applicable law, from the date such payment was required
to be paid.
Initialed by JMG for the Investor Initialed by MJK for the Company
--- ---
(c) Permitted Window. (i) The Holders agree that they will sell the
Registrable Securities pursuant to such registration only during a
"Permitted Window" (as defined below). For the purposes of this Agreement,
a "Permitted Window" with respect to a Holder is a period of 30 consecutive
calendar days commencing upon delivery to the Holder of the Company's
written notification to the Holder in response to a Notice of Resale that
the Prospectus contained in the Shelf Registration Statement is available
for resale. In order to cause a Permitted Window to commence, a Holder must
first give written notice to the Company of its bona fide present intention
to sell part or all of the Registrable Securities pursuant to such
registration (a "Notice of Resale"). Upon delivery of such Notice of
Resale, the Company will give written notice to the Holders as soon as
practicable, but in no event not more than two (2) business days after such
delivery, that (A) the Permitted Window will commence on the date such
notice is delivered to the Holder, (B) the Company believes it is
appropriate for the Company to supplement the Prospectus or make an
appropriate filing under the Exchange Act so as to cause the Prospectus to
become current (unless a certificate of the President or Chief Executive
Officer is delivered as provided in subparagraph (ii) below), or (C) the
Company believes it is required under the Act and the Rules and Regulations
thereunder to amend the Shelf Registration Statement in order to cause the
Prospectus to be current (unless a certificate of the President or Chief
Executive Officer is delivered as provided in subparagraph (ii) below). If
the Company determines that a supplement to the Prospectus, the filing of a
report pursuant to the Exchange Act or an amendment to the Shelf
Registration Statement required under the Act, as provided above, is
necessary, it will take such actions as soon as reasonably practicable
(subject to subparagraph (ii) below and paragraph (d) below), and the
Company will notify the Holder of the filing of such supplement, report or
amendment, and, in the case of an amendment, the effectiveness thereof, and
the Permitted Window will then commence.
(ii) If the Company furnishes to the Holders a certificate signed by
the President or Chief Executive Officer of the Company stating that, in
the good faith judgment of the Company, it would be seriously detrimental
to the Company and its stockholders for sales to be made from such Shelf
Registration Statement at such time (or, in the case a Notice of Resale has
been given, that would be seriously detrimental to the Company and its
stockholders for the Permitted Window to commence at such time), or that
there exists (A) a material development or potential material development
involving the Company which the Company would be obligated to disclose in
the Prospectus contained in the Shelf Registration
14
Statement, which disclosure would, in the good faith judgment of the
President or Chief Executive Officer or the Board of Directors of the
Company, be premature or otherwise inadvisable at such time or (B) a
concurrent public filing by the Company with the Commission of a
registration statement (other than on Form S-8) registering the offer and
sale of shares by the Company, then the Company will have the right (the
"Deferral Right") to defer the commencement of a Permitted Window for a
period of not more than 60 days after the date of delivery of the Notice of
Resale; provided, however, that the Company will not utilize the Deferral
Right more than four (4) times in any twelve month period, that the total
number of days covered by exercise of the Deferral Rights in any twelve
month period shall not exceed 180 days, and that the Company will exercise
all good faith efforts to minimize the period of such delays, consistent
with the Company's good faith business judgment, including without
limitation concerning premature public disclosure of confidential or
sensitive information; and provided further, however, that the Company may
defer the commencement of the Permitted Window for up to 60 days if so
requested by an underwriter in connection with an underwritten offering of
the Company's securities so long as any selling stockholders in such
underwritten offering are subject to a lock-up agreement of the same
duration (other than with respect to the Company securities to be sold by
such selling stockholders in such underwritten offering). In connection
with any such underwritten offering described in the preceding sentence
where commencement of a Permitted Window is deferred, the Holders shall be
given the opportunity to participate in the first three such offerings that
may occur after the Closing Date by including all or any of their
Registrable Securities for sale in any such offering, provided that the
right to include any Registrable Securities in any such offering shall be
subject to (i) the rights of other stockholders of the Company who also
have rights to include shares in such offering, (ii) the ability of the
underwriter for such offering to exclude some or all of the shares
requested to be registered on the basis of a good faith determination that
inclusion of such securities might adversely affect the success of the
offering or otherwise adversely affect the Company (with any such exclusion
to be pro rata among all Holders who are requesting to sell Registrable
Securities in such registration), and (iii) the execution by the Holders of
the underwriting agreement and other customary documents requested by the
managing underwriter that are executed by other holders selling securities
in such offering, and the furnishing of such information and documents as
the Company or the managing underwriter may reasonably request in
connection with such offering.
