UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_________________
FORM
8-K
_________________
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): October 16,
2008
_________________
NUTRACEA
(Exact
Name of Registrant as Specified in Charter)
_________________
California
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0-32565
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87-0673375
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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5090
N. 40th Street, Suite 400
Phoenix,
AZ
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85018
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (602) 522-3000
(Former
name or Former Address, if Changed Since Last Report.)
_________________
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01 Entry Into a Material Definitive Agreement
On
October 16, 2008, NutraCea entered into a Placement Agency Agreement (the
“Placement Agency Agreement”), with Rodman & Renshaw, LLC, as placement
agent, relating to the issuance and sale by NutraCea of up to 5,000 shares of
its Series D Convertible Preferred Stock (“Preferred Stock”), warrants to
purchase up to 9,090,010 shares of its common stock, and warrants to purchase up
to 5,000 shares of its Preferred Stock.
We are
offering the Preferred Stock and warrants in units consisting of one share of
Preferred Stock together with a warrant to purchase 909.09 shares of common
stock at an exercise price of $0.55 per share of common stock (“Series A
Warrant”), a warrant to purchase one share of Preferred Stock at an exercise
price of $1,000 per share of Preferred Stock (“Series B Warrant”), and a warrant
to purchase 909.09 shares of common stock at an exercise price of $0.55 per
share of common stock (“Series C Warrant”, and, together with the Series A
Warrant and Series B Warrant, the “Warrants”) to the signatories to
the Securities Purchase Agreement (as defined below) at a price of $1,000 per
unit. The Series A Warrant may be exercised immediately and through
and including October 20, 2013. The Series B Warrant may be
exercised immediately and through and including December 19,
2008. The Series C Warrant may be exercised immediately and through
and including December 20, 2013. A copy of the form
of Placement Agency Agreement is attached as Exhibit 1.1 to this
report and is incorporated herein by reference. A copy of the form of the Series
A Warrant, the Series B Warrant and the Series C Warrant are attached as
Exhibit 4.1, Exhibit 4.2 and Exhibit 4.3, respectively, to this report and
are incorporated herein by reference. The descriptions of the Warrants are a
summary only, do not purport to be complete and are qualified in their entirety
by reference to the Exhibits.
In
connection with the offering, NutraCea entered into a Securities Purchase
Agreement, dated October 16, 2008 (the “Securities Purchase Agreement”), with
each investor signatory thereto. The form of Securities Purchase Agreement is
attached as Exhibit 10.1 to this report and is incorporated herein by
reference. NutraCea
expects
the closing of the offering to occur on October 20, 2008.
Rodman
& Renshaw, LLC acted as placement agent, on a best efforts basis, for the
offering and will receive a placement fee equal to 6% of the gross purchase
price of the units (excluding any consideration that may be paid in the future
upon exercise of the Warrants) as well as warrants to purchase 545,454 shares of
Common Stock at an exercise price of $0.6875 per share and up to an additional
545,454 shares of Common Stock upon conversion of Preferred Stock issued upon
exercise of the Series B Warrants. These placement agent warrants may be
exercised immediately through and including October 20, 2013.
NutraCea
is making the offering and sale of the units pursuant to a shelf registration
statement on Form S-3 (Registration No. 333-148929) (“Registration
Statement”) declared effective by the Securities and Exchange Commission on
April 8, 2008, and a base prospectus dated April 24, 2008, as supplemented by a
prospectus supplement dated October 16, 2008 which was filed with the Securities
and Exchange Commission on October 20, 2008 pursuant to Rule 424(b) of the
Securities Act of 1933, as amended.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
Item 1.01
and Item 3.03 are incorporated herein by reference.
Item
3.03 Material Modification to Rights of Security
Holders
On
October 17, 2008, NutraCea filed a Certificate of Determination, Preferences and
Rights of the Series D Convertible Preferred Stock of NutraCea (“Certificate of
Determination”) with the Secretary of State of the State of California
establishing the Preferred Stock in connection with the offering of the
Preferred Stock pursuant to the Registration Statement. The Preferred
Stock accrues an 8% per annum preferred dividend. All shares of
capital stock of NutraCea are junior in rank to the Preferred Stock with
respect to preferences as to dividends, distributions and payments upon the
liquidation, dissolution and winding up of NutraCea. In the event of
liquidation, dissolution or winding up of NutraCea, the holders of Preferred
Stock are entitled to receive in cash out of the assets of NutraCea before any
amount is paid to holders of the capital stock of NutraCea of any class junior
in rank to the Preferred Stock an amount per share equal to 135% of the purchase
price paid for such Preferred Stock, subject to adjustment as provided in the
Certificate of Determination. The Preferred Stock is subject to
redemption by NutraCea at any time, subject to certain limitations as set forth
in the Certificate of Determination, at a price equal to 110% of the aggregate
stated value of the Preferred Stock being redeemed plus accrued and unpaid
dividends thereon. If not earlier redeemed, commencing on February 1,
2009, the Preferred Stock shall be automatically converted into common stock or
redeemed for cash over 9 months in 9 equal monthly installments in accordance
with the terms and conditions of the Certificate of
Determination. The terms and conditions of the Preferred Stock are
described under the heading “Description of Preferred Stock” in the prospectus
supplement to the prospectus included in the Registration Statement. The
foregoing description of the rights, preferences and privileges of the Preferred
Stock is a summary, does not purport to be complete and is qualified in its
entirety by the full text of the Certificate of Determination, which is attached
hereto as Exhibit 3.1 and incorporated by reference herein.
Item
5.03. Amendments to Articles of Incorporation or Bylaws; Change in
Fiscal Year.
Item 3.03
is incorporated herein by reference.
Item
9.01 Financial Statements and Exhibits
(d) Exhibits.
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Exhibit
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No.
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Description
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Form
of Placement Agency Agreement, dated October 16, 2008, by and between
NutraCea and Rodman & Renshaw, LLC.
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Certificate
of Determination, Preferences and Rights of the Series D Convertible
Preferred Stock of NutraCea
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Form
of Series A Warrant.
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Form
of Series B Warrant.
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Form
of Series C Warrant.
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Opinion
of Weintraub Genshlea Chediak.
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Form
of Securities Purchase Agreement, dated as of October 16, 2008, by and
between NutraCea and each investor signatory thereto.
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23.1
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Consent
of Weintraub Genshlea Chediak (included in
Exhibit 5.1).
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SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
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NUTRACEA
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Date:
October 17, 2008
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By:
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/s/
Brad Edson
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Brad
Edson
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Chief
Executive Officer
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(Duly
Authorized Officer)
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Exhibit
1.1
October 16, 2008
CONFIDENTIAL
Bradley
D. Edson
President
& Chief Executive Officer
NutraCea
5090
North 40
th
Street,
Suite 400
Phoenix,
AZ 85018
Dear
Brad:
This
letter (the “
Agreement
”)
constitutes the agreement between Rodman & Renshaw, LLC (“
Rodman
” or the “
Placement Agent
”) and
Nutracea (the “
Company
”), that
Rodman shall serve as the exclusive placement agent for the Company, on a
“reasonable best efforts” basis, in connection with the proposed placement (the
“
Placement
”) of
registered securities (the “
Securities
”) of the
Company, consisting of shares (“
Shares
”) of the
Company’s Series D Convertible Preferred Stock (“
Preferred Stock
”),
Series A Warrants to purchase shares of the Company’s common stock,
par value $0.001 per share (the “
Common Stock
”),
Series B Warrants to purchase Preferred Stock (“
Series B Warrants
”)
and Series C Warrants to purchase Common Stock. The terms of such
Placement and the Securities shall be mutually agreed upon by the Company and
the purchasers in the Placement (each, a “
Purchaser
” and
collectively, the “
Purchasers
”) and
nothing herein constitutes that Rodman would have the power or authority to bind
the Company or any Purchaser or an obligation for the Company to issue any
Securities or complete the Placement. The date of the closing of the
Placement shall be referred to herein as the “
Closing Date
.” This
Agreement and the documents executed and delivered by the Company and the
Purchasers in connection with the Placement shall be collectively referred to
herein as the “
Transaction
Documents
.” The
date of the closing of the Placement shall be referred to herein as the “
Closing
Date
.” The Company expressly acknowledges and agrees that
Rodman’s obligations hereunder are on a reasonable best efforts basis only and
that the execution of this Agreement does not constitute a commitment by Rodman
to purchase the Securities and does not ensure the successful placement of the
Securities or any portion thereof or the success of Rodman with respect to
securing any other financing on behalf of the Company.
SECTION 1
.
COMPENSATION AND OTHER
FEES.
As
compensation for the services provided by Rodman hereunder, the Company agrees
to pay to Rodman:
(A)
The fees set forth below with respect to the Placement:
1. A
cash fee payable immediately upon the closing of the Placement and equal to 6%
of theaggregate cash gross proceeds raised in the Placement on the Closing Date,
plus a cash fee payable within five days after each exercise of any Class B
Warrants equal to 6% of the aggregate cash gross proceeds paid by the holder in
making such exercise of a Class B Warrant.
12
51 Avenue of the Americas , 20
th
Floor,
New York , NY 10020 Tel: 212 356 0500 Fax: 212 581 5690
www.rodm.com
Member: FINRA , SIPC
2.
Warrants to purchase that number of shares of Common Stock equal to 6% of number
of shares of Common Stock underlying the Preferred Stock that are issuable upon
conversion of the Preferred Stock (including Preferred Stock issued after
exercise of the Series B Warrants) on the date the Preferred Stock is issued
(or, with respect to Preferred Stock that is issued upon exercise of the Series
B Warrants, within five days after the time all the Series B Warrants may no
longer be exercised). Such warrants shall be in the form attached
hereto as Addendum B and will have a per share exercise price equal to 125% of
the lowest offering price (which shall be the exercise price of the Series A
Warrants issued to the Purchasers) shall not have antidilution protections and
shall not be transferable for six months from the date of the Placement except
as permitted by NASD Rule 2710. Further, the number of Shares
underlying the warrants shall be reduced if necessary to comply with Financial
Industry Regulatory Authority (“FINRA”) rules or regulations.
(B)
The Company also agrees to reimburse Rodman’s expenses (with supporting
invoices/receipts) in an amount equal to 0.8% of gross offering proceeds, up to
a maximum of $20,000. Such reimbursement shall be payable immediately upon (but
only in the event of) the closing of the Placement.
SECTION 2
.
REGISTRATION
STATEMENT.
The
Company represents and warrants to, and agrees with, the Placement Agent
that:
(A)
The Company has filed with the Securities and Exchange Commission (the
“Commission”) a registration statement on Form S-3 (Registration File No.
333-148929
) under the Securities
Act of 1933, as amended (the “Securities Act”), which became effective on April
8, 2008. At the time of such filing, the Company met the requirements
of Form S-3 under the Securities Act. Such registration statement
meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act
and complies with said Rule. The Company will file with the Commission pursuant
to Rule 424(b) under the Securities Act, and the rules and regulations (the
“Rules and Regulations”) of the Commission promulgated thereunder, a supplement
to the form of prospectus included in such registration statement relating to
the placement of the Shares and the plan of distribution thereof and has advised
the Placement Agent of all further information (financial and other) with
respect to the Company required to be set forth therein. Such registration
statement, including the exhibits thereto, as amended at the date of this
Agreement, is hereinafter called the “Registration Statement”; such prospectus
in the form in which it appears in the Registration Statement is hereinafter
called the “Base Prospectus”; and the supplemented form of prospectus, in the
form in which it will be filed with the Commission pursuant to Rule 424(b)
(including the Base Prospectus as so supplemented) is hereinafter called the
“Prospectus Supplement.” Any reference in this Agreement to the Registration
Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to
refer to and include the documents incorporated by reference therein (the
“Incorporated Documents”) pursuant to Item 12 of Form S-3 which were filed under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or
before the date of this Agreement, or the issue date of the Base Prospectus or
the Prospectus Supplement, as the case may be; and any reference in this
Agreement to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Base Prospectus or the Prospectus Supplement shall
be deemed to refer to and include the filing of any document under the Exchange
Act after the date of this Agreement, or the issue date of the Base Prospectus
or the Prospectus Supplement, as the case may be, deemed to be incorporated
therein by reference. All references in this Agreement to financial statements
and schedules and other information which is “contained,” “included,”
“described,” “referenced,” “set forth” or “stated” in the Registration
Statement, the Base Prospectus or the Prospectus Supplement (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement, the Base
Prospectus or the Prospectus Supplement, as the case may be. No stop
order suspending the effectiveness of the Registration Statement or the use of
the Base Prospectus or the Prospectus Supplement has been issued, and no
proceeding for any such purpose is pending or has been initiated or, to the
Company's knowledge, is threatened by the Commission. For purposes of this
Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under
the Securities Act and the “Time of Sale Prospectus” means the preliminary
prospectus, if any, together with the free writing prospectuses, if any, used in
connection with the Placement, including any documents incorporated by reference
therein.
(B)
The Registration Statement (and any further documents to be filed with the
Commission) contains all exhibits and schedules as required by the Securities
Act. Each of the Registration Statement and any post-effective amendment
thereto, at the time it became effective, complied in all material respects with
the Securities Act and the Exchange Act and the applicable Rules and Regulations
and did not and, as amended or supplemented, if applicable, will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Base Prospectus, the Time of Sale Prospectus, if any, and the
Prospectus Supplement, each as of its respective date, comply in all material
respects with the Securities Act and the Exchange Act and the applicable Rules
and Regulations. Each of the Base Prospectus, the Time of Sale Prospectus, if
any, and the Prospectus Supplement, as amended or supplemented, did not and will
not contain as of the date thereof any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Incorporated Documents, when they were filed with the Commission, conformed in
all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, and none of such documents, when they were filed with the
Commission, contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein (with respect to
Incorporated Documents incorporated by reference in the Base Prospectus or
Prospectus Supplement), in light of the circumstances under which they were made
not misleading; and any further documents so filed and incorporated by reference
in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus
Supplement, when such documents are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, as applicable, and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No post-effective amendment to the Registration Statement
reflecting any facts or events arising after the date thereof which represent,
individually or in the aggregate, a fundamental change in the information set
forth therein is required to be filed with the Commission. There are
no documents required to be filed with the Commission in connection with the
transaction contemplated hereby that (a) have not been filed as required
pursuant to the Securities Act or (b) will not be filed within the requisite
time period. There are no contracts or other documents required to be described
in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus
Supplement, or to be filed as exhibits or schedules to the Registration
Statement, which have not been described or filed as required.
(C)
The Company has delivered, or will as promptly as practicable deliver, to the
Placement Agent complete conformed copies of the Registration Statement and of
each consent and certificate of experts, as applicable, filed as a part thereof,
and conformed copies of the Registration Statement (without exhibits), the Base
Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement,
as amended or supplemented, in such quantities and at such places as the
Placement Agent reasonably requests. Neither the Company nor any of
its directors and officers has distributed and none of them will distribute,
prior to the Closing Date, any offering material in connection with the offering
and sale of the Shares other than the Base Prospectus, the Time of Sale
Prospectus, if any, the Prospectus Supplement, the Registration Statement,
copies of the documents incorporated by reference therein and any other
materials permitted by the Securities Act.
SECTION
3
.
REPRESENTATIONS AND
WARRANTIES.
Except as set forth under the corresponding section of the
Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof,
the Company hereby makes the representations and warranties set forth below to
the Placement Agent.
(A)
Organization and
Qualification
. All of the direct and indirect subsidiaries
(individually, a “
Subsidiary
”) of the
Company are set forth on Schedule 3(A). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any “
Liens
” (which for
purposes of this Agreement shall mean a lien, charge, security interest,
encumbrance, right of first refusal, preemptive right or other restriction), and
all the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. The Company
and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “
Material Adverse
Effect
”) and no “
Proceeding
” (which
for purposes of this Agreement shall mean any action, claim, suit, investigation
or proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened) has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or
qualification.
(B)
Authorization;
Enforcement
. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its board of directors or its stockholders in connection therewith
other than in connection with the “
Required Approvals
”
(as defined in subsection 3(D) below). Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
(C)
No
Conflicts
. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
hereby and thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
(D)
Filings, Consents and
Approvals
. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other “
Person
” (defined as
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind,
including, without limitation, any Trading Market) in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than such filings as are required to be made under applicable Federal and
state securities laws (collectively, the “
Required Approvals
”),
which will have been made prior to closing, including, without limitation, Blue
Sky approvals from New York, California and Illinois.
(E)
Issuance of the
Securities; Registration
. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable pursuant to the Transaction Documents. The
issuance by the Company of the Securities has been registered under the
Securities Act and all of the Securities are freely transferable and tradable by
the Purchasers without restriction (other than any restrictions arising solely
from an act or omission of a Purchaser). The Securities are being
issued pursuant to the Registration Statement and the issuance of the Securities
has been registered by the Company under the Securities Act. The
Registration Statement is effective and available for the issuance of the
Securities thereunder and the Company has not received any notice that the
Commission has issued or intends to issue a stop-order with respect to the
Registration Statement or that the Commission otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so. The
"Plan of Distribution" section under the Registration Statement permits the
issuance and sale of the Securities hereunder. Upon receipt of the
Securities, the Purchasers will have good and marketable title to such
Securities and the Securities will be freely tradable on the “
Trading Market
”
(which, for purposes of this Agreement shall mean means the following markets or
exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the Nasdaq Capital Market, the American Stock Exchange, the New
York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board).
(F)
Capitalization
. The
capitalization of the Company is as set forth on Schedule 3(F). The
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase plan
and pursuant to the conversion or exercise of securities exercisable,
exchangeable or convertible into Common Stock (“
Common Stock
Equivalents
”). No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as
a result of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents. The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company’s stockholders.
(G)
SEC Reports; Financial
Statements
. The Company has complied in all material respects
with requirements to file all reports, schedules, forms, statements and other
documents required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively
referred to herein as the “
SEC Reports
”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“
GAAP
”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(H)
Material Changes;
Undisclosed Events, Liabilities or Developments
. Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or “
Affiliate
” (defined
as any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities Act), except
pursuant to existing Company stock option plans. The Company does not
have pending before the Commission any request for confidential treatment of
information. Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 3(H), no event, liability or
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made that has not
been publicly disclosed 1 Trading Day prior to the date that this representation
is made.
(I)
Litigation
. There
is no action, suit, inquiry, notice of violation, Proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “
Action
”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act. None of the Company’s or its Subsidiaries’ employees
is a member of a union that relates to such employee’s relationship with the
Company, and neither the Company or any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive
officer, to the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(J)
Labor
Relations
. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.