(d) Closing of Permitted Window. During a Permitted Window and in the
event (i) of the happening of any event of the kind described in Section
7.2(c)(ii) hereof or (ii) that, in the judgment of the President, Chief
Executive Officer or the Company's Board of Directors, it is advisable to
suspend use of the Prospectus for a discrete period of time due to
undisclosed pending corporate developments or pending public filings with
the Commission (which need not be described in detail), the Company shall
deliver a certificate in writing to the Holder to the effect of the
foregoing and, upon delivery of such certificate, the Permitted Window
shall terminate. The Permitted Window shall resume upon the Holder's
receipt of copies of the supplemented or amended Prospectus, or at such
time as the Holder is advised in writing by the Company that the Prospectus
may be used, and at such time as the Holder has received copies of any
additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus and which are required to be
delivered as part of the Prospectus. In any event, the Permitted Window
shall resume no later than 60 days after it has been terminated pursuant to
this Section. If the Company has previously terminated a
15
Permitted Window pursuant to this subsection within 90 days of the date
that it delivers another notice pursuant this subsection terminating
another Permitted Window, then the time period set forth in the preceding
sentence shall be shortened so that the Permitted Window shall resume no
later than 30 days after it has been terminated pursuant to such second
notice.
(e) Expenses. The registration fees and expenses incurred by the
Company in connection with the Shelf Registration Statement, including,
without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, shall be borne by the
Company. Each Holder shall be responsible for any fees and expenses of its
counsel or other advisers. Each Holder shall be responsible for its pro
rata share of underwriters' and brokers' discounts and commissions relating
to any Registrable Securities included in such registration.
7.3 Obligations of the Company. The Company shall furnish to the
Holder such number of copies of a Prospectus, including a preliminary
Prospectus, in conformity with the requirements of the Act, and such other
documents (including supplements or prospectus amendments) as the Holder
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by it that are included in
such registration. In addition, whenever required to effect the
registration of any Registrable Securities under this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) Use commercially reasonable efforts to (i) register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such states as shall be reasonably requested
by the Holder, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions and (ii) to keep such registration or qualification in effect
for so long as the Shelf Registration Statement remains in effect, except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction where
it is not so qualified, or to subject itself to taxation in any such
jurisdiction, or to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except as
may be required by the Act or applicable rules or regulations thereunder.
(b) Notify the Holder promptly (and in any event within one business
day, by email, fax or other type of communication) (i) of any request by
the Commission or any other federal or state governmental authority during
the period of effectiveness of a registration statement for amendments or
supplements to such registration statement or related prospectus or for
additional information, (ii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order or similar action
suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose and (iii) of the receipt by the Company
from the Commission or any other federal or state governmental authority of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose.
16
(c) Use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement
as soon as practicable.
(d) Subject to the limitations described in the second sentence of
Section 3.9, use all its commercially reasonable efforts to cause all
Registrable Securities to be listed continuously throughout the
Registration Period on each securities exchange or market, if any, on which
equity securities issued by the company are then listed.
(e) Subject to the provisions of Section 7.2(b), promptly file such
amendments to the Shelf Registration Statement and the Prospectus, file
such documents as may be required to be incorporated by reference in any of
such documents, and take all other actions as may be necessary to ensure to
the holders of Registrable Securities the ability to effect the public
resale of their Registrable Securities (including, without limitation,
taking any actions necessary to ensure the availability of a Prospectus
meeting the requirements of Section 10(a) of the Act) continuously
throughout the Registration Period; and provide each holder of Registrable
Securities copies of any documents prepared pursuant to the foregoing
promptly after such preparation.
7.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 7.2 or
Section 7.3 that the Holder shall furnish to the Company such information
regarding it, the Registrable Securities held by it, and the intended
method of disposition of such securities (and, when necessary, furnish
updated information) as shall be required to timely effect (and maintain
the effectiveness of) the registration of its Registrable Securities.
7.5 Indemnification. For the purposes of this Section 7.5, the term
"registration statement" shall include any final Prospectus, exhibit,
supplement, amendment or other document included in, filed as part of,
deemed to be a part of, incorporated by reference in, or otherwise relating
to the Shelf Registration Statement referred to in this Section 7.
(a) By the Company. To the extent permitted by law, the Company will
defend, indemnify and hold harmless the Investor, each Holder, the officers
and directors, trustees, each person, if any, who controls any Holder and
any underwriter for each (as defined in the Act) (such persons and entities
collectively referred to as "Holder Indemnified Parties"), against any
losses, expenses (including, without limitation, reasonable legal fees and
expenses), damages or liabilities (including in settlement of any claim) to
which they may become subject under the Act, the Exchange Act or other
federal or state law (a "Loss"), insofar as such Losses (or actions in
respect thereof) arise out of any claim, action or proceeding brought by a
third party arising out of or based upon any of the following
(collectively, a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in a registration statement filed pursuant to
this Section 7;
(ii) the omission or alleged omission to state in a registration
statement filed pursuant to this Section 7 a material fact required to
be stated therein, or necessary to make the statements therein not
misleading;
17
(iii) any violation or alleged violation by the Company of the
Act, the Exchange Act, any federal or state securities law or any rule
or regulation promulgated under the Act, the Exchange Act or any
federal or state securities law, in each case in connection with the
offering covered by such registration statement; or
(iv) any failure by the Company to fulfill any undertaking
included in a registration statement;
and, if the Company elects not to assume the defense as permitted by
Section 7.5 (c), the Company will reimburse each Holder Indemnified Party
for any legal or other expenses reasonably incurred by them, as incurred,
in connection with investigating or defending or settling, compromising or
paying an award granted in any proceeding relating to any such Violation;
provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such Loss,
if such settlement is effected without the prior written consent of the
Company, nor shall the Company be liable in any such case for any such Loss
to the extent that it arises out of or is based upon a Violation caused by
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration statement by the
Holder Indemnified Party; and provided further, that the Company will not
be liable for the reasonable legal fees and expenses of more than one
counsel to all Holder Indemnified Parties.
(b) By the Holder. To the extent permitted by law, each Holder
(severally and not jointly with any other Holder) will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Shelf Registration Statement, and each person, if any, who
controls the Company within the meaning of the Act (such persons and
entities collectively referred to as "Company Indemnified Parties") against
any Losses to which such Company Indemnified Parties may become subject
under the Act, the Exchange Act or other federal or state law, insofar as
such Losses (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation is caused by reliance upon and in conformity with written
information furnished by the Holder expressly for use in connection with
such registration statement; and the Holder will reimburse any legal or
other expenses reasonably incurred by such Company Indemnified Parties in
connection with investigating or defending any such Violation; provided,
however, that the indemnity agreement contained in this subsection shall
not apply to amounts paid in settlement of any such Loss if such settlement
is effected without the consent of the Holder; provided further, that the
Holder shall not be liable for the reasonable legal fees and expenses of
more than one counsel to the Company Indemnified Parties.