(K)
Compliance
. Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have a Material Adverse Effect.
(L)
Regulatory
Permits
. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not have or reasonably be expected to result in a
Material Adverse Effect (“
Material Permits
”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(M)
Title to
Assets
. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.
(N)
Patents and
Trademarks
. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other similar intellectual property rights necessary or material
for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the “
Intellectual Property
Rights
”). Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that the Intellectual Property Rights used by
the Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights of others. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(O)
Insurance
. The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate subscription amount under the
Transaction Documents. To the best knowledge of the Company, such
insurance contracts and policies are accurate and complete. Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.
(P)
Transactions With
Affiliates and Employees
. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, other than
(i) for payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and (iii) for other
employee benefits, including stock option agreements under any stock option plan
of the Company.
(Q)
Sarbanes-Oxley
. The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 which are applicable to it as of the date hereof and of the closing date
of the Placement.
(R)
Certain
Fees
. Except as otherwise provided in this Agreement, no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.
(S)
Trading Market
Rules
. The issuance and sale of the Securities hereunder does
not contravene the rules and regulations of the Trading Market.
(T)
Investment
Company
. The Company is not, and is not an Affiliate of, and immediately
after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of
1940, as amended. The Company shall conduct its business in a manner
so that it will not become subject to the Investment Company Act.
(U)
Registration
Rights
. No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company.
(V)
Listing and
Maintenance Requirements
. The Company’s Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. The Company has not,
in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(W)
Application of
Takeover Protections
. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities.
(X)
Solvency
. Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder, (i) the Company’s fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its
debt). The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year
from the Closing Date. The SEC Reports set forth as of the dates
thereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, “
Indebtedness
” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(Y)
Tax
Status
. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any
Subsidiary.
(Z)
Foreign Corrupt
Practices
. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
(AA)
Accountants
. The
Company’s accountants are set forth on Schedule 3(AA) of the Disclosure
Schedule. To the knowledge of the Company, such accountants, who the
Company expects will express their opinion with respect to the financial
statements to be included in the Company’s next Annual Report on Form 10-K, are
a registered public accounting firm as required by the Securities
Act.
(BB)
Regulation M
Compliance
. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities (other than for the placement
agent’s placement of the Securities), or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(CC)
Approvals
. The
issuance and listing on the OTCBB of the Shares requires no further approvals,
including but not limited to, the approval of shareholders.
(DD)
FINRA
Affiliations
. There are no affiliations with any FINRA member
firm among the Company’s officers, directors or, to the knowledge of the
Company, any five percent (5%) or greater stockholder of the Company, except as
set forth in the Base Prospectus.
SECTION
4
.
INDEMNIFICATION.
The
Company agrees to the indemnification and other agreements set forth in the
Indemnification Provisions (the “
Indemnification
”)
attached hereto as Addendum A, the provisions of which are incorporated herein
by reference and shall survive the termination or expiration of this
Agreement.
SECTION 5
.
ENGAGEMENT
TERM
. Rodman’s engagement hereunder will be for the period of
180 days. The engagement may be terminated by either the Company or Rodman at
any time upon 10 days’ written notice. Notwithstanding anything to the contrary
contained herein, the provisions concerning confidentiality, indemnification,
contribution and the Company’s obligations to pay fees and reimburse expenses
contained herein and the Company’s obligations contained in the Indemnification
Provisions will survive any expiration or termination of this
Agreement. Rodman agrees not to use any confidential information
concerning the Company provided to them by the Company for any purposes other
than those contemplated under this Agreement.
SECTION 6
.
RODMAN
INFORMATION
. The Company agrees that any information or advice
rendered by Rodman in connection with this engagement is for the confidential
use of the Company only in their evaluation of the Placement and, except as
otherwise required by law, the Company will not disclose or otherwise refer to
the advice or information in any manner without Rodman’s prior written
consent.
SECTION 7
.
NO FIDUCIARY
RELATIONSHIP
. This Agreement does not create, and shall not be
construed as creating rights enforceable by any person or entity not a party
hereto, except those entitled hereto by virtue of the Indemnification Provisions
hereof. The Company acknowledges and agrees that Rodman is not and
shall not be construed as a fiduciary of the Company and shall have no duties or
liabilities to the equity holders or the creditors of the Company or any other
person by virtue of this Agreement or the retention of Rodman hereunder, all of
which are hereby expressly waived.
SECTION 8
.
CLOSING.
The
obligations of the Placement Agent and the Purchasers, and the closing of the
sale of the Securities hereunder are subject to the accuracy, when made and on
the Closing Date, of the representations and warranties on the part of the
Company and its Subsidiaries contained herein, to the accuracy of the statements
of the Company and its Subsidiaries made in any certificates pursuant to the
provisions hereof, to the performance by the Company and its Subsidiaries of
their obligations hereunder, and to each of the following additional terms and
conditions:
(A)
No stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the Commission, and any request for additional information on
the part of the Commission (to be included in the Registration Statement, the
Base Prospectus or the Prospectus Supplement or otherwise) shall have been
complied with to the reasonable satisfaction of the Placement
Agent. Any filings required to be made by the Company in shall have
been timely filed with the Commission.
(B)
The Placement Agent shall not have discovered and disclosed to the Company on or
prior to the Closing Date that the Registration Statement, the Base Prospectus
or the Prospectus Supplement or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the Placement
Agent, is material or omits to state any fact which, in the opinion of such
counsel, is material and is required to be stated therein or is necessary to
make the statements therein not misleading.
(C)
All corporate proceedings and other legal matters incident to the authorization,
form, execution, delivery and validity of each of this Agreement, the
Securities, the Registration Statement, the Base Prospectus and the Prospectus
Supplement and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Placement Agent, and the Company shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(D)
The Placement Agent shall have received from outside counsel to the Company such
counsel’s written opinion, addressed to the Placement Agent and the Purchasers
dated as of the Closing Date, in form and substance reasonably satisfactory to
the Placement Agent.
(E)
Neither the Company nor any of its Subsidiaries shall have sustained since the
date of the latest audited financial statements included or incorporated by
reference in the Base Prospectus, any loss or interference with its business
from fire, explosion, flood, terrorist act or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in or contemplated by the Base
Prospectus and (ii) since such date there shall not have been any change in the
capital stock or long-term debt of the Company or any of its Subsidiaries or any
change, or any development involving a prospective change, in or affecting the
business, general affairs, management, financial position, stockholders’ equity,
results of operations or prospects of the Company and its Subsidiaries,
otherwise than as set forth in or contemplated by the Base Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is, in the
judgment of the Placement Agent, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by the Base Prospectus,
the Time of Sale Prospectus, if any, and the Prospectus Supplement.
(F)
The Common Stock is registered under the Exchange Act and, as of the Closing
Date, the Shares shall be listed and admitted and authorized for trading on the
(OTCBB), and satisfactory evidence of such actions shall have been provided to
the Placement Agent. The Company shall have taken no action designed
to, or likely to have the effect of terminating the registration of the Common
Stock under the Exchange Act or delisting or suspending from trading the Common
Stock from the OTCBB), nor has the Company received any information suggesting
that the Commission or the (OTCBB) is contemplating terminating such
registration or listing.
(G)
Subsequent to the execution and delivery of this Agreement, there shall not have
occurred any of the following: (i) trading in securities generally on the New
York Stock Exchange, the Nasdaq National Market or the American Stock Exchange
or in the OTCBB, or trading in any securities of the Company on any exchange or
on the OTCBB, shall have been suspended or minimum or maximum prices or maximum
ranges for prices shall have been established on any such exchange or such
market by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities in which it is not currently engaged, the subject of an act of
terrorism, there shall have been an escalation in hostilities involving the
United States, or there shall have been a declaration of a national emergency or
war by the United States, or (iv) there shall have occurred any other calamity
or crisis or any change in general economic, political or financial conditions
in the United States or elsewhere, if the effect of any such event in clause
(iii) or (iv) makes it, in the sole judgment of the Placement Agent,
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by the Base Prospectus
and the Prospectus Supplement.
(H)
No action shall have been taken and no statute, rule, regulation or order shall
have been enacted, adopted or issued by any governmental agency or body which
would, as of the Closing Date, prevent the issuance or sale of the Securities or
materially and adversely affect or potentially and adversely affect the business
or operations of the Company; and no injunction, restraining order or order of
any other nature by any federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance or sale
of the Securities or materially and adversely affect or potentially and
adversely affect the business or operations of the Company.
(I)
The Company shall have prepared and filed with the Commission a Current Report
on Form 8-K with respect to the Placement, including as an exhibit thereto this
Agreement.
(J)
The Company shall have entered into subscription agreements with each of the
Purchasers and such agreements shall be in full force and effect and shall
contain representations and warranties of the Company as agreed between the
Company and the Purchasers.
(K)
FINRA shall have raised no objection to the fairness and reasonableness of the
terms and arrangements of this Agreement. In addition, the Company
shall, if requested by the Placement Agent, make or authorize Placement Agent’s
counsel to make on the Company’s behalf, an Issuer Filing with the FINRA
Corporate Financing Department pursuant to FINRA Rule 2710 with respect to the
Registration Statement and pay all filing fees required in connection
therewith.
(L)
Prior to the Closing Date, the Company shall have furnished to the Placement
Agent such further information, certificates and documents as the Placement
Agent may reasonably request.
All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.
SECTION
9
.
GOVERNING
LAW.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be performed entirely in such State. This Agreement may not be
assigned by either party without the prior written consent of the other
party. This Agreement shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and permitted assigns.
Any right to trial by jury with respect to any dispute arising under this
Agreement or any transaction or conduct in connection herewith is
waived. Any dispute arising under this Agreement may be brought into
the courts of the State of New York or into the Federal Court located in New
York, New York and, by execution and delivery of this Agreement, the Company
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of aforesaid courts. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by delivering a copy
thereof via overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
SECTION
10
.
ENTIRE
AGREEMENT/MISC.
This Agreement (including the attached
Indemnification Provisions) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. If any
provision of this Agreement is determined to be invalid or unenforceable in any
respect, such determination will not affect such provision in any other respect
or any other provision of this Agreement, which will remain in full force and
effect. This Agreement may not be amended or otherwise modified or
waived except by an instrument in writing signed by both Rodman and the
Company. The representations, warranties, agreements and covenants
contained herein shall survive the closing of the Placement and delivery and/or
exercise of the Securities, as applicable. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or a .pdf format file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
SECTION 11
.
NOTICES.
Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified on
the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a
business day, (b) the next business day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number on
the signature pages attached hereto on a day that is not a business day or later
than 6:30 p.m. (New York City time) on any business day, (c) the business day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications
shall be as set forth on the signature pages hereto.
Please
confirm that the foregoing correctly sets forth our agreement by signing and
returning to Rodman the enclosed copy of this Agreement.
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Very
truly yours,
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RODMAN
& RENSHAW, LLC
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By:
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Name:
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Title:
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Address for notice:
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1251
Avenue of the Americas, 20th Floor
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New
York, NY, 10020
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Fax
(646)
841-1640
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Accepted
and Agreed to as of
the date
first written above:
Nutracea.
By:
______________________________
Name:
Title:
Address for
notice:
5090
North 40
th
St.,
Suite 400
Phoenix,
AZ 85018
Attention:
Chief Executive Officer
Attention: General
Counsel
ADDENDUM
A
INDEMNIFICATION
PROVISIONS
In connection with the engagement of
Rodman & Renshaw, LLC (“
Rodman
”) by
Nutracea (the
“Company
”) pursuant
to a letter agreement dated September 25, 2008 between the Company and Rodman,
as it may be amended from time to time in writing (the “
Agreement
”), the
Company hereby agrees as follows:
1.
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To
the extent permitted by law, the Company will indemnify Rodman and its
affiliates, stockholders, directors, officers, employees and controlling
persons (within the meaning of Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities Exchange Act of 1934) against
all losses, claims, damages, expenses and liabilities, as the same are
incurred (including the reasonable fees and expenses of counsel), relating
to or arising out of its activities hereunder or pursuant to the
Agreement, except to the extent that any losses, claims, damages, expenses
or liabilities (or actions in respect thereof) are found in a final
judgment (not subject to appeal) by a court of law to have resulted
primarily and directly from Rodman’s willful misconduct or gross
negligence in performing the services described
herein.
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2.
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Promptly
after receipt by Rodman of notice of any claim or the commencement of any
action or proceeding with respect to which Rodman is entitled to indemnity
hereunder, Rodman will notify the Company in writing of such claim or of
the commencement of such action or proceeding, and the Company will assume
the defense of such action or proceeding and will employ counsel
reasonably satisfactory to Rodman and will pay the fees and expenses of
such counsel. Notwithstanding the preceding sentence, Rodman
will be entitled to employ counsel separate from counsel for the Company
and from any other party in such action if counsel for
Rodman reasonably determines that it would be inappropriate
under the applicable rules of professional responsibility for the same
counsel to represent both the Company and Rodman. In such
event, the reasonable fees and disbursements of no more than one such
separate counsel will be paid by the Company. The Company will
have the exclusive right to settle the claim or proceeding provided that
the Company will not settle any such claim, action or proceeding without
the prior written consent of Rodman, which will not be unreasonably
withheld.
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3.
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The
Company agrees to notify Rodman promptly of the assertion against it or
any other person of any claim or the commencement of any action or
proceeding relating to a transaction contemplated by the
Agreement.
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If for
any reason the foregoing indemnity is unavailable to Rodman or insufficient to
hold Rodman harmless, then the Company shall contribute to the amount paid or
payable by Rodman as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and Rodman on the other, but also the
relative fault of the Company on the one hand and Rodman on the other that
resulted in such losses, claims, damages or liabilities, as well as any relevant
equitable considerations. The amounts paid or payable by a party in
respect of losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees and expenses incurred in defending any
litigation, proceeding or other action or claim. Notwithstanding the
provisions hereof, Rodman’s share of the liability hereunder shall not be in
excess of the amount of fees actually received, or to be received, by Rodman
under the Agreement (excluding any amounts received as reimbursement of expenses
incurred by Rodman).
5. These Indemnification Provisions
shall remain in full force and effect whether or not the transaction
contemplated by the Agreement is completed and shall survive the termination of
the Agreement, and shall be in addition to any liability that the Company might
otherwise have to any indemnified party under the Agreement or
otherwise.
RODMAN & RENSHAW, LLC
By:
______________________
Name:
Title:
Accepted
and Agreed to as of
the date
first written above:
NUTRACEA
By:
______________________
Name:
Title:
Exhibit
3.1
CERTIFICATE
OF DETERMINATION, PREFERENCES AND RIGHTS OF THE
SERIES
D CONVERTIBLE PREFERRED STOCK OF
NUTRACEA
I,
Bradley Edson, hereby certify that I am the President and Secretary of NutraCea
(the “
Company
”), a
corporation organized and existing under the Corporations Code of the State of
California (the “
Corporations
Code
”), and further do hereby certify:
That
pursuant to the authority conferred upon the Board of Directors of the Company
(the “
Board
”) by the
Company’s Articles of Incorporation, as amended (the “
Articles of Incorporation
”),
the Board on October 14, 2008 adopted the following resolutions creating a
series of 10,000 shares of Preferred Stock designated as Series D Convertible
Preferred Stock, none of which shares have been issued:
RESOLVED,
that the Board of Directors of the Company designates the Series D Convertible
Preferred Stock and the number of shares constituting such series, and fixes the
rights, preferences, privileges and restrictions relating to such series in
addition to any set forth in the Articles of Incorporation as
follows:
TERMS
OF SERIES D CONVERTIBLE PREFERRED STOCK
1.
Designation and Number of
Shares
. There shall hereby be created and established a series of
preferred stock of the Company designated as “Series D Convertible Preferred
Stock” (the “
Series D Preferred
Stock
”). The authorized number of shares of Series D Preferred stock
shall be 10,000 shares.
2.
Dividends
. Each
holder of a share of Series D Preferred Stock (each, a “
Holder
” and collectively, the
“
Holders
”) shall be
entitled to receive dividends (“
Dividends
”) payable on the
Stated Value (as defined below) of each share of Series D Preferred Stock held
by such Holder at the Dividend Rate (as defined below) in the manner provided
below in this Section 2. Dividends on each share of Series D Preferred Stock
shall accrue daily at the Dividend Rate, commence accruing on the Initial
Issuance Date (as defined below) (including for shares of Series D Preferred
Stock issued on or after the Initial Issuance Date pursuant to the Series B
Warrants (as defined below)), be computed on the basis of a 360-day year
consisting of twelve 30-day months and be payable (in the manner provided below
in this Section 2) in arrears for each Calendar Quarter (as defined below) on
the first day following the end of each Calendar Quarter during the period
beginning on the Initial Issuance Date and ending on, and including, the Final
Redemption Date (each, a “
Dividend
Date
”), with the first
Dividend Date being January 1, 2009. If a Dividend Date is not a Business Day
(as defined below), then the applicable Dividends shall be due and payable on
the first (1
st
)
Business Day immediately following such Dividend Date. Dividends shall be
payable in shares of Common Stock (as defined below) (“
Dividend Shares
”) or, at the
option of the Company, in cash; provided, however, that unless the Equity
Conditions (as defined below) are and remain satisfied (or are waived by
the applicable Holder) during the entire period commencing ten (10) Trading Days
prior to the applicable Dividend Date through the later of such Dividend Date or
the date on which the applicable Dividends are paid, the applicable Dividends
shall be payable only in cash; and provided further that, except to the extent
Dividends are required to be paid in cash pursuant to the foregoing proviso,
Dividends shall be paid in cash only if the Company has elected to pay in cash
in the applicable Dividend Notice (as defined below). The Company shall provide
a written notice (the “
Dividend
Notice
”) to each Holder of shares of Series D Preferred Stock at least
ten (10) Trading Days prior to each applicable Dividend Date (the “
Dividend Notice Date
”)
indicating either that the entire Dividends are to be paid in cash or confirming
that the entire Dividends shall be paid in Dividend Shares (any election by the
Company to pay in cash shall apply to all Holders of the then outstanding shares
of Series D Preferred Stock); provided, that if the applicable Dividend Notice
indicates payment in Dividend Shares, such Dividend Notice shall contain a
certification that the Equity Conditions are satisfied as of the applicable
Dividend Notice Date (unless waived by the applicable Holder). If the Equity
Conditions were satisfied as of the applicable Dividend Notice Date but the
Equity Conditions are no longer satisfied at any time prior to or on the
Dividend Date, the Company shall provide each Holder a subsequent notice to that
effect indicating that unless such Holder waives the Equity Conditions, the
applicable Dividends shall be paid in cash to such Holder, and if such waiver is
not received from such Holder by the applicable Dividend Date then the
applicable Dividends shall be paid in cash to such Holder. The Company shall be
required to provide a Dividend Notice electing to pay Dividends in cash if any
of the Equity Conditions are not satisfied as of the applicable Dividend Notice
Date, and the applicable Dividends shall be paid in cash to a Holder if a waiver
of the Equity Conditions is not received from such Holder by the applicable
Dividend Date. The amount payable on a Dividend Date in respect of Dividends on
each share of Series D Preferred Stock shall equal the Additional Amount (as
defined below) thereon. Dividends paid in Dividend Shares shall be paid in a
number of freely tradable, fully paid and non-assessable shares of Common Stock
equal to the quotient of (i) the Additional Amount divided by (ii) the Stock
Dividend Rate (as defined below), provided that no fractional shares of Common
Stock shall be issued pursuant to the foregoing quotient and the portion of such
Additional Amount that would result in the issuance of fractional shares of
Common Stock shall instead be payable by the Company in cash on the applicable
Dividend Date. If any Dividend Shares are to be issued on a Dividend Date, then
the Company shall (X) provided the Company’s designated transfer agent (the
“
Transfer Agent
”) is
participating in The Depository Trust Company (“
DTC
”) Fast Automated
Securities Transfer Program, upon the request of a Holder made before the
applicable Dividend Date, credit such aggregate number of shares of Common Stock
to which such Holder shall be entitled to such Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent Commission system,
within three (3) Trading Days of the applicable Dividend Date, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to such Holder, a certificate, registered in
the name of such Holder or its designee, for the number of shares of Common
Stock to which such Holder shall be entitled within two (2) Trading Days of the
applicable Dividend Date. Notwithstanding anything contained in this Certificate
of Determination to the contrary, no certificate representing Dividend Shares or
shares of Common Stock issued upon conversion of a share of Series D Preferred
Stock shall bear any restrictive or other legend (other than the legend
expressly required by Section 3(d)(vii)).