(c) Notice. Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim for
indemnification in respect thereof is to be made against any indemnifying
party under this Section, deliver to the indemnifying party a written
notice of the commencement of such an action and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably acceptable to a majority in interest of
the indemnified parties; provided, however,
18
that an indemnified party shall have the right to retain its own counsel,
with the reasonable fees and expenses to be paid by the indemnifying party,
if the indemnified party has been advised in writing by counsel that
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual conflict of
interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any
such action shall relieve such indemnifying party of liability to the
indemnified party under this Section to the extent, and only to the extent
that, such delay caused material prejudice to the indemnified or
indemnifying party, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and the Holder are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended Prospectus on file with the
Commission at the time the registration statement in question becomes
effective or in the amended Prospectus filed with the Commission pursuant
to Rule 424(b) of the Commission (the "Final Prospectus"), such indemnity
agreements shall not inure to the benefit of any person if a copy of the
Final Prospectus was furnished in a timely manner to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Act.
(e) Contribution. If the indemnification provided for in this Section
7.5 is unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the Holder on the other in connection
with the statements or omissions or other matters which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, in
the case of an untrue statement, whether the untrue statement relates to
information supplied by the Company on the one hand or a Holder on the
other and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement. The Company
and the Investors agree that it would not be just and equitable if
contribution pursuant to this subsection (e) were determined by pro rata
allocation (even if all Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to above in this subsection
(e). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), no Holder shall be
required to contribute any amount in excess of the net amount of proceeds
(i.e., proceeds net of underwriting discounts, fees and commissions payable
by such Holder) received by the Holder from the sale of the Registrable
Securities. No person guilty of fraudulent misrepresentation (within the
meaning of Section
19
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
Contribution (together with any indemnification or other obligations under
this Agreement) by any Holder (including any Indemnified Person associated
with such Holder) shall be limited in amount to the net amount of proceeds
(i.e., proceeds net of underwriting discounts, fees and commissions payable
by such Holder) received by such Holder from the sale of the Registrable
Securities
(f) Survival. The obligations of the Company and the Holder under this
Section shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
7.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission, which may at any time permit
the sale of the Registrable Securities to the public without registration, the
Company agrees to:
(a) Make and keep adequate, current public information available, as
those terms are understood and defined in Rule 144 under the Act, at all
times;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as the Holder owns any Registrable Securities, to furnish
to the Holder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of said Rule 144, a copy
of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company as the Holder may reasonably
request in availing itself of any rule or regulation of the Commission
allowing a Holder to sell any such securities without registration.
7.7 Termination of Company's Obligations. The Company shall have no
obligation to register, or maintain, a registration statement governing
Registrable Securities and the restrictive legend described in Section 4.8 will
be removed from any certificate representing the Purchased Shares, (i) if all
Registrable Securities have been registered and sold pursuant to registrations
effected pursuant to this Agreement, or (ii) with respect to any particular
Holder, at such time as all Registrable Securities held by such Holder may be
sold without restriction (including, without limitation, as to volume, but by
complying with the manner of sale and Form 144 filing requirements, if
applicable) within a three-month period pursuant to Rule 144, as it may be
amended from time to time, including but not limited to amendments that reduce
that period of time that securities must be held before such securities may be
sold pursuant to such rule.
8. ASSIGNMENT.
-----------
Notwithstanding anything herein to the contrary, the registration rights of
the Holder under Section 7 hereof shall be automatically assigned by such
Investor to any transferee of all or any portion of such Investor's Registrable
Securities who is a Permitted Transferee (as defined below); provided, however,
that (w) no party may be assigned any of the foregoing rights until the Company
is given written notice by the assigning party at the time of such assignment
stating the name and address of the assignee and identifying the securities of
the Company as to which the rights in question are being assigned; (x) that any
such
20
assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement; and (y) no such assignment or assignments shall
increase the obligations of the Company hereunder. For purposes of this
Agreement, a "Permitted Transferee" shall mean any person who (a) is (i) an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the Act; (ii) a partner of such Holder, an affiliate of such Holder or a
partner of an affiliate or any corporation, partnership, limited liability
company or other entity or person controlling, controlled by, or under common
control with, such Holder; or (iii) any other direct transferee from such Holder
of at least 25% of the Registrable Securities held by such Holder and (b) is a
transferee of the Registrable Securities as permitted under the securities laws
of the United States.