3.
Conversion
. Each
share of Series D Preferred Stock shall be convertible into shares of Common
Stock (as defined below) on the terms and conditions set forth in this Section
3.
(a)
Certain Defined
Terms
. For purposes of this Certificate of Determination, the following
terms shall have the following meanings:
(i) “
1934 Act
”
means
the Securities Exchange
Act of 1934, as amended.
(ii) “
Additional Amount
” means, as
of a particular date of determination, with respect to each share of Series D
Preferred Stock, the product of (x) the result of the following formula: (1) the
Dividend Rate multiplied by (2) the quotient of N divided by 360; multiplied by
(y) the Stated Value.
(iii) “
Aggregate
Redemption Amount
” means (i)
with respect to each Redemption Date (other than the Final Redemption Date), the
greater of (A) $556,000 or (B) the sum of (I) $556,000 plus (II) the quotient of
(X) the aggregate Stated Value of all shares of Series D Preferred Stock issued
on or after the Initial Issuance Date pursuant to the Series B Warrants divided
by (Y) nine (9) (with such quotient being rounded up to the nearest thousand)
and (ii) with respect to the Redemption Date that is the Final Redemption Date,
the aggregate Stated Value of all shares of Series D Preferred Stock issued and
outstanding as of the Final Redemption Date.
(iv) “
Automatic Conversion Price
”
means, as of a particular date of determination, the lower of (i) the then
applicable Conversion Price and (ii) the price which shall be computed as 90% of
the arithmetic average of the VWAP of the Common Stock on each of the ten (10)
consecutive Trading Days immediately preceding the applicable Redemption Date
(each such period, an “
Automatic Conversion Measuring
Period
”). All such determinations to be appropriately adjusted for any
stock split, stock dividend, stock combination or other similar transaction
during such Automatic Conversion Measuring Period.
(v) “
Bloomberg
” means Bloomberg
Financial Markets.
(vi) “
Business Day
” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
(vii) “
Calendar Quarter
” means each
of the following periods: (1) the period beginning on and including
January 1 and ending on and including March 31; (2) the period beginning on and
including April 1 and ending on and including June 30; (3) the period beginning
on and including July 1 and ending on and including September 30; and (4) the
period beginning on and including October 1 and ending on and including December
31.
(viii) “
Closing Bid Price
” and “
Closing Sale Price
” means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Required
Holders. If the Company and the Required Holders are unable to agree upon the
fair market value of such security, then such dispute shall be resolved in
accordance with the procedures in Section 3(d)(iii). The resolution of such
dispute shall be binding on all Holders. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period.
(ix) “
Common Stock
” means
(i) the Company’s shares of common stock, no par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common
stock.
(x)
“
Conversion Amount
”
means, with respect to each share of Series D Preferred Stock, as of a
particular date of determination, the sum of (1) the Stated Value thereof plus
(2) the Additional Amount thereon.
(xi) “
Conversion Price
” means, with
respect to each share of Series D Preferred Stock, as of any Conversion Date or
other particular date of determination, $0.55, subject to adjustment as provided
herein.
(xii)
“Conversion Share Ratio
”
means, as to any applicable Redemption Date, the quotient of (i) the number of
Pre-Redemption Conversion Shares delivered in connection with such Redemption
Date divided by (ii) the number of Post-Redemption Conversion Shares applicable
to such Redemption Date.
(xiii) “
Convertible Securities
” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
(xiv) “
Dividend Rate
” means (i) eight
percent (8%) per annum and (ii) for the period from and after the occurrence of
a Triggering Event through such time that such Triggering Event is cured,
sixteen percent (16%) per annum.
(xv) “
Dollar Failure
” means, with
respect to a particular date of determination, that the aggregate dollar trading
volume (as reported on Bloomberg) of the Common Stock on the Eligible Market on
which the Common Stock is listed as of such date of determination over the ten
(10) consecutive Trading Day period ending on the Trading Day immediately
preceding such date of determination is less than $250,000.
(xvi) “
Eligible Market
” means The New
York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market, the American Stock Exchange or the Principal
Market.
(xvii) “
Equity Conditions
” means: (i)
on each day during the period beginning one month prior to the applicable date
of determination and ending on and including the applicable date of
determination, the Registration Statement shall be effective and the prospectus
contained therein shall be available for use for the sale all of the Securities
unless all the Securities are otherwise freely tradable without restriction by
the Holders; (ii) on each day during the period beginning one month prior to the
applicable date of determination and ending on and including the applicable date
of determination (the “
Equity
Conditions Measuring Period
”), the shares of Common Stock are listed or
designated for quotation on an Eligible Market and shall not have been suspended
from trading on an Eligible Market (other than suspensions of not more than two
(2) days and occurring prior to the applicable date of determination due to
business announcements by the Company) nor shall delisting or suspension by an
Eligible Market have been threatened (with a reasonable prospect of delisting
occurring) or pending either (A) in writing by such Eligible Market or (B) by
falling below the minimum listing maintenance requirements of the Eligible
Market on which the shares of Common Stock are then listed; (iii) on each day
during the Equity Conditions Measuring Period, the Company shall have delivered
all shares of Common Stock issuable upon conversion of the shares of Series D
Preferred Stock on a timely basis as set forth in Section 3(d)(v) hereof and all
other shares of capital stock required to be delivered by the Company on a
timely basis as set forth in the other Transaction Documents (including, without
limitation, under the Warrants); (iv) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating Section 7 hereof; (v) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating the rules or regulations of the Eligible Market on which the shares of
Common Stock are then listed; (vi) on each day during the Equity Conditions
Measuring Period, no public announcement of a pending, proposed or intended
Fundamental Transaction shall have occurred which has not been abandoned,
terminated or consummated; (vii) the Company shall have no knowledge of any fact
that would reasonably be expected to cause the Registration Statement to not be
effective or the prospectus contained therein to not be available for use for
the sale of all of the Securities (disregarding any limitation on conversion or
exercise contained therein) unless all the Securities are otherwise freely
tradable without restriction by the Holders; (viii) no Holder shall be in
possession of any material, non-public information provided to any of them by
the Company or any of its affiliates or representatives; (ix) on each day during
the Equity Conditions Measuring Period, the Company otherwise shall have been in
compliance with and shall not have breached in any material respect any
provision, covenant, representation or warranty of any Transaction Document; and
(x) on each day during the Equity Conditions Measuring Period, there shall not
have occurred a Triggering Event or an event that with the passage of time or
giving of notice would constitute a Triggering Event.
(xviii) “
Equity Conditions Failure
”
means that on any day during the period commencing ten (10) Trading Days prior
to the applicable Company Redemption Notice Date through the later of the
applicable Redemption Date and the date on which the applicable shares of Common
Stock are actually delivered to the applicable Holder, any of the Equity
Conditions have not been satisfied (or waived in writing by such
Holder).
(xix) “
Equity Value Redemption
Premium
” means 135%.
(xx) “
Excluded Securities
” means,
collectively, (A) shares of Common Stock or standard options to purchase Common
Stock issued to directors, officers, employees or consultants of the Company in
connection with their service as directors or officers of the Company, their
employment by the Company or their retention as consultants by the Company
pursuant to an equity compensation program or other contract or arrangement
approved by the Board (or the compensation committee of the Board) for
consideration per share or having an exercise price (as the case may be) (as
determined pursuant to the provisions of Section 3(f)(i) hereof) less than the
Conversion Price in effect on the date of issuance, provided that all such
issuances of shares of Common Stock (including, shares issuable upon exercise of
such standard options) after the Subscription Date pursuant to this clause (A)
that are not described in clause (B) below do not, in the aggregate, exceed more
than 2.5% of the Common Stock issued and outstanding immediately prior to the
Subscription Date (as adjusted for any stock dividend, stock split, stock
combination or other similar transaction) (excluding, for purposes of the
foregoing 2.5% calculation, shares of Common Stock issuable upon exercise of
such standard options issued after the Subscription Date that have been
terminated or forfeited), provided further that all such issuances must be for
consideration per share or have an exercise price (as the case may be) (as
determined pursuant to the provisions of Section 3(f)(i) hereof) greater than or
equal to the Closing Sale Price of the Common Stock on the date of such
issuance; (B) shares of Common Stock issued upon the conversion or exercise of
Convertible Securities or Options issued prior to the Subscription Date,
provided that such Convertible Securities or Options have not been amended since
the Subscription Date to increase the number of shares issuable thereunder or to
lower the exercise or conversion price thereof or otherwise materially change
the terms or conditions thereof in any manner that adversely affects any of the
Holders; (C) shares of Common Stock issuable upon conversion of the shares of
Series D Preferred Stock; (D) the Warrant Shares; (E) the Dividend Shares; (F)
up to 1,090,910 shares of Common Stock issuable pursuant to warrants issued to
the Placement Agent in connection with the transactions contemplated by the
Securities Purchase Agreement; (G) shares of Common Stock issued by the Company
solely as a penalty pursuant to the Prior Registration Rights Agreements; and
(H) shares of Common Stock issued in connection with strategic transactions or
acquisitions (the primary purpose of which is not to raise capital, and which
are approved in good faith by the Board) having a price per share (as determined
pursuant to the provisions of Section 3(f)(i) hereof) less than the Conversion
Price in effect on the date of issuance, provided that (i) any such issuance
pursuant to this clause (H) shall only be to a Person that is, itself or through
its subsidiaries, an operating company in a business synergistic with the
business of the Company; (ii) all such issuances after the Subscription Date
pursuant to this clause (H) do not, in the aggregate, exceed more than 10% of
the shares of Common Stock issued and outstanding immediately prior to the
Subscription Date (as adjusted for any stock dividend, stock split, stock
combination or other similar transaction) and (iii) all such issuances pursuant
to this clause (H) must have a price per share (as determined pursuant to the
provisions of Section 3(f)(i) hereof) greater than or equal to the Closing Sale
Price of the Common Stock on the date of such issuance.
(xxi) “
Final Redemption Date
” means,
with respect to each share of Series D Preferred Stock, the first anniversary of
the Initial Issuance Date.
(xxii) “
Fundamental Transaction
” means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company or any material Subsidiary to another
Person, or (3) allow another Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (4) consummate a stock
or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock (for clarification purposes,
excluding customary stock splits and stock dividends), or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.
(xxiii) “
Fundamental Transaction Redemption
Premium
” means 135%.
(xxiv) “
Initial Issuance Date
” means
October 17, 2008.
(xxv) “
Liquidation Event
” means, in a
single transaction or series of transactions, the voluntary or involuntary
liquidation, dissolution or winding up of the Company or such Subsidiaries, the
assets of which constitute all or substantially all of the assets or business of
the Company and its Subsidiaries taken as a whole.
(xxvi) “
N
” means the number of days
from and including the last Dividend Date with respect to which Dividends have
been paid by the Company on shares of Series D Preferred Stock, or the Initial
Issuance Date if no Dividend Date has occurred, through and including the day
immediately before the Conversion Date or other date of determination for each
share of Series D Preferred Stock (as the case may be) for which such
determination is being made.
(xxvii)
“
Options
” means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.
(xxviii)
“
Parent Entity
” of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.
(xxix) “
Person
” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(xxx) “
Placement Agent
” means Rodman
& Renshaw LLC.
(xxxi) “
Pro Rata Amount
” means, as of
the applicable date of determination, with respect to a particular Holder, a
fraction (i) the numerator of which is the aggregate number of shares of Series
D Preferred Stock held by such Holder as of such date and (ii) the denominator
of which is the aggregate number of shares of Series D Preferred Stock
outstanding as of such date.
(xxxii) “
Post-Redemption Conversion
Shares
” means that number of shares of Common Stock that would be
required to be delivered pursuant to Section 5 on the applicable Redemption Date
without taking into account the delivery of any Pre-Redemption Conversion
Shares.
(xxxiii)
“
Pre-Redemption Conversion
Price
” means the lower of (i) the then applicable Conversion Price and
(ii) the price which shall be computed as 90% of the arithmetic average of the
VWAP of the Common Stock on each of the ten (10) consecutive Trading Days
immediately preceding the delivery or deemed delivery of the applicable Company
Redemption Notice. All such determinations to be appropriately adjusted for any
stock split, stock dividend, stock combination or other similar transaction
during such ten (10) Trading Day period.
(xxxiv)
“
Principal Market
”
means the OTC Bulletin Board.
(xxxv) “
Prior Registration Rights
Agreements
” means, collectively, (i) that certain Registration Rights
Agreement that was entered into by the Company and certain investors in
connection with the Company’s issuance of its Series B Convertible Preferred
Stock on October 4, 2005, (ii) that certain Registration Rights Agreement that
was entered into by the Company and certain investors in connection with the
Company’s issuance of its Series C Convertible Preferred Stock on May 12, 2006
and (iii) that certain Registration Rights Agreement that was entered into by
the Company and certain investors in connection with the Company’s issuance of
Common Stock on February 15, 2007.
(xxxvi)
“
Redemption
Amount
” means, as of the applicable date of determination, with respect
to a particular Holder, an amount equal to (i) the product of (1) the Aggregate
Redemption Amount multiplied by (2) such Holder’s Pro Rata Amount or (ii) the
aggregate Stated Value of all shares of Series D Preferred Stock then held by
such Holder only if such aggregate Stated Value is less than the amount
determined under the immediately preceding clause (i).
(xxxvii)
“
Redemption
Date
” means each of the
following dates: (i) February 1, 2009, (ii) March 1, 2009, (iii) April 1, 2009,
(iv) May 1, 2009, (v) June 1, 2009, (vi) July 1, 2009, (vii) August 1, 2009,
(viii) September 1, 2009, and (ix) the Final Redemption Date.
(xxxviii)
“
Registration Statement
”
means the registration statement on Form S-3, as amended (Registration Number
333-148929), filed by the Company with the SEC and declared effective by the SEC
on April 8, 2008.
(xxxix)
“
Required Holders
”
means, as of a particular date of determination, the Holders of all of the
shares of Series D Preferred Stock outstanding as of such date.
(xl) “
SEC
” means the Securities and
Exchange Commission.
(xli) “
Securities
” means,
collectively, the shares of Series D Preferred Stock, the shares of Common Stock
issuable upon conversion of the shares of Series D Preferred Stock, the
Warrants, the Warrant Shares and the Dividend Shares.
(xlii) “
Securities Purchase Agreement
”
means that certain securities purchase agreement by and among the Company and
the initial Holders, dated as of the Subscription Date, as such agreement may be
amended from time to time as provided in such agreement.
(xliii) “
Series A Warrants
” means,
collectively, all of the Series A Warrants to purchase Common Stock issued by
the Company pursuant to the terms of the Securities Purchase Agreement,
including all warrants issued in exchange therefor or replacement
thereof.
(xliv) “
Series B Warrants
” means,
collectively, all of the Series B Warrants to purchase shares of Series D
Preferred Stock issued by the Company pursuant to the terms of the Securities
Purchase Agreement, including all warrants issued in exchange therefor or
replacement thereof.
(xlv) “
Series C Warrants
” means,
collectively, all of the Series C Warrants to purchase Common Stock issued by
the Company pursuant to the terms of the Securities Purchase Agreement,
including all warrants issued in exchange therefor or replacement
thereof.
(xlvi) “
Stated Value
” means $1,000
(adjusted for any stock dividend, stock split or other similar transaction with
respect to the shares of Series D Preferred Stock).
(xlvii)
“
Stock Dividend Rate
”
means, with respect to each applicable Dividend Date, the price which shall be
computed as 90% of the arithmetic average of the VWAP of the Common Stock on
each of the ten (10) consecutive Trading Days immediately preceding (but not
including) such Dividend Date. All such determinations shall be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period.
(xlviii)
“
Subscription Date
”
means October 16, 2008.
(xlix) “
Subsidiaries
” means,
collectively, Persons in which the Company, directly or indirectly, owns any
capital stock or holds any equity or similar interest (and individually, each a
“
Subsidiary
”).
(l) “
Successor Entity
” means the
Person (or, if so elected by the Required Holders, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(li) “
Trading Day
” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).
(lii) “
Transaction Documents
” means
the Securities Purchase Agreement, this Certificate of Determination and the
Warrants.
(liii) “
Triggering Event
Redemption Premium
” means
135%.
(liv) “
Warrants
” means, collectively,
the Series A Warrants, the Series B Warrants and the Series C
Warrants.
(lv) “
Warrant Shares
” means,
collectively, (A) the shares of Common Stock issuable upon exercise of the
Series A Warrants and the Series C Warrants and (B) the shares of Series D
Preferred Stock issuable upon exercise of the Series B Warrants.
(lvi) “
Volume Failure
” means, with
respect to a particular date of determination, the average daily volume of the
Common Stock on the Eligible Market on which the Common Stock is listed (as
reported on Bloomberg) as of such date of determination over the ten (10)
consecutive Trading Day period ending on the Trading Day immediately preceding
such date of determination is less than 350,000 shares (adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
such period)
(lvii) “
VWAP
” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the applicable Holder. If the
Company and such Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 3(d)(iii). All such determinations shall be appropriately adjusted
for any stock dividend, stock split or other similar transaction during such
period.
(b)
Holder’s Conversion
Right
. Subject to the provisions of Section 7 and, if applicable, the
proviso in the last sentence of Section 5(c), at any time or times on or after
the Initial Issuance Date, each Holder shall be entitled to convert any whole
number of shares of Series D Preferred Stock into fully paid and nonassessable
shares of Common Stock in accordance with Section 3(d) at the Conversion Rate
(as defined below).
(c)
Conversion Rate
. The
number of shares of Common Stock issuable upon conversion of each share of
Series D Preferred Stock pursuant to Section 3(b) shall be determined according
to the following formula (the “
Conversion
Rate
”):
Conversion
Amount
Conversion
Price
No
fractional shares of Common Stock are to be issued upon the conversion of any
share Series D Preferred Stock, and in lieu thereof, the Company shall pay cash
to the Holder on the applicable Share Delivery Date (as defined below) equal to
the product of such fractional share multiplied by the Closing Sale Price of the
Common Stock for the Trading Day immediately preceding the applicable Conversion
Date (as defined below).
(d)
Mechanics of
Conversion
. The conversion of each share of Series D Preferred Stock
shall be conducted in the following manner:
(i)
Holder’s Delivery
Requirements
. To convert a share of Series D Preferred Stock into shares
of Common Stock on any date (a “
Conversion Date
”), a Holder
shall (A) transmit or otherwise deliver (whether via facsimile or otherwise),
for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of a
fully completed notice of conversion executed by the registered Holder of the
share(s) of Series D Preferred Stock subject to such conversion in the form
attached hereto as
Exhibit I
(the “
Conversion Notice
”) to the
Company and (B) if required by Section 3(d)(vii), surrender to a common carrier
for delivery to the Company as soon as practicable following such date the
original certificates representing the share(s) of Series D Preferred Stock
being converted (or comply with the procedures set forth in Section 16) (the
“
Preferred Share
Certificates
”).
(ii)
Company’s Response
.
Upon receipt by the Company of a copy of a fully completed Conversion Notice,
the Company shall as soon as practicable, but in any event within two (2)
Trading Days, send, via facsimile, a confirmation of receipt of such Conversion
Notice to such Holder and the Transfer Agent, which confirmation shall
constitute an instruction to the Transfer Agent to process such Conversion
Notice in accordance with the terms herein. On or before the third
(3
rd
)
Trading Day following the date of receipt by the Company of such fully completed
Conversion Notice (the “
Share
Delivery Date
”), the Company shall (1) provided the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, credit such
aggregate number of shares of Common Stock to which such Holder shall be
entitled to such Holder’s or its designee’s balance account with DTC through its
Deposit Withdrawal Agent Commission system, or (2) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and
deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of such Holder or its designee, for the number of shares
of Common Stock to which such Holder shall be entitled. If the number of shares
of Series D Preferred Stock represented by the Preferred Share Certificate(s)
submitted for conversion, as may be required pursuant to Section 3(d)(vii), is
greater than the number of shares of Series D Preferred Stock being converted,
then the Company shall, as soon as practicable and in no event later than three
(3) Trading Days after receipt of the Preferred Share Certificate(s) (the “
Preferred Share Delivery
Date
”) and at its own expense, issue and deliver to such Holder a new
Preferred Share Certificate representing the number of shares of Series D
Preferred Stock not converted.
(iii)
Dispute Resolution
.
In the case of a dispute as to the determination of the Closing Sale Price, the
Closing Bid Price or fair market value or the arithmetic calculation of the
Conversion Rate (as the case may be), the Company shall instruct the Transfer
Agent to issue to such Holder the number of shares of Common Stock that is not
disputed and shall transmit an explanation of the disputed determinations or
arithmetic calculations (as the case may be) to such Holder via facsimile within
two (2) Business Days of receipt of such Holder’s Conversion Notice or other
date of determination. If such Holder and the Company are unable to
agree upon the determination of the Closing Sale Price, the Closing Bid Price or
fair market value (as the case may be) or arithmetic calculation of the
Conversion Rate (as the case may be) within two (2) Business Days of such
disputed determination or arithmetic calculation (as the case may be) being
transmitted to such Holder, then the Company shall within one (1) Business Day
submit via facsimile (A) the disputed determination of the Closing Sale Price,
Closing Bid Price or fair market value (as the case may be) to an independent,
reputable investment bank selected by the Company and approved by the such
Holder or (B) the disputed arithmetic calculation of the Conversion Rate to the
Company’s independent, outside accountant. The Company shall cause, at the
Company’s expense, the investment bank or the accountant (as the case may be) to
perform the determinations or calculations and notify the Company and such
Holder of the results no later than four (4) Business Days from the time it
receives the disputed determinations or calculations (as the case may be). Such
investment bank’s or accountant’s determination or calculation (as the case may
be) shall be binding upon all parties absent manifest error (provided such
determination is approved by the Required Holders).
(iv)
Record Holder
. The
Person or Persons entitled to receive the shares of Common Stock issuable upon a
conversion of shares of Series D Preferred Stock shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
Conversion Date.
(v)
Company’s Failure to Timely
Convert
.
(A)
Damages
. If
(I) within three (3) Trading Days after the Company’s receipt of a fully
completed Conversion Notice (whether via facsimile or otherwise) the Company
shall fail to credit the applicable Holder’s balance account with DTC or issue
and deliver a certificate to such Holder for the number of shares of Common
Stock to which such Holder is entitled upon such Holder’s conversion of shares
of Series D Preferred Stock (as the case may be) (a “
Conversion Failure
”) or (II)
within three (3) Trading Days of the Company’s receipt of a Preferred Share
Certificate the Company shall fail to issue and deliver a new Preferred Share
Certificate representing the number of shares of Series D Preferred Stock to
which such Holder is entitled pursuant to Section 3(d)(ii), then in addition to
all other available remedies which such holder may pursue hereunder and under
the Securities Purchase Agreement (including indemnification pursuant to Section
9(k) thereof), the Company shall pay additional damages to such Holder for each
day after the Share Delivery Date that such conversion is not timely effected
and/or each day after the Preferred Share Delivery Date that each Preferred
Share Certificate is not delivered (as the case may be) in an amount equal to 2%
of the product of (I) the sum of the number of shares of Common Stock not
issued to such Holder on or prior to the Share Delivery Date and to which such
Holder is entitled as set forth in the applicable Conversion Notice and, in the
event the Company has failed to deliver a Preferred Share Certificate to such
Holder on or prior to the Preferred Share Delivery Date, the number of shares of
Common Stock issuable upon conversion of the shares of Series D Preferred Stock
represented by the Preferred Share Certificate as of the Preferred Share
Delivery Date and (II) the Closing Sale Price of the Common Stock on the Share
Delivery Date, in the case of the failure to deliver shares of Common Stock, or
the Preferred Share Delivery Date, in the case of failure to deliver a Preferred
Share Certificate (as the case may be). In addition to the foregoing, if within
three (3) Trading Days after the Company’s receipt of a fully completed
Conversion Notice (whether via facsimile or otherwise) the Company shall fail to
issue and deliver a certificate to a Holder or credit such Holder’s balance
account with DTC (as the case may be) for the number of shares of Common Stock
to which such Holder is entitled upon such Holder’s conversion of shares of
Series D Preferred Stock, and if on or after such Business Day such Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the shares of Common Stock
issuable upon such conversion that such Holder anticipated receiving from the
Company (a “
Buy-In
”),
then the Company shall, in addition to all other rights and remedies available
to such Holder, within three (3) Business Days after such Holder’s request and
in such Holder’s discretion, either (i) pay cash to such Holder in an amount
equal to such Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “
Buy-In Price
”), at which point
the Company’s obligation to deliver such certificate or credit such Holder’s
balance account with DTC (and to issue such shares of Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to such Holder a
certificate or certificates representing such shares of Common Stock or credit
such Holder’s balance account with DTC (as the case may be) and pay cash to such
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing Sale
Price of the Common Stock on the Conversion Date.
(B)
Void Conversion Notice;
Adjustment of Conversion Price
. If for any reason a Holder has
not received all of the shares of Common Stock to which such Holder is entitled
prior to the fifth (5
th
)
Trading Day after the Share Delivery Date with respect to a conversion of shares
of Series D Preferred Stock, then such Holder, upon written notice to the
Company, with a copy to the Transfer Agent, may void its Conversion Notice with
respect to, and retain or have returned (as the case may be) any shares of
Series D Preferred Stock that have not been converted pursuant to such Holder’s
Conversion Notice; provided that the voiding of a Holder’s Conversion Notice
shall not affect the Company’s obligations to make any payments which have
accrued prior to the date of such notice pursuant to Section 3(d)(v)(A) or
otherwise. Thereafter, the Conversion Price of any shares of Series D Preferred
Stock returned or retained by such Holder for failure to timely convert shall be
adjusted to the lesser of (I) the Conversion Price relating to the voided
Conversion Notice and (II) the lowest Closing Bid Price of the Common Stock
during the period beginning on the Conversion Date and ending on the date such
Holder voided the Conversion Notice, subject to further adjustment as provided
in this Certificate of Determination.
(vi)
Pro Rata Conversion;
Disputes
. In the event the Company receives a Conversion
Notice from more than one Holder for the same Conversion Date and the Company
can convert some, but not all, of such shares of Series D Preferred Stock, the
Company shall convert from each Holder electing to have shares of Series D
Preferred Stock converted at such time a pro rata amount of such Holder’s shares
of Series D Preferred Stock submitted for conversion based on the number of
shares of Series D Preferred Stock submitted for conversion on such date by such
Holder relative to the number of shares of Series D Preferred Stock submitted
for conversion on such date. In the event of a dispute as to the number of
shares of Common Stock issuable to a Holder in connection with a conversion of
shares of Series D Preferred Stock, the Company shall issue to such Holder the
number of shares of Common Stock not in dispute and resolve such dispute in
accordance with Section 3(d)(iii).
(vii)
Book-Entry
. Notwithstanding
anything to the contrary set forth herein, upon conversion of shares of Series D
Preferred Stock in accordance with the terms hereof, any Holder thereof shall
not be required to physically surrender the certificate representing the shares
of Series D Preferred Stock to the Company unless (A) the full or remaining
number of shares of Series D Preferred Stock represented by the certificate are
being converted or redeemed or (B) such Holder has provided the Company with
prior written notice (which notice may be included in a Conversion Notice)
requesting reissuance of shares of Series D Preferred Stock upon physical
surrender of any shares of Series D Preferred Stock. Each Holder and
the Company shall maintain records showing the number of shares of Series D
Preferred Stock so converted by such Holder and the dates of such conversions or
shall use such other method, reasonably satisfactory to such Holder and the
Company, so as not to require physical surrender of the certificate representing
the shares of Series D Preferred Stock upon each such conversion. In the event
of any dispute or discrepancy, such records of the Company establishing the
number of shares of Series D Preferred Stock to which the record holder is
entitled shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if shares of Series D Preferred
Stock represented by a certificate are converted as aforesaid, a Holder may not
transfer the certificate representing the shares of Series D Preferred Stock
unless such Holder first physically surrenders the certificate representing the
shares of Series D Preferred Stock to the Company, whereupon the Company will
forthwith issue and deliver upon the order of such Holder a new certificate of
like tenor, registered as such Holder may request, representing in the aggregate
the remaining number of shares of Series D Preferred Stock represented by such
certificate. A Holder and any assignee, by acceptance of a certificate,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of any shares of Series D Preferred Stock, the number of
shares of Series D Preferred Stock represented by such certificate may be less
than the number of shares of Series D Preferred Stock stated on the face
thereof. Each certificate for shares of Series D Preferred Stock
shall bear the following legend:
ANY
TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE
COMPANY’S CERTIFICATE OF DETERMINATION RELATING TO THE SHARES OF SERIES D
PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 3(d)(vii)
THEREOF. THE NUMBER OF SHARES OF SERIES D PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES D PREFERRED STOCK
STATED ON THE FACE HEREOF PURSUANT TO SECTION 3(d)(vii) OF THE CERTIFICATE OF
DETERMINATION RELATING TO THE SHARES OF SERIES D PREFERRED STOCK REPRESENTED BY
THIS CERTIFICATE.
(e)
Taxes
. The Company
shall pay any and all documentary, stamp, transfer (but only in respect of the
registered holder thereof) and other similar taxes that may be payable with
respect to the issuance and delivery of shares of Common Stock upon the
conversion of shares of Series D Preferred Stock.
(f)
Adjustments to Conversion
Price
. The Conversion Price will be subject to adjustment from
time to time as provided in this Section 3(f).
(i)
Adjustment of Conversion
Price upon Issuance of shares of Common Stock
. If and whenever on or
after the Subscription Date the Company issues or sells, or in accordance with
this Section 3(f) is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding any Excluded Securities issued or
sold or deemed to have been issued or sold) for a consideration per share (the
“
New Issuance Price
”)
less than a price equal to the Conversion Price in effect immediately prior to
such issue or sale or deemed issuance or sale (such Conversion Price then in
effect is referred to as the “
Applicable Price
”) (the
foregoing a “
Dilutive
Issuance
”), then, immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the New
Issuance Price. For purposes of determining the adjusted Conversion Price under
this Section 3(f), the following shall be applicable:
(A)
Issuance of Options
.
If the Company in any manner grants or sells any Options and the lowest price
per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this Section 3(f)(i)(A),
the “lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Options or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option” shall be equal
to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon conversion,
exercise or exchange of any Convertible Security issuable upon exercise of such
Option. Except as contemplated below, no further adjustment of the Conversion
Price shall be made upon the actual issuance of such share of Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the actual
issuance of such share of Common Stock upon conversion, exercise or exchange of
such Convertible Securities.
(B)
Issuance of Convertible
Securities
. If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 3(f)(i)(B), the “lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security. Except as
contemplated below, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such share of Common Stock upon conversion, exercise
or exchange of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustment of the Conversion Price has been or is to be made pursuant to other
provisions of this Section 3(f)(i), except as contemplated below, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(C)
Change in Option Price or
Rate of Conversion
. If the purchase or exercise price provided
for in any Options, the additional consideration, if any, payable upon the
issue, conversion, exercise or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Conversion Price in effect at the time of such increase or decrease shall be
adjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate (as the case may be) at the time initially granted, issued or
sold. For purposes of this Section 3(f)(i)(C), if the terms of any Option or
Convertible Security that was outstanding as of the Subscription Date are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 3(f)(i) shall be made if such adjustment
would result in an increase of the Conversion Price then in effect.
(D)
Calculation of Consideration
Received
. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01. If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the amount of
consideration received by the Company therefor. If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company will be the
fair value of such consideration, except where such consideration consists of
publicly traded securities, in which case the amount of consideration received
by the Company for such securities will be the arithmetic average of the VWAP of
such security for the five (5) Trading Day period immediately preceding the date
of receipt. If any shares of Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such shares of
Common Stock, Options or Convertible Securities (as the case may be). The fair
value of any consideration other than cash or publicly traded securities will be
determined jointly by the Company and the Required Holders. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “
Valuation Event
”), the fair
value of such consideration will be determined within five (5) Trading Days
after the tenth (10
th
) day
following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error
(provided such determination is approved by the Required Holders) and the fees
and expenses of such appraiser shall be borne by the Company.
(E)
Record
Date
. If the Company takes a record of the holders of shares
of Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase (as the case may
be).
(ii)
Adjustment of
Conversion Price upon Subdivision or Combination of shares of Common
Stock
. If the Company at any time on or after the Subscription
Date subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Company at any time on
or after the Subscription Date combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased. Any adjustment pursuant to
this Section 3(f)(ii) shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment
under this Section 3(f)(ii) occurs during the period that a Conversion Price is
calculated hereunder, then the calculation of such Conversion Price shall be
adjusted appropriately to reflect such event.
(iii)
Other
Events
. In the event that the Company (or any direct or
indirect Subsidiary thereof) shall take any action to which the provisions
hereof are not strictly applicable, or, if applicable, would not operate to
protect the Holders from dilution or if any event occurs of the type
contemplated by the provisions of this Section 3(f) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Board shall in good faith determine and implement an appropriate
adjustment in the Conversion Price (subject to the approval of the Required
Holders) so as to protect the rights of the Holders; provided that no such
adjustment pursuant to this Section 3(f)(iii) will increase the Conversion Price
as otherwise determined pursuant to this Section 3(f), provided further that if
a Holder does not accept such adjustments as appropriately protecting its
interests hereunder against such dilution, then the Board and such Holder shall
agree, in good faith, upon an independent investment bank of nationally
recognized standing to make such appropriate adjustments, whose determination
shall be final and binding absent manifest error (provided such determination is
approved by the Required Holders) and whose fees and expenses shall be borne by
the Company.
4.
Redemption at Option of
Holders
.