9. MISCELLANEOUS.
--------------
9.1 Survival of Warranties. The representations, warranties and covenants
of the Company and the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investors, their counsel or the Company, as the case
may be.
9.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties.
9.3 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed under the internal laws of the State of Delaware as
applied to agreements among Delaware residents entered into and to be performed
entirely within Delaware, without reference to principles of conflict of laws or
choice of laws.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits,
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
9.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified, by telecopier or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified in the case of the
Company, at 8320 Guilford Road, Columbia, Maryland 21046, Attention: President,
with a copy to David A. White, Esq., White & McNamara, P.C., 65 William Street,
Suite 250, Wellesley, Massachusetts 02481, or in the case of Investor, at the
record address for such Investor as reflected on the books of the Company, with
copies to Mark Manno, Esq., General Counsel, SJ Strategic Investments LLC, 340
Edgemont Avenue, Suite 500, Bristol, TN 37620, or at such other address as any
party may designate by giving ten (10) days advance written notice to the other
party. Notices shall be deemed delivered upon delivery
21
if personally delivered, one business day after transmission with confirmation
of receipt if sent by telecopier, or three days after deposit in the mails if
mailed.
9.7 No Finder's Fees. Except as may be disclosed by the Company in the
Disclosure Schedule: each party represents that it neither is nor will be
obligated for any finder's or broker's fee or commission in connection with this
transaction; each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's or broker's fee (and any asserted liability) for which such Investor or
any of its officers, partners, employees, or representatives is responsible; and
the Company agrees to indemnify and to hold harmless each Investor from any
liability for any commission or compensation in the nature of a finder's or
broker's fee (and any asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
9.8 Costs, Expenses. Each party's costs in connection with the preparation,
execution delivery and performance of this Agreement (including without
limitation legal fees) shall be borne by that party.
9.9 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and Investors holding a majority of the
Purchased Shares purchased hereunder; provided, however, that no amendment or
waiver of the Company's obligations under Section 7 of this Agreement that
materially and adversely affects the rights of a holder of Purchased Shares
shall be binding upon that holder unless that holder has consented in writing to
such amendment or waiver. Subject to the limitations set forth in the preceding
sentence, any amendment or waiver effected in accordance with this Section shall
be binding upon each holder of any Purchased Shares at the time outstanding
(even if such Investor or other holder did not vote with respect to, or voted
against, such amendment or waiver), each future holder of such securities, and
the Company. The Investors acknowledge that by virtue of this provision, holders
of a majority of the Purchased Shares may bind other holders to amendment or
waivers that such other holders may have voted to oppose.
9.10 Severability. If one or more provisions of this Agreement are held to
be invalid, illegal or unenforceable under applicable law, such provision(s)
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
9.11 Entire Agreement. This Agreement, together with any exhibits or
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
9.12 Further Assurances. From and after the date of this Agreement, upon
the request of an Investor or the Company, the Company and the Investors shall
execute and deliver
22
such instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
9.13 Termination.
(a) By the Investors: The Investors may terminate this Agreement
immediately if, at any time prior to the Closing, (i) the Company shall
cease conducting business in the normal course; become insolvent or become
unable to meet its obligations as they become due; make a general
assignment for the benefit of creditors; petition, apply for, suffer or
permit with or without its consent the appointment of a custodian,
receiver, trustee in bankruptcy or similar officer for all or any
substantial part of its business or assets; avail itself or become subject
to any proceeding under the Federal Bankruptcy Code or any similar state,
federal or foreign statute relating to bankruptcy, insolvency,
reorganization, receivership, arrangement, adjustment of debts,
dissolutions or liquidation or (ii) the Company shall have breached or
failed to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to perform
(A) would give rise to the failure of a condition set forth in Section
5.1.1 or Section 5.1.2 and (B) is incapable of being cured or has not been
cured by the Company within 10 calendar days following receipt of written
notice of such breach or failure to perform from the Investor.