(a)
Triggering Event
. A
“
Triggering Event
” shall
be deemed to have occurred at such time as any of the following
events:
(i) the
effectiveness of the Registration Statement (or the prospectus contained
therein) lapses for any reason (including, without limitation, the issuance of a
stop order) or is unavailable for the sale of all of the Securities, and such
lapse or unavailability continues for a period of five (5) consecutive days or
for more than an aggregate of ten (10) days in any 365-day period, unless all
the Securities are otherwise freely tradable without restriction by the
Holders;
(ii) the
suspension (or threatened suspension) from trading or
failure (or threatened failure) of the Common Stock to be listed on
an Eligible Market for a period of five (5) consecutive days or for more than an
aggregate of ten (10) days in any 365-day period;
(iii) the
Company’s (A) failure to cure a Conversion Failure by delivery of the required
number of shares of Common Stock within five (5) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any Holder of
shares of Series D Preferred Stock, including, without limitation, by way of
public announcement or through any of its agents, at any time, of its intention
not to comply, as required, with a request for conversion of any shares of
Series D Preferred Stock into shares of Common Stock that is requested in
accordance with the provisions of this Certificate of
Determination;
(iv) at
any time following the tenth (10
th
)
consecutive day that any Holder’s Authorized Share Allocation is less than the
number of shares of Common Stock that such Holder would be entitled to receive
upon a conversion of the Conversion Amount of all shares of Series D Preferred
Stock held by such Holder (without regard to any limitations on conversion set
forth in Section 7 or otherwise);
(v) the
Company’s failure to pay to any Holder any amount when and as due under this
Certificate of Determination (including, without limitation, the Company’s
failure to pay any Dividends, redemption payments or amounts hereunder) or any
other Transaction Document, and any such failure continues uncured for at least
two (2) days after notice from any Holder;
(vi) any
restrictive or other legend (other than the legend expressly required by Section
3(d)(vii)) is placed on any certificate representing any of the
Securities;
(vii) bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
the relief of debtors shall be instituted by or against the Company or any
material Subsidiary and, if instituted against the Company or any material
Subsidiary by a third party, shall not be dismissed within forty-five (45) days
of their initiation;
(viii) the
commencement by the Company or any material Subsidiary of a voluntary case or
proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any material Subsidiary in an involuntary case or proceeding
under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal,
state or foreign law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any
material Subsidiary or of any substantial part of its property, or the making by
it of an assignment for the benefit of creditors, or the execution of a
composition of debts, or the occurrence of any other similar federal, state or
foreign proceeding, or the admission by it in writing of its inability to pay
its debts generally as they become due, the taking of corporate action by the
Company or any material Subsidiary in furtherance of any such action or the
taking of any action by any Person to commence a UCC foreclosure sale or any
other similar action under federal, state or foreign law;
(ix) the
entry by a court of (i) a decree, order, judgment or other similar document in
respect of the Company or any material Subsidiary of a voluntary or involuntary
case or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree, order,
judgment or other similar document adjudging the Company or any material
Subsidiary as bankrupt or insolvent, or approving as properly filed a petition
seeking liquidation, reorganization, arrangement, adjustment or composition of
or in respect of the Company or any material Subsidiary under any applicable
federal, state or foreign law or (iii) a decree, order, judgment or other
similar document appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any material
Subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree, order,
judgment or other similar document or any such other decree, order, judgment or
other similar document unstayed and in effect for a period of forty-five (45)
consecutive days;
(x) a
final judgment or judgments for the payment of money aggregating in excess of
$250,000 are rendered against the Company and/or any of its material
Subsidiaries and which judgments are not, within thirty (30) days after the
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within thirty (30) days after the expiration of such stay; provided,
however, that any judgment which is covered by insurance or an indemnity from a
credit worthy party shall not be included in calculating the $250,000 amount set
forth above so long as the Company provides each Holder of shares of Series D
Preferred Stock a written statement from such insurer or indemnity provider
(which written statement shall be reasonably satisfactory to each such Holder)
to the effect that such judgment is covered by insurance or an indemnity and the
Company or such Subsidiary (as the case may be) will receive the proceeds of
such insurance or indemnity within forty-five (45) days of the issuance of such
judgment.
(xi) the
Company and/or any Subsidiary, individually or in the aggregate, fails to pay,
when due, or within any applicable grace period, any payment with respect to any
indebtedness in excess of $250,000 due to any third party, other than, with
respect to unsecured indebtedness only, payments contested by the Company and/or
such Subsidiary (as the case may be) in good faith by proper proceedings and
with respect to which adequate reserves have been set aside for the payment
thereof in accordance with United States generally accepted accounting
principles, or otherwise be in breach or violation of any agreement for monies
owed or owing in an amount in excess of $250,000, which breach or violation
permits the other party thereto to declare a default or otherwise accelerate
amounts due thereunder that are in excess of $500,000;
(xii) a
false certification by the Company that the Equity Conditions are satisfied,
that there has been no Equity Conditions Failure or as to whether or not a
Triggering Event has occurred; or
(xiii)
the Company breaches in any material respect representation, warranty, covenant
or other term or condition of any Transaction Document, except, in the case of a
breach of a covenant or other term or condition that is curable, only if such
breach remains uncured for a period of three (3) days following notice from any
Holder.
(b)
Redemption Option Upon
Triggering Event
. Within one (1) Business Day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via facsimile
and overnight courier (with next day delivery specified) (“
Notice of Triggering Event
”)
to each Holder. At any time after the earlier of a Holder’s receipt of a Notice
of Triggering Event and such Holder becoming aware of a Triggering Event, such
Holder shall have the right, at such Holder’s option, to require the Company to
redeem up to all of such Holder’s shares of Series D Preferred Stock by
delivering written notice thereof via facsimile and overnight courier (with next
day delivery specified) (“
Notice of Redemption at Option of
Holder
”) to the Company, which Notice of Redemption at Option of Holder
shall indicate the number of shares of Series D Preferred Stock that such Holder
is electing to redeem. In addition to all other rights of such Holder contained
herein, each share of Series D Preferred Stock subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the Company at a
price per share of Series D Preferred Stock equal to the greater of (i) the
product of (A) the Conversion Amount and (B) the Triggering Event Redemption
Premium and (ii) the product of (X) the Conversion Rate with respect to the
Conversion Amount in effect at such time as such Holder delivers a Notice of
Redemption at Option of Holder and (Y) the product of (1) the Equity Value
Redemption Premium and (2) the greatest of (I) the Closing Sale Price of the
Common Stock on the date immediately preceding such Triggering Event, (II) the
Closing Sale Price of the Common Stock on the date immediately after such
Triggering Event and (III) the Closing Sale Price of the Common Stock on the
date such Holder delivers the Notice of Redemption at Option of Holder (the
“
Triggering Event Redemption
Price
”).
(c)
Payment of Redemption
Price
. Upon the Company’s receipt of the first Notice of Redemption at
Option of Holder from any Holder, the Company shall immediately notify each
other Holder by facsimile of the Company’s receipt of such notice. The Company
shall deliver on the fifth (5
th
)
Business Day after the Company’s receipt of the first Notice of Redemption at
Option of Holder the applicable Triggering Event Redemption Price to all Holders
that deliver a Notice of Redemption at Option of Holder prior to the fifth
(5
th
)
Business Day after the Company’s receipt of the first Notice of Redemption at
Option of Holder. The Company shall deliver on the second (2
nd
)
Business Day after the Company’s receipt of a Notice of Redemption at Option of
Holder the applicable Triggering Event Redemption Price to a Holder who delivers
a Notice of Redemption at Option of Holder at any time on or following the fifth
(5
th
)
Business Day after the Company’s receipt of such the first Notice of Redemption
at Option of Holder. To the extent redemptions required by this Section 4 are
deemed or determined by a court of competent jurisdiction to be prepayments of
the shares of Series D Preferred Stock by the Company, such redemptions shall be
deemed to be voluntary prepayments. If the Company is unable to redeem all of
the shares of Series D Preferred Stock submitted for redemption, the Company
shall (i) redeem a pro rata amount from each Holder based on the number of
shares of Series D Preferred Stock submitted for redemption by such Holder
relative to the total number of shares of Series D Preferred Stock submitted for
redemption by all Holders and (ii) in addition to any remedy such Holder may
have under this Certificate of Determination and the Securities Purchase
Agreement, pay to each Holder interest at the rate of 2% per month (prorated for
partial months) in respect of each unredeemed share of Series D Preferred Stock
until paid in full. In the event of the Company’s redemption of any shares of
Series D Preferred Stock under this Section 4, a Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for such Holder. Accordingly, any redemption
premium due under this Section 4 is intended by the parties to be, and shall be
deemed, a reasonable estimate of such Holder’s actual loss of its investment
opportunity and not as a penalty.
(d)
Void Redemption
. In
the event that the Company does not pay the Redemption Price within the time
period set forth in Section 4(c), at any time thereafter and until the Company
pays such unpaid applicable Triggering Event Redemption Price in full, a Holder
shall have the option to, in lieu of redemption, require the Company to promptly
return to such Holder any or all of the shares of Series D Preferred Stock that
were submitted for redemption by such Holder under this Section 4 and for which
the applicable Triggering Event Redemption Price (together with any interest
thereon) has not been paid, by sending written notice thereof to the Company
(whether via facsimile or otherwise) (the “
Void Optional Redemption
Notice
”). Upon the Company’s receipt of such Holder’s Void Optional
Redemption Notice, (i) such Holder’s Notice of Redemption at Option of Holder
shall be null and void with respect to those shares of Series D Preferred Stock
subject to such Void Optional Redemption Notice, (ii) the Company shall
immediately return to such Holder any shares of Series D Preferred Stock subject
to such Void Optional Redemption Notice, and (iii) the Conversion Price of such
returned shares of Series D Preferred Stock shall be adjusted to the lesser of
(A) the Conversion Price as in effect on the date on which such Void Optional
Redemption Notice is delivered to the Company and (B) the lowest Closing Bid
Price of the Common Stock during the period beginning on and including the date
on which such Holder’s Notice of Redemption at Option of Holder is delivered to
the Company and ending on and including the date on which such Void Optional
Redemption Notice is delivered to the Company.
(e)
Disputes;
Miscellaneous
. In the event of a dispute as to the determination of the
arithmetic calculation of the Triggering Event Redemption Price, such dispute
shall be resolved pursuant to Section 3(d)(iii) above with the term “Triggering
Event Redemption Price” being substituted for the term “Conversion Rate.” A
Holder’s delivery of a Void Optional Redemption Notice and exercise of its
rights following such notice shall not effect the Company’s obligations to make
any payments which have accrued prior to the date of such notice. In
the event of a redemption pursuant to this Section 4 of less than all of the
shares of Series D Preferred Stock represented by a particular Preferred Share
Certificate, the Company shall promptly cause to be issued and delivered to such
Holder of such shares of Series D Preferred Stock a Preferred Share Certificate
representing the remaining shares of Series D Preferred Stock which have not
been redeemed, if necessary.
5.
Automatic Conversion or
Company Redemption
.
(a)
General
. On each
applicable Redemption Date, each Holder’s Redemption Amount applicable to such
Redemption Date shall be automatically converted, provided that there is not
then an Equity Conditions Failure, in accordance with this Section 5(a) into
shares of Common Stock (an “
Automatic Conversion
”),
provided that the Company may, at its option as described below, in lieu of such
Automatic Conversion redeem such Holder’s Redemption Amount in cash (a “
Company Redemption
”), subject
to the provisions of this Section 5, provided further that an Automatic
Conversion shall not occur with respect to such Holder’s Redemption Amount and
the Company shall instead be required to redeem such Holder’s Redemption Amount
in cash pursuant to a Company Redemption if at the time of such election there
is an Equity Conditions Failure, a Volume Failure or a Dollar Failure. On or
prior to the date which is the tenth (10
th
)
Trading Day prior to each Redemption Date (each, a “
Redemption
Notice Due Date
”), the Company
shall deliver written notice (each, a “
Company Redemption Notice
” and
the date all of the Holders receive such notice is referred to as to the “
Company Redemption Notice
Date
”), to each Holder of shares of Series D Preferred Stock which
Company Redemption Notice shall (i) either (A) confirm that such Holder’s
Redemption Amount shall be automatically converted in whole pursuant to an
Automatic Conversion or (B) state that the Company elects to redeem, or is
required to redeem in accordance with the provisions of this Certificate of
Determination, such Holder’s Redemption Amount in whole pursuant to a Company
Redemption and (ii) if such Holder’s Redemption Amount is to be converted
pursuant to an Automatic Conversion, certify that there is not then an Equity
Conditions Failure as of the date of the Company Redemption Notice. Each Company
Redemption Notice shall be irrevocable by the Company. If the Company does not
timely deliver a Company Redemption Notice in accordance with this Section 5(a),
then the Company shall be deemed to have delivered an irrevocable Company
Redemption Notice confirming an Automatic Conversion and shall be deemed to have
certified that there is not then an Equity Conditions Failure in connection with
any such conversion. No later than two (2) Trading Days after delivery of a
Company Redemption Notice setting forth an Automatic Conversion, the Company
shall deliver to such Holder’s account with DTC such number of shares of Common
Stock (the “
Pre-Redemption
Conversion Shares
”) equal to the quotient of (x) such Holder’s Redemption
Amount divided by (y) the Pre-Redemption Conversion Price, and as to which such
Holder shall be the owner thereof as of such time of delivery. If the Company
elects a Company Redemption with respect to any Holder for a Redemption Date,
then the Company must elect a Company Redemption with respect to all Holders for
such Redemption Date. An Automatic Conversion (whether set forth in the Company
Redemption Notice or by operation of this Section 5(a)) shall be converted in
accordance with Section 5(b) and a Company Redemption shall be redeemed in
accordance with Section 5(c).
(b)
Mechanics of Automatic
Conversion
. Subject to Section 5(a), if the Company delivers a Company
Redemption Notice and confirms, or is deemed to have delivered a Company
Redemption Notice and deemed to have confirmed, in whole, an Automatic
Conversion in accordance with Section 5(a), then the remainder of this Section
5(b) shall apply. Such Holder’s Redemption Amount shall be automatically
converted as of the applicable Redemption Date on such Redemption Date at the
Automatic Conversion Price and the Company shall, on the applicable Redemption
Date, deliver to such Holder’s account with DTC such shares of Common Stock
issued upon such Automatic Conversion (subject to the reduction contemplated by
the immediately following sentence and, if applicable, the last sentence of this
Section 5(b)); provided that the Equity Conditions are then satisfied (or waived
in writing by such Holder) on such Redemption Date and an Automatic Conversion
is not otherwise prohibited under any other provision of this Certificate of
Determination, and upon such conversion and delivery the number of shares of
Series D Preferred Stock then held by such Holder shall be reduced, due to such
conversion, by a number of shares equal to the quotient of (1) such Holder’s
Redemption Amount divided by (2) the Stated Value of one share of Series D
Preferred Stock (with the quotient rounded down to the nearest whole number)
(such rounded quotient being the “
Converted Shares
”). The number
of shares of Common Stock to be delivered upon such Automatic Conversion shall
be reduced by the amount of any Pre-Redemption Conversion Shares delivered to
such Holder in connection with such Redemption Date. On each applicable
Redemption Date, the Company shall also deliver to such Holder’s account with
DTC such number of shares of Common Stock equal to the quotient of (A) the
aggregate Additional Amount on each of the applicable Converted Shares by (B)
the Automatic Conversion Price with respect to the applicable Redemption Date.
If a Triggering Event occurs during any applicable Automatic Conversion
Measuring Period, then either (i) such Holder shall return any Pre-Redemption
Conversion Shares delivered in connection with the applicable Redemption Date or
(ii) the Conversion Amount used to calculate the Triggering Event Redemption
Price shall be reduced by the product of (x) such Holder’s Redemption Amount
applicable to such Redemption Date multiplied by (y) the Conversion Share Ratio.
If any of Equity Conditions are not satisfied (or waived in writing by such
Holder) on such Redemption Date or an Automatic Conversion is not otherwise
permitted under any other provision of this Certificate of Determination
(including, without limitation, as a result of a Volume Failure (determined as
of the applicable Redemption Date) or a Dollar Failure (determined as of the
applicable Redemption Date)), then, at the option of such Holder designated in
writing to the Company, such Holder may require the Company to do any one or
more of the following: (i) the Company shall redeem all or any part designated
by such Holder of such Holder’s Redemption Amount plus the Additional Amount
thereon (such designated amount is referred to as the “
Designated Redemption Amount
”)
and the Company shall pay to such Holder within three (3) days of such
Redemption Date, by wire transfer of immediately available funds, an amount in
cash equal to 135% (or, 110% only if clause (iv) of the Equity Conditions is not
satisfied, a Volume Failure occurs (determined as of the applicable Redemption
Date) or a Dollar Failure occurs (determined as of the applicable Redemption
Date), in each case, with respect to the applicable Redemption Date) of such
Designated Redemption Amount, and/or (ii) the Automatic Conversion shall be null
and void with respect to all or any part designated by such Holder of such
Holder’s Redemption Amount and such Holder shall be entitled to all the rights
of a holder of shares of Series D Preferred Stock with respect to such part of
such Holder’s Redemption Amount; provided, however, that the Conversion Price in
respect of shares of Series D Preferred Stock, as may be designated from time to
time by such Holder, having a Stated Value equal to such part of such Holder’s
Redemption Amount shall thereafter be adjusted to equal the lesser of (A) the
Automatic Conversion Price as in effect on the date on which such Holder voided
such Automatic Conversion and (B) the Automatic Conversion Price that would be
in effect on the date on which such Holder delivers a Conversion Notice relating
thereto as if such date was a Redemption Date (provided that this proviso shall
not apply with respect to the applicable Redemption Date only if clause (iv) of
the Equity Conditions is not satisfied, a Volume Failure occurs (determined as
of the applicable Redemption Date) or a Dollar Failure occurs (determined as of
the applicable Redemption Date), in each case, with respect to such Redemption
Date). In addition, if any of the Equity Conditions are not satisfied (or waived
in writing by such Holder) on such Redemption Date or an Automatic Conversion is
not otherwise permitted under any other provision of this Certificate of
Determination (including, without limitation, as a result of a Volume Failure
(determined as of the applicable Redemption Date) or a Dollar Failure
(determined as of the applicable Redemption Date)), then, at such Holder’s
option, either (I) such Holder shall return any Pre-Redemption Conversion Shares
delivered in connection with the applicable Redemption Date or (II) the
applicable Designated Redemption Amount shall be reduced by the product of (X)
such Holder’s Redemption Amount applicable to such Redemption Date multiplied by
(Y) the Conversion Share Ratio. If the Company fails to redeem any Designated
Redemption Amount by the third (3
rd
) day
following the applicable Redemption Date by payment of such amount on the
applicable Redemption Date, then such Holder shall have the rights set forth in
Section 5(d) as if the Company failed to pay the applicable Company Redemption
Price (as defined below) and all other rights under this Certificate of
Determination (including, without limitation, such failure constituting a
Triggering Event described in Section 4(a)(v)). Notwithstanding anything to the
contrary in this Section 5(b), but subject to 3(b), until the Company delivers
Common Stock representing all or any portion of such Holder’s Redemption Amount
to such Holder pursuant to an Automatic Conversion, such Holder’s Redemption
Amount may be converted by such Holder into Common Stock pursuant to Section 3.
If, with respect to a Redemption Date, the number of Pre-Redemption Conversion
Shares delivered to a Holder exceeds the number of Post-Redemption Conversion
Shares with respect to such Redemption Date, then the number of shares of Common
Stock equal to such excess shall constitute a credit against shares of Common
Stock to be issued to such Holder pursuant to Sections 3 and 5(b) hereof and
shall reduce the number of shares of Common Stock required to be actually issued
by the Company to such Holder under such sections on a share-for-share basis
until such time as the number of shares that would have been issued by the
Company to such Holder (not taking account of such credit) equals the amount of
such excess.