(b) By the Company or the Investors: The Company or the Investors may
terminate this Agreement at any time after March 15, 2003 if the Closing
has not occurred prior to such date, or such later date as the Company and
the Investors shall have agreed to extend the offering.
(c) By the Company: The Company may terminate this Agreement with
respect to an Investor if such Investor shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (i) would give
rise to the failure of a condition set forth in Section 6.1.1 and (ii) is
incapable of being cured or has not been cured by such Investor within 10
calendar days following receipt of written notice of such breach or failure
to perform from the Company.
9.14. Public Announcements. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties. The
Investors and the Company shall consult with each other before issuing, and give
each other the opportunity to review and comment upon, any subsequent press
release primarily relating to the transactions contemplated by this Agreement,
and shall not issue any such press release prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange or national
securities quotation system.
9.15. Acknowledgement. The Company acknowledges that SJ Strategic
Investments LLC, an investor listed on the Schedule of Investors, has disclosed
to the Company that its Managing Partner, John M. Gregory is neither an officer
nor a director of, and neither Mr. Gregory nor SJ Strategic Investments LLC is
an "affiliate" of, King Pharmaceuticals, Inc. and that the investment being made
in the Company by SJ Strategic Investments LLC is not being made at the
direction of King Pharmaceuticals, Inc.
23
9.16. Standstill. Without the prior written consent of the Company, during
the period commencing on the date of this Agreement and ending twelve (12)
months following the Closing Date, neither SJ Strategic Investments LLC, nor any
of its affiliates, agents or representatives, will (i) acquire or offer, seek,
propose or agree to acquire, by purchase or otherwise, any voting securities or
assets or direct or indirect rights or options to acquire any voting securities,
or securities or instruments convertible into voting securities, or assets of
the Company (other than acquisition of securities which, together with all of SJ
Strategic Investments' other securities in the Company, do not exceed
twenty-five percent (25%) of the number of outstanding shares of Common Stock of
the Company), (ii) form, join or in any way participate, directly or indirectly,
in a "group" within the meaning of Section 13(d)(3) of the Exchange Act, as
amended, with respect to any voting securities of the Company, (iii) transfer
beneficial ownership or the right to vote any of the capital securities of the
Company owned as of the date hereof or hereafter acquired, (iv) propose or seek
a merger, consolidation or recapitalization involving the Company or propose or
seek the disposition of substantially all of the assets of the Company or any
similar transaction, (v) seek to effect a change in control of the Company or
its Board of Directors, (vi) nominate any person as a director of the Company
who is not nominated by the then incumbent directors of the Company, or propose
any matter to be voted on by the stockholders of the Company, (vii) publicly
announce or disclose any intention, plan or arrangement inconsistent with the
foregoing clauses (i) through (vi), or (viii) take any action that would require
the Company to make a public announcement regarding any of the matters
prohibited by the foregoing clauses.
[Remainder of this page intentionally left blank]
24
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.
THE COMPANY: INVESTOR:
----------- --------
Novavax, Inc., SJ Strategic Investments, LLC
a Delaware corporation -----------------------------------
Name of Investor
By: /s/ Mitchell J. Kelly By: John M. Gregory
---------------------------- -----------------------------------
Title: President and CEO Title: Managing Partner
--------------------------- -----------------------------------
[COUNTERPART SIGNATURE PAGE
COMMON STOCK PURCHASE AGREEMENT]
25