(c)
Mechanics of Company
Redemption
. If the Company elects, or is required to elect, a Company
Redemption in accordance with Section 5(a), then such Holder’s Redemption Amount
shall be redeemed by the Company on the applicable Redemption Date, and the
Company shall pay to such Holder on such Redemption Date, by wire transfer of
immediately available funds, an amount in cash equal to 110% of such Holder’s
Redemption Amount (the “
Company
Redemption Price
”). Upon receipt by such Holder of the entire applicable
Company Redemption Price, a number of shares of Series D Preferred Stock then
held by such Holder equal to the quotient of (i) such Holder’s Redemption Amount
divided by (ii) the Stated Value of one share of Series D Preferred Stock (with
the quotient rounded down to the nearest whole number) shall be cancelled and no
longer be outstanding (such rounded quotient being the “
Redeemed Shares
”). On each
applicable Redemption Date, the Company shall also pay to such Holder an amount
in cash equal to the aggregate Additional Amount with respect to each of the
applicable Redeemed Shares. If the Company fails to redeem such Holder’s
Redemption Amount or pay such aggregate Additional Amount on the applicable
Redemption Date by payment of the Company Redemption Price or the aggregate
Additional Amount on such date, then, at the option of such Holder designated in
writing to the Company (any such designation shall be a “Conversion Notice” for
purposes of this Certificate of Determination), such Holder may require the
Company to convert all or any part of such Holder’s Redemption Amount plus the
aggregate Additional Amount at the Automatic Conversion Price. Conversions
required by this Section 5(c) shall be made in accordance with the provisions of
Section 3(b). Notwithstanding anything to the contrary in this Section 5(c), but
subject to Section 3(b), until the Company Redemption Price is paid in full,
such Holder’s Redemption Amount may be converted, in whole or in part, by such
Holder into Common Stock pursuant to Section 3; provided, however, such Holder
may not deliver a Conversion Notice to the Company solely relating to the shares
of Series D Preferred Stock subject to a Company Redemption beginning on the
date that is two (2) Trading Days prior to the applicable Redemption Date
through such Redemption Date.
(d)
Miscellaneous
. To the
extent redemptions required by this Section 5 are deemed or determined by a
court of competent jurisdiction to be prepayments of the shares of Series D
Preferred Stock by the Company, such redemptions shall be deemed to be voluntary
prepayments. In the event of the Company’s redemption of any shares of Series D
Preferred Stock under this Section 5, a Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to predict future
interest rates and the uncertainty of the availability of a suitable substitute
investment opportunity for such Holder. Accordingly, any redemption premium due
under this Section 5 is intended by the parties to be, and shall be deemed, a
reasonable estimate of such Holder’s actual loss of its investment opportunity
and not as a penalty. In the event that the Company does not effect an Automatic
Conversion or Company Redemption (as the case may be) on the applicable
Redemption Date, then, in addition to all other rights and remedies available to
such Holder, such Holder shall have the right to void the conversion or
redemption (as the case may be) pursuant to Section 4(d) with the term
“Redemption Amount” being substituted for “Triggering Event Redemption Price”
and “Company Redemption Notice” being substituted for “Notice of Redemption at
Option of Holder,” shall have all rights of a Holder under Section 4(d) and
Section 4(e) as if they were part of this Section 5 and applied to this Section
5 and the Company shall pay to such Holder interest at the rate of 2% per month
(prorated for partial months) in respect of such Holder’s Redemption Amount
until converted or redeemed (as the case may be) in full.
6.
Other Rights of
Holders
.
(a)
Assumption
. The
Company shall not enter into or be party to a Fundamental Transaction unless
(i) the Successor Entity assumes in writing all of the obligations of the
Company under this Certificate of Determination in accordance with the
provisions of this Section 6(a) pursuant to written agreements in form and
substance satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of shares of Series D Preferred Stock in exchange for such shares
of Series D Preferred Stock a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this
Certificate of Determination, including, without limitation, having a stated
value and dividend rate equal to the stated value and dividend rate of the
shares of Series D Preferred Stock held by the Holders and having similar
ranking to the shares of Series D Preferred Stock, and reasonably satisfactory
to the Required Holders and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose shares of common stock are quoted
on or listed for trading on an Eligible Market. Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Certificate of Determination and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Certificate of
Determination and the other Transaction Documents with the same effect as if
such Successor Entity had been named as the Company herein. Upon consummation of
a Fundamental Transaction, the Successor Entity shall deliver to each Holder
confirmation that there shall be issued upon conversion or redemption of the
shares of Series D Preferred Stock at any time after the consummation of such
Fundamental Transaction, in lieu of the shares of Common Stock (or other
securities, cash, assets or other property (except such items still issuable
under Sections 6(b) and 14, which shall continue to be receivable thereafter))
issuable upon the conversion or redemption of the shares of Series D Preferred
Stock prior to such Fundamental Transaction, such shares of publicly traded
common stock (or their equivalent) of the Successor Entity (including its Parent
Entity) which each Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the shares of Series D Preferred Stock held
by each Holder been converted immediately prior to such Fundamental Transaction
(without regard to any limitations on the conversion of the Series D Preferred
Stock contained in this Certificate of Determination), as adjusted in accordance
with the provisions of this Certificate of Determination. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions
and shall be applied without regard to any limitations on the conversion or
redemption of the shares of Series D Preferred Stock.
(b)
Purchase Rights
. In
addition to any adjustments pursuant to Section 3(f) above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to all the
record holders of any class of Common Stock (the “
Purchase Rights
”), then each
of the Holders will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of the shares of Series D Preferred Stock (without
taking into account any limitations or restrictions on the convertibility of the
shares of Series D Preferred Stock) held by such Holder immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights (provided, however, that to the extent that a Holder’s right to
participate in any such Purchase Right would result in such Holder exceeding the
Maximum Percentage, then such Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for such Holder until
such time, if ever, as its right thereto would not result in such Holder
exceeding the Maximum Percentage).
(c)
Other Corporate
Events
. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of any Fundamental Transaction pursuant to
which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a “
Corporate Event
”), the Company
shall make appropriate provision to insure that each Holder will thereafter have
the right to receive upon a conversion of the shares of Series D Preferred Stock
held by such Holder (i) in addition to the shares of Common Stock receivable
upon such conversion, such securities or other assets to which such Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by such Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
convertibility of the Series D Preferred Stock contained in this Certificate of
Determination) or (ii) in lieu of the shares of Common Stock otherwise
receivable upon such conversion, such securities or other assets received by the
holders of shares of Common Stock in connection with the consummation of such
Corporate Event in such amounts as such Holder would have been entitled to
receive had the Series D Preferred Stock held by such Holder initially been
issued with conversion rights for the form of such consideration (as opposed to
shares of Common Stock) at a conversion rate for such consideration commensurate
with the Conversion Rate. The provisions of this Section 6 shall apply similarly
and equally to successive Corporate Events and shall be applied without regard
to any limitations on the conversion or redemption of the shares of Series D
Preferred Stock contained in this Certificate of Determination.
7.
Limitation on Beneficial
Ownership
. Notwithstanding anything to the contrary contained in this
Certificate of Determination, the shares of Series D Preferred Stock held by a
Holder shall not be convertible by such Holder, and the Company shall not effect
any conversion of any shares of Series D Preferred Stock held by such Holder or
otherwise issue to such Holder any shares of Common Stock pursuant to Sections 2
or 5 hereof, to the extent (but only to the extent) that, if after giving effect
to such conversion, such Holder or any of its affiliates would beneficially own
in excess of 9.9% (the “
Maximum
Percentage
”) of the outstanding shares of Common Stock
immediately after giving effect to such conversion or issuance (as the case may
be). To the extent the above limitation applies, the determination of whether
the shares of Series D Preferred Stock held by such Holder shall be convertible
(vis-à-vis other convertible, exercisable or exchangeable securities owned by
such Holder) shall, subject to such Maximum Percentage limitation, be determined
on the basis of the first submission to the Company for conversion, exercise or
exchange (as the case may be). No prior inability of a Holder to convert shares
of Series D Preferred Stock, or of the Company to issue shares of Common Stock
to such Holder, pursuant to this Section 7 shall have any effect on the
applicability of the provisions of this Section 7 with respect to any
subsequent determination of convertibility or issuance (as the case may be). For
purposes of this Section 7, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined by such Holder in accordance with
Section 13(d) of the 1934 Act and the rules and regulations promulgated
thereunder. The provisions of this Section 7 shall be implemented in a manner
otherwise than in strict conformity with the terms of this Section 7 to correct
this Section 7 (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such Maximum Percentage limitation. The limitations contained in
this Section 7 shall apply to a successor Holder. The holders of Common Stock
shall be third party beneficiaries of this Section 7 and the Company may not
waive this Section 7 without the consent of holders of a majority of its Common
Stock. For any reason at any time, upon the written or oral request of a Holder,
the Company shall within two (2) Business Days confirm orally and in writing to
such Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Certificate of Determination or securities issued pursuant to the Securities
Purchase Agreement. Each delivery of a Conversion Notice by a Holder will
constitute a representation by such Holder that it has evaluated the limitation
set forth in this Section 7 and determined that issuance of the full number of
shares of Common Stock issuable upon conversion of the shares of Series D
Preferred Stock requested by such Holder in such Conversion Notice is permitted
under this Section 7.
8.
Authorized
Shares
.
(a)
Reservation
. The
Company shall have sufficient authorized and unissued shares of Common Stock for
each of the shares of Series D Preferred Stock equal to 133% of the sum of (i)
the number of shares of Common Stock necessary to effect the conversion at the
Conversion Rate with respect to the Conversion Amount of each share of Series D
Preferred Stock as of the Initial Issuance Date (including shares of Series D
Preferred Stock issuable upon exercise of the Series B Warrants), (ii) the
number of Dividend Shares issuable hereunder, determined as if issued as of the
Trading Day immediately preceding the applicable date of determination and (iii)
the number of shares of Common Stock necessary to effect the exercise of all of
the Series A Warrants and the Series C Warrants. So long as any of the shares of
Series D Preferred Stock are outstanding, the Company shall take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series D Preferred Stock, the number of shares of Common Stock as
shall from time to time be necessary to effect the conversion of all of the
shares of Series D Preferred Stock then outstanding; provided that at no time
shall the number of shares of Common Stock so available be less than the number
of shares required to be reserved by the previous sentence (without regard to
any limitations on conversions contained in this Certificate of Determination)
(the “
Required Amount
”);
provided, further, that any Dividend Shares issued by the Company shall not be
issued from any shares of Common Stock so reserved. The initial
number of shares of Common Stock reserved for conversions of the shares of
Series D Preferred Stock and each increase in the number of shares so reserved
shall be allocated pro rata among the Holders based on the number of shares of
Series D Preferred Stock held by each Holder at the time of issuance of shares
of Series D Preferred Stock or increase in the number of reserved shares (as the
case may be) (the “
Authorized
Share Allocation
”). In the event a Holder shall sell or
otherwise transfer any of such Holder’s shares of Series D Preferred Stock, each
transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any shares of Series D
Preferred Stock shall be allocated to the remaining Holders of shares of Series
D Preferred Stock, pro rata based on the number of shares of Series D Preferred
Stock then held by such Holders.
(b)
Insufficient Authorized
Shares
. If, notwithstanding Section 8(a) and not in limitation
thereof, at any time while any of the shares of Series D Preferred Stock remain
outstanding the Company does not have a sufficient number of authorized and
unissued shares of Common Stock to satisfy its obligation to have available for
issuance upon conversion of the shares of Series D Preferred Stock at least a
number of shares of Common Stock equal to the Required Amount (an “
Authorized Share Failure
”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to have available the Required Amount for the shares of Series D
Preferred Stock then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its Board to recommend to the stockholders
that they approve such proposal.
9.
Voting
Rights
. Holders of shares of Series D Preferred Stock shall
have no voting rights, except as required by law, including but not limited to
the Corporations Code, and as expressly provided in this Certificate of
Determination. To the extent that under the Corporations Code the vote of the
holders of the Series D Preferred Stock, voting separately as a class or series
as applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the holders of all of the shares of the Series D
Preferred Stock, voting together in the aggregate and not in separate series
unless required under the Corporations Code, represented at a duly held meeting
at which a quorum is presented or by written consent of all of the shares of
Series D Preferred Stock (except as otherwise may be required under the
Corporations Code), voting together in the aggregate and not in separate series
unless required under the Corporations Code, shall constitute the approval of
such action by both the class or the series, as applicable. Subject to Section
7, to the extent that under the Corporations Code holders of the Series D
Preferred Stock are entitled to vote on a matter with holders of shares of
Common Stock, voting together as one class, each share of Series D Preferred
Stock shall entitle the holder thereof to cast that a number of votes per share
as is equal to the number of shares of Common Stock into which it is then
convertible (subject to the ownership limitations specified in Section 7 hereof)
using the recorded date for determining the stockholders of the Company eligible
to vote on such matters as the date as of which the Conversion Price is
calculated. Holders of the Series D Preferred Stock shall be entitled to written
notice of all stockholder meetings or written consents (and copies of proxy
materials and other information sent to stockholders) with respect to which they
would be entitled by vote, which notice would be provided pursuant to the
Company’s bylaws and the Corporations Code).
10.
Fundamental Transaction
Redemption Right
. No sooner than twenty (20) Trading Days nor
later than ten (10) Trading Days prior to the consummation of a Fundamental
Transaction, but not prior to the public announcement of such Fundamental
Transaction, the Company shall deliver written notice thereof via facsimile and
overnight courier to each Holder of Series D Preferred Stock (a “
Fundamental Transaction
Notice
”). At any time during
the period beginning after a Holder’s receipt of a Fundamental Transaction
Notice and ending on the date that is the later of twenty (20) Trading Days
after (A) consummation of such Fundamental Transaction or (B) the date of
receipt of such Fundamental Transaction Notice, such Holder may require the
Company to redeem all or any portion of such Holder’s shares of Series D
Preferred Stock by delivering written notice thereof (“
Fundamental Transaction Redemption
Notice
”) to the Company, which Fundamental Transaction Redemption Notice
shall indicate the aggregate Conversion Amount such Holder is electing to
redeem. Any shares of Series D Preferred Stock subject to redemption pursuant to
this Section 10 shall be redeemed by the Company in cash at a price equal to the
greater of (i) the product of the Fundamental Transaction Redemption Premium and
the Conversion Amount being redeemed and (ii) the product of (x) the Equity
Value Redemption Premium and (y) the product of (A) the Conversion Amount being
redeemed multiplied by (B) the quotient determined by dividing (I) the aggregate
cash consideration and the aggregate cash value of any non-cash consideration
per share of Common Stock to be paid to the holders of the shares of Common
Stock upon consummation of such Fundamental Transaction (any such non-cash
consideration to be valued at the higher of the Closing Sale Price of such
securities as of the Trading Day immediately prior to the consummation of such
Fundamental Transaction, the Closing Sale Price of the Common Stock on the
Trading Day immediately following the public announcement of such proposed
Fundamental Transaction and the Closing Sale Price of the Common Stock on the
Trading Day immediately prior to the public announcement of such proposed
Fundamental Transaction) by (II) the Conversion Price (the “
Fundamental Transaction Redemption
Price
”). Redemptions required by this Section 10 shall have priority to
payments to all other stockholders of the Company in connection with such
Fundamental Transaction. To the extent redemptions required by this Section 10
are deemed or determined by a court of competent jurisdiction to be prepayments
of the shares of Series D Preferred Stock by the Company, such redemptions shall
be deemed to be voluntary prepayments. Notwithstanding anything to the contrary
in this Section 10, but subject to Section 7, until the Fundamental Transaction
Redemption Price is paid in full, the Conversion Amount submitted by a Holder
for redemption under this Section 10 may be converted, in whole or in part, by
such Holder into Common Stock pursuant to Section 3 or in the event the
Conversion Date is after the consummation of such Fundamental Transaction, stock
or equity interests of the Successor Entity substantially equivalent to the
Company’s shares of Common Stock pursuant to Section 3. In the event of the
Company’s redemption of any portion of the shares of Series D Preferred Stock
under this Section 10, such Holder’s damages would be uncertain and difficult to
estimate because of the parties’ inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment
opportunity for a Holder. Accordingly, any redemption premium due under this
Section 10 is intended by the parties to be, and shall be deemed, a reasonable
estimate of such Holder’s actual loss of its investment opportunity and not as a
penalty. The Company shall make payment of the Fundamental Transaction
Redemption Price concurrently with the consummation of such Fundamental
Transaction if such a Fundamental Transaction Redemption Notice is received
prior to the consummation of such Fundamental Transaction and within two (2)
Trading Days after the Company’s receipt of such notice otherwise (the “
Fundamental Transaction Redemption
Date
”). In the event that the Company does not pay the Fundamental
Transaction Redemption Price on the Fundamental Transaction Redemption Date,
then, in addition to all other rights and remedies available to such Holder,
such Holder shall have the right to void the redemption pursuant to Section 4(d)
with the term “Fundamental Transaction Redemption Price” being substituted for
“Triggering Event Redemption Price” and “Fundamental Transaction Redemption
Notice” being substituted for “Notice of Redemption at Option of Holder,” shall
have all rights of a Holder under Section 4(d) and Section 4(e) as if they were
part of this Section 10 and applied to this Section 10 and the Company shall pay
to such Holder interest at the rate of 2% per month (prorated for partial
months) in respect of such Holder’s Fundamental Transaction Redemption Price
until paid in full.
11.
Redemption at Option of the
Company
.
(a)
Right to Cause
Redemption
. At any time after the Initial Issuance Date so long as no
Holder has a right to require the Company to redeem any shares of Series D
Preferred Stock pursuant to the terms of Section 10 of this Certificate of
Determination, the Company shall have the right to redeem all, but not less than
all, of the shares of Series D Preferred Stock then outstanding (the “
Company Optional Redemption
Right
”).
(b)
Mechanics of Redemption at
Option of the Company
. The Company shall give written notice
to each Holder that it has elected to redeem all of the then outstanding shares
of Series D Preferred Stock pursuant to the exercise of the Company Optional
Redemption Right (the “
Notice
of Company Optional Redemption
”). The Notice of Company Optional
Redemption shall state the date on which the redemption shall occur (which date
shall be a Business Day that is no less than ten (10) Business Days after the
date of such notice (the “
Optional Redemption Date
”)),
certify whether or not a Triggering Event has occurred, and direct each Holder
to deliver its Preferred Share Certificate(s) to the Transfer
Agent.
(c)
Payment of Optional
Redemption Price
. The redemption price of each share of Series D
Preferred Stock to be redeemed pursuant to this Section 11 (the “
Optional Redemption Price
”)
shall be determined as of the Optional Redemption Date and shall be an amount
equal to (i) 110% of the Conversion Amount thereof as of the Optional Redemption
Date if no Triggering Event has occurred on or prior to the Optional Redemption
Date, or (ii) the Triggering Event Redemption Price thereof as of the Optional
Redemption Date (determined pursuant to Section 4(b) and assuming for purposes
thereof that a Notice of Redemption at Option of Holder was delivered on the
date on which the Closing Sale Price of the Common Stock was the highest during
the period beginning on the date the Triggering Event occurred and ending on the
Optional Redemption Date) if a Triggering Event occurred on or prior to the
Optional Redemption Date. The Optional Redemption Price shall be payable in cash
to each Holder on the later of the Optional Redemption Date or the date on which
such Holder delivers its Preferred Share Certificate(s) to the Transfer Agent
(such later date being the “
Optional Redemption Payment
Date
”). To the extent redemptions required by this Section 11 are deemed
or determined by a court of competent jurisdiction to be prepayments of the
shares of Series D Preferred Stock by the Company, such redemptions shall be
deemed to be voluntary prepayments. In the event of the Company’s redemption of
any portion of the shares of Series D Preferred Stock under this Section 11, a
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for such Holder.
Accordingly, any redemption premium due under this Section 11 is intended by the
parties to be, and shall be deemed, a reasonable estimate of such Holder’s
actual loss of its investment opportunity and not as a penalty. Notwithstanding
anything to the contrary in this Section 11, but subject to Section 7, until the
Optional Redemption Price is paid in full to a Holder for all such Holder’s
shares of Series D Preferred Stock, the Conversion Amount subject to redemption
under this Section 11 may be converted, in whole or in part, by such Holder into
Common Stock pursuant to Section 3. In the event that the Company does not pay
to a Holder the Optional Redemption Price on the Optional Redemption Payment
Date, then, in addition to all other rights and remedies available to such
Holder, such Holder shall have the right to void the redemption pursuant to
Section 4(d) with the term “Optional Redemption Price” being substituted for
“Triggering Event Redemption Price” and “Notice of Company Optional Redemption”
being substituted for “Notice of Redemption at Option of Holder,” shall have all
rights of a Holder under Section 4(d) and Section 4(e) as if they were part of
this Section 11 and applied to this Section 11 and the Company shall pay to such
Holder interest at the rate of 2% per month (prorated for partial months) in
respect of such Holder’s Optional Redemption Price until paid in full.
Notwithstanding anything contained in this Section 11 to the contrary, if a
Holder delivers a Notice of Redemption at Option of Holder at any time on or
prior to the Optional Redemption Date, then the provisions of Section 4
shall apply instead of the provisions of this Section 11 with respect
to the shares of Series D Preferred Stock specified in, and subject to, such
Notice of Redemption at Option of Holder and any shares of Series D Preferred
Stock held by such Holder that are not subject to such Notice of Redemption at
Option of Holder shall continue to be subject to redemption by the Company on
the Optional Redemption Date pursuant to this Section 11.
12.
Liquidation, Dissolution,
Winding-Up
. In the event of a Liquidation Event, the Holders shall be
entitled to receive in cash out of the assets of the Company, whether from
capital or from earnings available for distribution to its stockholders (the
“
Liquidation Funds
”),
before any amount shall be paid to the holders of any of shares of the capital
stock of the Company of any class junior in rank to the shares of Series D
Preferred Stock in respect of the preferences as to distributions and payments
on the liquidation, dissolution and winding up of the Company, an amount per
share of Series D Preferred Stock equal to 135% of the Conversion Amount thereof
on the date of such payment; provided that, if the Liquidation Funds are
insufficient to pay the full amount due to the Holders and holders of shares of
other classes or series of shares of preferred stock of the Company that are of
equal rank with the shares of Series D Preferred Stock as to payments of
Liquidation Funds (the “
Pari
Passu Shares
”), then each Holder and Pari Passu Shares shall receive a
percentage of the Liquidation Funds equal to the full amount of Liquidation
Funds payable to such Holder as a liquidation preference, in accordance with
their respective certificate of designations (or equivalent), as a percentage of
the full amount of Liquidation Funds payable to all holders of shares of Series
D Preferred Stock and Pari Passu Shares. To the extent necessary, the
Company shall cause such actions to be taken by any of its Subsidiaries so as to
enable, to the maximum extent permitted by law, the proceeds of a Liquidation
Event to be distributed to the Holders in accordance with this Section. All the
preferential amounts to be paid to the Holders under this Section shall be paid
or set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of any Liquidation Funds of the Company to the
holders of shares capital stock of the Company (including, without limitation,
other classes or series of shares of preferred stock of the Company) junior in
rank to the shares of Series D Preferred Stock in connection with a Liquidation
Event as to which this Section applies.
13.
Preferred
Rank
. All shares of capital stock of the Company shall be
junior in rank to all shares of Series D Preferred Stock with respect to the
preferences as to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Company. The rights of all such
shares of capital stock of the Company shall be subject to the preferences and
relative rights of the shares of Series D Preferred Stock. Without the prior
express written consent of the Required Holders, the Company shall not hereafter
authorize or issue additional or other capital shares that is of senior or pari
passu rank to the shares of Series D Preferred Stock in respect of the
preferences as to distributions and payments upon the liquidation, dissolution
and winding up of the Company (collectively, the “
Senior
Preferred
”). The Company shall be permitted to issue shares of
preferred stock that are junior in rank to the shares of Series D Preferred
Stock in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company, provided that the
maturity date (or any other date requiring redemption or repayment of such
shares of preferred stock) of any such junior shares of preferred stock are not
on or before the Final Redemption Date. In the event of the merger or
consolidation of the Company with or into another corporation, the shares of
Series D Preferred Stock shall maintain their relative powers, designations and
preferences provided for herein and no merger shall result inconsistent
therewith.
14.
Participation
. The
Holders shall, as holders of shares of Series D Preferred Stock, be entitled to
receive such dividends paid and distributions made to the holders of shares of
Common Stock to the same extent as if such Holders had converted each share of
Series D Preferred Stock held by each of them into shares of Common Stock
(without regard to any limitations on conversion herein or elsewhere) and had
held such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of shares of Common Stock
(provided, however, that to the extent that a Holder’s right to participate in
any such dividend or distribution would result in such Holder exceeding the
Maximum Percentage, then such Holder shall not be entitled to participate in
such dividend or distribution to such extent (or the beneficial ownership of any
such shares of Common Stock as a result of such dividend or distribution to such
extent) and such dividend or distribution to such extent shall be held in
abeyance for the benefit of such Holder until such time, if ever, as its right
thereto would not result in such Holder exceeding the Maximum
Percentage).
15.
Vote to Change the Terms of
or Issue Series D Preferred Stock
. In addition to any other
rights provided by law, except where the vote or written consent of the holders
of a greater number of shares is required by law or by another provision of the
Articles of Incorporation, without first obtaining the affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting of
the Required Holders, voting together as a single class, the Company shall not:
(a) amend or repeal any provision of, or add any provision to, its Articles of
Incorporation or bylaws, or file any certificate of designations or articles of
amendment of any series of shares of preferred stock, if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
restrictions provided for the benefit of the Series D Preferred Stock,
regardless of whether any such action shall be by means of amendment to the
Articles of Incorporation or by merger, consolidation or otherwise; (b) increase
or decrease (other than by conversion) the authorized number of shares of Series
D Preferred Stock; (c) create or authorize (by reclassification or otherwise)
any new class or series of shares that has a preference over or is on a parity
with the Series D Preferred Stock with respect to dividends or the distribution
of assets on the liquidation, dissolution or winding up of the Company; (d)
purchase, repurchase or redeem any shares of capital stock of the Company junior
in rank to the Series D Preferred Stock (other than pursuant to equity incentive
agreements (that have in good faith been approved by the Board) with employees
giving the Company the right to repurchase shares upon the termination of
services); (e) pay dividends or make any other distribution on any shares of any
capital stock of the Company junior in rank to the Series D Preferred Stock; (f)
issue any shares of Series D Preferred Stock other than pursuant to the
Securities Purchase Agreement and the Series B Warrants or (g) whether or not
prohibited by the terms of the Series D Preferred Stock, circumvent a right of
the Series D Preferred Stock.
16.
Lost or Stolen
Certificates.
Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Share Certificates representing shares of Series D
Preferred Stock (as to which a written certification and the indemnification
contemplated below shall suffice as such evidence), and, in the case of loss,
theft or destruction, of an indemnification undertaking by a Holder to the
Company in customary and reasonable form and, in the case of mutilation, upon
surrender and cancellation of the Preferred Share Certificate(s), the Company
shall execute and deliver new Preferred Share Certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to re-issue
Preferred Share Certificates if such Holder contemporaneously requests the
Company to convert such shares of Series D Preferred Stock into shares of Common
Stock.
17.
Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief.
The
remedies provided in this Certificate of Determination shall be cumulative and
in addition to all other remedies available under this Certificate of
Determination, the other Transaction Documents, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and no remedy
contained herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy. Nothing herein shall limit a Holder’s
right to pursue actual damages for any failure by the Company to comply with the
terms of this Certificate of Determination. The Company covenants to each Holder
that there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by a Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holders shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
18.
Noncircumvention
. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation, bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Certificate of
Determination, and will at all times in good faith carry out all the provisions
of this Certificate of Determination and take all action as may be required to
protect the rights of the Holders. Without limiting the generality of the
foregoing or any other provision of this Certificate of Determination, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the conversion of any shares of Series D Preferred Stock above
the Conversion Price then in effect, (ii) shall take all such actions as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
conversion of shares of Series D Preferred Stock, and (iii) shall, so long as
any shares of Series D Preferred Stock are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series D Preferred Stock, the maximum number of shares of Common
Stock as shall from time to time be necessary to effect the conversion of the
shares of Series D Preferred Stock (without regard to any limitations on
conversion contained herein).
19.
Failure or Indulgence Not
Waiver
. No failure or delay on the part of a Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party. This Certificate of
Determination shall be deemed to be jointly drafted by the Company and all
Holders and shall not be construed against any Person as the drafter
hereof.
20.
Notice
. Whenever
notice is required to be given under this Certificate of Determination, unless
otherwise provided herein, such notice must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one (1) Business Day after deposit with an overnight courier
service (with next day delivery specified), in each case, properly addressed to
the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the
Company:
NutraCea
5090 N.
40th Street , Suite 400
Phoenix,
AZ 85018
Telephone:
(602) 522-3000
Facsimile:
(602) 522-3001
Attention: Chief
Executive Officer
General
Counsel
With a
copy (for informational purposes only) to:
Weintraub
Genshlea Chediak Law Corporation
400
Capitol Mall
Sacramento,
CA 95814
Telephone:
(916) 558-6164
Facsimile:
(916) 446-1611
Attention: Christopher
Chediak, Esq.
Michael
DeAngelis, Esq.
If to the
Transfer Agent:
American
Stock Transfer & Trust
59 Maiden
Lane, Plaza Level – Lobby
New York,
NY 10038
Telephone:
(718) 921-8143
Facsimile:
(718) 921-8116
Attention:
Joe Wolf, Vice President
If to a
Holder, to its address and facsimile number set forth in the records of the
Company,
with a
copy (for informational purposes only) to:
Greenberg
Traurig, LLP
77 W.
Wacker Drive, Suite 2500
Chicago,
Illinois 60601
Telephone: (312)
456-8400
Facsimile: (312)
456-8435
Attention: Peter
H. Lieberman, Esq.
Todd A.
Mazur, Esq.
or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
overnight courier service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
21.
Transfer of Series D
Preferred Stock
. A Holder may transfer some or all of its shares of
Series D Preferred Stock without the consent of the Company; provided that such
Holder provides the Company with written notice thereof within a reasonable
period of time thereafter of the transferee and the number of shares of Series D
Preferred Stock so transferred.
22.
Series D Preferred Stock
Register
. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holders), a register for the Series D Preferred
Stock, in which the Company shall record the name, address and facsimile number
of the Persons in whose name the shares of Series D Preferred Stock have been
issued, as well as the name and address of each transferee. The Company may
treat the Person in whose name any Series D Preferred Stock is registered on the
register as the owner and holder thereof for all purposes, notwithstanding any
notice to the contrary, but in all events recognizing any properly made
transfers.
23.
Stockholder Matters
.
Any stockholder action, approval or consent required, desired or otherwise
sought by the Company pursuant to the rules and regulations of the Eligible
Market on which the Common Stock is then listed, the Corporations Code, this
Certificate of Determination or otherwise with respect to the issuance of Series
D Preferred Stock or the shares of Common Stock issuable upon conversion thereof
or the issuance of any Warrants and the Warrant Shares may be effected by
written consent of the Company’s stockholders or at a duly called meeting of the
Company’s stockholders, all in accordance with the applicable rules and
regulations of such Eligible Market and the Corporations Code. This provision is
intended to comply with the applicable sections of the Corporations Code
permitting stockholder action, approval and consent affected by written consent
in lieu of a meeting.
24.
Notices
. The Company
shall provide each Holder of Series D Preferred Stock with prompt written notice
of all actions taken pursuant to the terms of this Certificate of Determination,
including in reasonable detail a description of such action and the reason
therefor. Without limiting the generality of the foregoing, the Company shall
give written notice to each such Holder (i) promptly following any adjustment of
the Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least ten (10) days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any grant,
issuances, or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of shares of Common
Stock as a class or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such Holder.
25.
Disclosure
. Upon
receipt or delivery by the Company of any notice in accordance with the terms of
this Certificate of Determination, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
nonpublic information relating to the Company or any of its Subsidiaries, the
Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, nonpublic information on a Current Report on
Form 8-K or otherwise. In the event that the Company believes that a
notice contains material, nonpublic information relating to the Company or any
of its Subsidiaries, the Company so shall indicate to the Holders
contemporaneously with delivery of such notice, and in the absence of any such
indication, the Holders shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries. Nothing contained in this Section 25 shall limit
any obligations of the Company, or any rights of a Holder, under Section 4(i) of
the Securities Purchase Agreement.
* * * * *
EXHIBIT
I
NUTRACEA
CONVERSION NOTICE
Reference
is made to the Certificate of Determination, Preferences and Rights of the
Series D Convertible Preferred Stock of NutraCea (the “
Certificate of
Determination
”). In accordance with and pursuant to the Certificate of
Determination, the undersigned hereby elects to convert the number of shares of
Series D Convertible Preferred Stock, no par value per share (the “
Series D Preferred Stock
”), of
NutraCea, a California corporation (the “
Company
”), indicated below
into shares of common stock, no par value per share (the “
Common Stock
”), of the
Company, as of the date specified below.
Number
of shares of Series D Preferred Stock to be converted:
|
|
Share
certificate no(s). of Series D Preferred Stock to be converted:
|
|
Tax
ID Number (If applicable):
|
|
Please
confirm the following information:
|
|
Number
of shares of Common Stock to be credited:
|
1
|
Number
of shares of Common Stock to be issued:
|
|
Please
issue the shares of Common Stock into which the shares of Series D Preferred
Stock are being converted in the following name and to the following
address:
Dated:
Account
Number (if electronic book entry transfer):
|
|
Transaction
Code Number (if electronic book entry transfer):
|
|
__________________________________
1
Only
applicable if a credit exists under Section 5(b).
ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs
[ ]
to issue the above indicated number of shares of Common Stock in accordance with
the Irrevocable Transfer Agent Instructions dated __________, 2008 from the
Company and acknowledged and agreed to by
[ ].
|
NUTRACEA
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
The
undersigned declares under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of his own knowledge.
The
undersigned has executed this certificate in Phoenix, Arizona on October 16,
2008.
/s/ Bradley Edson
|
|
Bradley
Edson,
|
President,
Chief Executive Officer and
Secretary
|
Exhibit
4.1
[FORM
OF SERIES A WARRANT]
NUTRACEA
Warrant
To Purchase Common Stock
Warrant
No.:
A-
Date of
Issuance: October ___, 2008 (“
Issuance Date
”)
NutraCea,
a California corporation (the “
Company
”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, _________________, the registered holder hereof or its
permitted assigns (the “
Holder
”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “
Warrant
”), at any time or
times on or after the Issuance Date, but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), ______________ (subject to adjustment as
provided herein) fully paid and nonassessable shares of Common Stock (as defined
below)
(the “
Warrant Shares
”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 16. This Warrant is one of the warrants to
purchase Common Stock (the “
SPA
Warrants
”) issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of October 16, 2008, by and among the Company and
the investors referred to therein (the “
Securities Purchase
Agreement
”).
(a)
Mechanics of
Exercise
. Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the Issuance Date, in whole or in part, by (i)
delivery (whether via facsimile or otherwise) of a written notice, in the form
attached hereto as
Exhibit
A
(the “
Exercise
Notice
”), of the Holder’s election to exercise this Warrant and (ii) (A)
payment to the Company of an amount equal to the then-applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the “
Aggregate
Exercise Price
”) in cash or wire transfer of immediately available funds
or, (B) if permitted pursuant to Section 1(d) of this Warrant, by notifying the
Company that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)). The Holder shall not be required to deliver the
original of this Warrant in order to effect an exercise hereunder until the
Holder has purchased all the Warrant Shares available hereunder and the Warrant
has been exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation as soon as practicable following the
delivery of the applicable Exercise Delivery Documents (as defined below).
Execution and delivery of the Exercise Notice with respect to less than all of
the Warrant Shares shall have the same effect as cancellation of the original of
this Warrant and issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. Execution and delivery of the Exercise
Notice for all of the Warrant Shares shall have the same effect as cancellation
of the original of this Warrant after delivery of the Warrant Shares in
accordance with the terms hereof. On or before the second (2
nd
)
Trading Day following the date on which the Company has received each of the
fully completed Exercise Notice and the Aggregate Exercise Price (or notice of a
Cashless Exercise, if applicable) (the “
Exercise Delivery Documents
”),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “
Transfer
Agent
”). On or before the third (3
rd
)
Trading Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “
Share Delivery Date
”), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company (“
DTC
”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at Holder’s instruction
pursuant to the Exercise Notice, Holder’s agent or designee, in each case, sent
by reputable overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company’s share register in the name of
the Holder or its designee (as indicated in the Exercise Notice), for the number
of shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be). If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3)
Business Days after any exercise and at its own expense, issue and deliver to
the Holder (or its designee) a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all
transfer taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, the applicable Exercise Notice shall be accompanied by the
Assignment Form attached hereto as
Exhibit B
duly executed by the
Holder, and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental
thereto.
(b)
Exercise
Price
. For
purposes of this Warrant, “
Exercise Price
” means $0.55,
subject to adjustment as provided herein.
(c)
Company’s Failure to Timely
Deliver Securities
. If
within three (3) Trading Days after the Company’s receipt of the applicable
Exercise Delivery Documents, the Company shall fail to issue and deliver a
certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance account with DTC for the
number of shares of Common Stock to which the Holder is entitled upon such
Holder’s exercise hereunder (as the case may be), and if on or after such third
(3
rd
)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “
Buy-In
”), then, in addition to
all other remedies available to the Holder, the Company shall, within three (3)
Business Days after the Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased (the “
Buy-In
Price
”), at which point the Company’s obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon such Holder’s exercise hereunder (as the case may be)
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock times
(B) the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice.
(d)
Cashless
Exercise
.
Notwithstanding anything contained herein to the contrary (other than Section
1(f) below), if at the time of exercise hereof the Registration Statement (as
defined in the Securities Purchase Agreement) is not effective (or the
prospectus contained therein is not available for use) and all of the Warrant
Shares are not then registered for resale into the market at market prices from
time to time on an effective registration statement for use on a continuous
basis (or the prospectus contained therein is not available for use), the Holder
may, in its sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (a “
Cashless
Exercise
”):
Net
Number =
(A x B) - (A
x C)
B
For
purposes of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then being
exercised.
B= the
Closing Sale Price of the Common Stock on the Trading Day immediately preceding
the date of the Exercise Notice.
C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.
(e)
Disputes
. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 13.
(f)
Limitations on Exercises
.
Notwithstanding anything to the contrary contained in this Warrant, this Warrant
shall not be exercisable by the Holder hereof to the extent (but only to the
extent) that, if exercisable by the Holder, the Holder or any of its affiliates
would beneficially own in excess of [4.9%][9.9%] (the “
Maximum Percentage
”) of the
outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether this Warrant shall be exercisable (vis-à-vis other
convertible, exercisable or exchangeable securities owned by the Holder) and of
which such securities shall be exercisable (as among all such securities owned
by the Holder) shall, subject to such Maximum Percentage limitation, be
determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to exercise this
Warrant pursuant to this paragraph shall have any effect on the applicability of
the provisions of this paragraph with respect to any subsequent determination of
exercisability. For the purposes of this paragraph, beneficial ownership and all
determinations and calculations (including, without limitation, with respect to
calculations of percentage ownership) shall be determined by the Holder in
accordance with Section 13(d) of the 1934 Act (as defined in the Securities
Purchase Agreement) and the rules and regulations promulgated thereunder. The
provisions of this paragraph shall be implemented in a manner otherwise than in
strict conformity with the terms of this paragraph to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the intended
Maximum Percentage beneficial ownership limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
Maximum Percentage limitation. The limitations contained in this paragraph shall
apply to a successor Holder of this Warrant. The holders of Common Stock shall
be third party beneficiaries of this paragraph and the Company may not waive
this paragraph without the consent of holders of a majority of its Common Stock.
For any reason at any time, upon the written or oral request of the Holder, the
Company shall within two (2) Business Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Securities Purchase Agreement. [By
written notice to the Company, the Holder may increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.9% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61
st
) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.][HOLDER MAY ELECT WHICH BRACKETED PROVISIONS APPLY PRIOR TO ISSUANCE]
Each delivery of an Exercise Notice by the Holder will constitute a
representation by the Holder that it has evaluated the limitation set forth in
this paragraph and determined that issuance of the full number of Warrant Shares
requested by the Holder in such Exercise Notice is permitted under this
paragraph.
(g)
Insufficient Authorized
Shares
. The
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock as shall be necessary to satisfy the Company’s
obligation to issue shares of Common Stock hereunder (without regard to any
limitation otherwise contained herein with respect to the number of shares of
Common Stock that may be acquirable upon exercise of this Warrant). If,
notwithstanding the foregoing, and not in limitation thereof, at any time while
any of the SPA Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the SPA Warrants at
least a number of shares of Common Stock equal to the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the SPA Warrants then outstanding (the “
Required Reserve Amount
”) (an
“
Authorized Share
Failure
”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for all
the SPA Warrants then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
2.
ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
.
The Exercise Price and number
of Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 2.
(a)
Stock Dividends and
Splits
. If
the Company, at any time on or after the date of the Securities Purchase
Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its then outstanding shares of Common Stock into a larger
number of shares or (iii) combines (by combination, reverse stock split or
otherwise) one or more classes of its then outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event.
(b)
Adjustment Upon Issuance of
Shares of Common Stock
. If and
whenever on or after the date of the Securities Purchase Agreement the Company
issues or sells, or in accordance with this Section 2 is deemed to have issued
or sold, any shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company, but excluding
any Excluded Securities (as defined in the Certificate of Determination) issued
or sold or deemed to have been issued or sold) for a consideration per share
(the “
New Issuance
Price
”) less than a price equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “
Applicable Price
”) (the
foregoing a “
Dilutive
Issuance
”), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance
Price. For purposes of determining the adjusted Exercise Price under this
Section 2(b), the following shall be applicable:
(i)
Issuance of
Options
. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(b)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock (a) upon the granting or sale of the Option, (b) upon
exercise of the Option and (c) upon conversion, exercise or exchange of any
Convertible Security issuable upon exercise of such Option. Except as
contemplated below, no further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.
(ii)
Issuance of Convertible
Securities
. If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 2(b)(ii), the “lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock (a) upon the issuance or sale of the Convertible Security
and (b) upon conversion, exercise or exchange of such Convertible Security.
Except as contemplated below, no further adjustment of the Exercise Price shall
be made upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(b), except as contemplated below, no further
adjustment of the Exercise Price shall be made by reason of such issue or
sale.
(iii)
Change in Option Price or
Rate of Conversion
. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(b)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(b) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect.
(iv)
Calculation of Consideration
Received
. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01. If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the amount of
consideration received by the Company. If any shares of Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of publicly
traded securities, in which case the amount of consideration received by the
Company for such securities will be the average VWAP of such security for the
five (5) Trading Day period immediately preceding the date of receipt. If any
shares of Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or publicly traded securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “
Valuation
Event
”), the fair value of such consideration will be determined within
five (5) Trading Days after the tenth (10
th
) day
following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. The determination of such appraiser
shall be final and binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v)
Record Date
. If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable in
shares of Common Stock, Options or in Convertible Securities or (B) to subscribe
for or purchase shares of Common Stock, Options or Convertible Securities, then
such record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase (as the case may
be).
(c)
Number of Warrant
Shares
.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
(a) or (b) of this Section 2, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment (without regard to
any limitations on exercise contained herein).
(d)
Other Events
. In the
event that the Company (or any direct or indirect subsidiary thereof) shall take
any action to which the provisions hereof are not strictly applicable, or, if
applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors shall in good faith
determine and implement an appropriate adjustment in the Exercise Price and the
number of Warrant Shares (if applicable) so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section 2(d) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2, provided further that if the
Holder does not accept such adjustments as appropriately protecting its
interests hereunder against such dilution, then the Company’s Board of Directors
and the Holder shall agree, in good faith, upon an independent investment bank
of nationally recognized standing to make such appropriate adjustments, whose
determination shall be final and binding and whose fees and expenses shall be
borne by the Company.
(e)
Calculations
. All
calculations under this Section 2 shall be made to the nearest cent or the
nearest 1/100
th
of a
share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
3.
RIGHTS UPON DISTRIBUTION OF
ASSETS
. If the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to all the holders
of shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “
Distribution
”), at any time
after the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, that to the extent that the Holder’s right
to participate in any such Distributions would result in the Holder exceeding
the Maximum Percentage, then the Holder shall not be entitled to participate in
such Distribution to such extent (or the beneficial ownership of any such shares
of Common Stock as a result of such Distribution to such extent) and such
Distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).
4.
PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS
.
(a)
Purchase
Rights
. In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to all the
record holders of any class of shares of Common Stock (the “
Purchase Rights
”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise
hereof, including without limitation, the Maximum Percentage) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, that to the extent that the
Holder’s right to participate in any such Purchase Right would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage).
(b)
Fundamental
Transactions
. The
Company shall not enter into or be party to a Fundamental Transaction unless the
Successor Entity assumes in writing all of the obligations of the Company under
this Warrant and the other Transaction Documents (as defined in the Securities
Purchase Agreement) in accordance with the provisions of this Section 4(b)
pursuant to written agreements in form and substance satisfactory to the Holder
and approved by the Holder prior to such Fundamental Transaction, including
agreements to deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant, including, without limitation, which is
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction), and
which is satisfactory in form and substance to the Holder. Upon the occurrence
of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property (except such items still issuable under Sections
3 and 4(a) above, which shall continue to be receivable thereafter)) issuable
upon the exercise of this Warrant prior to such Fundamental Transaction, such
shares of Common Stock (or its equivalent) of the Successor Entity (including
its Parent Entity) which the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction had this Warrant been exercised
immediately prior to such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant), as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “
Corporate
Event
”), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the shares of the Common Stock (or
other securities, cash, assets or other property (except such items still
issuable under Sections 3 and 4(a) above, which shall continue to be receivable
thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the Warrant been exercised immediately prior
to such Fundamental Transaction (without regard to any limitations on the
exercise of this Warrant). Provision made pursuant to the preceding sentence
shall be in a form and substance reasonably satisfactory to the Holder. The
provisions of this Section 4 shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied as if this
Warrant (and any such subsequent warrants) were fully exercisable and without
regard to any limitations on the exercise of this Warrant (provided that the
Holder shall continue to be entitled to the benefit of the Maximum Percentage,
applied however with respect to shares of capital stock registered under the
1934 Act and thereafter receivable upon exercise of this Warrant (or any such
other warrant)).
(c)
Black Scholes
Value
.
Notwithstanding the foregoing and the provisions of Section 4(b) above, in the
event of a Fundamental Transaction (other than a Fundamental Transaction
resulting solely from a merger or consolidation in which the Company is the
surviving entity, the Common Stock continues to be publicly traded on an
Eligible Market following such merger or consolidation and an amount of shares
of Common Stock which is less than 20% of the Company’s issued and outstanding
shares of Common Stock outstanding immediately prior to such merger or
consolidation are issued in connection with such merger or consolidation), at
the request of the Holder delivered before the ninetieth (90
th
) day
after the consummation of such Fundamental Transaction, the Company or the
Successor Entity (as the case may be) shall purchase this Warrant from the
Holder by paying to the Holder cash in an amount equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction.
5.
NONCIRCUMVENTION
. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6.
WARRANT HOLDER NOT DEEMED A
STOCKHOLDER
. Except as otherwise specifically provided herein, the
Holder, solely in such Person’s capacity as a holder of this Warrant, shall not
be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person’s capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
7.
REISSUANCE
OF WARRANTS
.
(a)
Transfer of
Warrant
. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b)
Lost, Stolen or Mutilated
Warrant
. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant (as to which a written
certification and the indemnification contemplated below shall suffice as such
evidence), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, that
no warrants for fractional shares of Common Stock shall be given.
(d)
Issuance of New
Warrants
.
Whenever the Company is required to issue a new Warrant pursuant to the terms of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.
8.
NOTICES
. Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder (at its last
address as it shall appear upon the Warrant register of the Company) with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (at its last address as it shall appear upon the Warrant register
of the Company) (i) promptly following each adjustment of the Exercise Price and
the number of Warrant Shares, setting forth in reasonable detail, and
certifying, the calculation of such adjustment(s) and (ii) at least ten (10)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to all the holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder and (iii) at least ten (10) Trading Days prior to the
consummation of any Fundamental Transaction. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of its subsidiaries, the Company shall
simultaneously file such notice with the SEC (as defined in the Securities
Purchase Agreement) pursuant to a Current Report on Form 8-K.
9.
AMENDMENT AND
WAIVER
. Except as otherwise provided herein, the provisions of
this Warrant (other than Section 1(f)) may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. The Holder shall be entitled, at its option, to the benefit of any
amendment of any other similar warrant issued under the Securities Purchase
Agreement. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
10.
SEVERABILITY
. If
any provision of this Warrant or the application thereof becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.
11.
GOVERNING LAW
. This
Warrant shall be governed by and construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.
12.
CONSTRUCTION;
HEADINGS
. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the Holder.
13.
DISPUTE RESOLUTION
.
In the case of a dispute as to the determination of the Exercise Price or fair
market value or the arithmetic calculation of the Warrant Shares (as the case
may be), the Company or the Holder (as the case may be) shall submit the
disputed determinations or arithmetic calculations (as the case may be) via
facsimile within five (5) Business Days of receipt of the applicable notice
giving rise to such dispute to the Company or the Holder (as the case may be).
If the Holder and the Company are unable to agree upon such determination or
calculation (as the case may be) of the Exercise Price or fair market value or
the number of Warrant Shares (as the case may be) within three (3) Business Days
of such disputed determination or arithmetic calculation being submitted to the
Company or the Holder (as the case may be), then the Company shall, within ten
(10) days submit via facsimile (a) the disputed determination of the Exercise
Price or fair market value (as the case may be) to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and
the Holder of the results no later than twenty (20) days from the time it
receives such disputed determinations or calculations (as the case may be). Such
investment bank’s or accountant’s determination or calculation (as the case may
be) shall be binding upon all parties absent demonstrable error.
14.
REMEDIES, CHARACTERIZATION,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required. The issuance of shares and certificates for
shares as contemplated hereby upon the exercise of this Warrant shall be made
without charge to the Holder or such shares for any issuance tax or other costs
in respect thereof, provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.
15.
TRANSFER
. This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company so long as the Company receives written notice of such
sale, transfer or assignment within a reasonable amount of time thereafter that
contains the name(s) of the transferees or assignees and the rights so sold,
transferred or assigned.
16.
CERTAIN
DEFINITIONS
. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) “
Black Scholes Value
” means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg determined as of the day of closing
of the applicable Fundamental Transaction for pricing purposes and reflecting
(i) a risk-free interest rate corresponding to the U.S. Treasury rate for a
period equal to the remaining term of this Warrant as of such date of request,
(ii) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable Fundamental
Transaction and (iii) the underlying price per share used in such calculation
shall be the sum of the price per share being offered in cash, if any, plus the
value of any non cash consideration, if any, being offered in such Fundamental
Transaction.
(b) “
Bloomberg
” means Bloomberg
Financial Markets.
(c) “
Business Day
” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
(d) “
Certificate of Determination
”
has the meaning set forth in the Securities Purchase Agreement.
(e) “
Closing Sale Price
” means, for
any security as of any date, the last closing trade price for such security on
the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price, then the last trade price of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
trade price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in Section 13. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.
(f) “
Common Stock
” means (i) the
Company’s shares of common stock, no par value per share, and (ii) any capital
stock into which such common stock shall have been changed or any share capital
resulting from a reclassification of such common stock.
(g) “
Convertible Securities
” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
(h) “
Eligible Market
” means The New
York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market or the Principal Market.
(i) “
Expiration Date
” means the
date that is the fifth (5
th
)
anniversary of the Issuance Date or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a
“
Holiday
”), the next
date that is not a Holiday.
(j) “
Fundamental Transaction
” means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (3) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock (for clarification purposes,
excluding customary stock splits and stock dividends), or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common
Stock.
(k) “
Options
” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.
(l) “
Parent Entity
” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
(m) “
Person
” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(n) “
Principal Market
” means The
OTC Bulletin Board.
(o) “
Successor Entity
” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.
(p) “
Trading Day
” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).
(q) “
VWAP
” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.
[
signature page
follows
]
IN WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
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NUTRACEA
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By:
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Name:
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Title:
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EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
NUTRACEA
The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“
Warrant Shares
”) of NutraCea,
a California corporation (the “
Company
”), evidenced by
Warrant to Purchase Common Stock No. _______ (the “
Warrant
”). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1.
Form of
Exercise Price
. The Holder intends that payment of the
Exercise Price shall be made as:
____________
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a
“
Cash Exercise
” with respect to
_________________ Warrant Shares; and/or
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____________
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[if
permitted] a “
Cashless Exercise
” with
respect to _______________ Warrant
Shares.
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2.
Payment of Exercise
Price
. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3.
Qualified
Institutional/Accredited Investor
. If the Holder is a resident
of (or, in the case of an entity, such entity’s principal place of business is
located in) any State other than New York or California and is making a Cash
Exercise, the Holder hereby represents that the Holder is a “qualified
institutional investor” as defined in Section 2(g) of the Securities Purchase
Agreement, except that if the Holder is a resident of (or, in the case of an
entity, such entity’s principal place of business is located in) the State of
Illinois and is making a Cash Exercise, the Holder hereby represents that the
Holder is an “accredited investor” as that term is defined in Rule 501 of the
rules and regulations promulgated under the Securities Act of 1933, as
amended.
4.
Delivery of Warrant
Shares
. The Company shall deliver to Holder, or its designee
or agent as specified below, __________ Warrant Shares in accordance with the
terms of the Warrant. Delivery shall be made to Holder, or for its
benefit, to the following address:
Date:
_______________
__
,
______
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Name
of Registered Holder
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By:
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Name:
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Title:
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _____________, 2008 from
the Company and acknowledged and agreed to by _______________.
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NUTRACEA
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By:
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Name:
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Title:
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EXHIBIT
B
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE
RECEIVED, [all of the] [_______] shares of the foregoing Warrant and all rights
evidenced thereby [with respect to such shares] are hereby assigned
to
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Dated:
______________
,
_______
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Holder’s
Signature:
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Holder’s
Address:
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NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or any change
whatsoever.
Exhibit
4.2
[FORM
OF SERIES B WARRANT]
NUTRACEA
Warrant
To Purchase Series D Convertible Preferred Stock
Warrant
No.:
B-_______
Date of
Issuance: October ___, 2008 (“
Issuance Date
”)
NutraCea,
a California corporation (the “
Company
”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, _________________, the registered holder hereof or its
permitted assigns (the “
Holder
”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to
Purchase Series D Preferred Stock (as defined below) (including any Warrants to
Purchase Series D Preferred Stock issued in exchange, transfer or replacement
hereof, the “
Warrant
”),
at any time or times on or after the Issuance Date, but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below), ______________
(subject to adjustment as provided herein) fully paid and nonassessable shares
of Series D Preferred Stock (as defined below)
(the “
Warrant Shares
”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 16. This Warrant is one of the warrants to
purchase Series D Preferred Stock (the “
Series B Warrants
”) issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of
October 16, 2008, by and among the Company and the investors referred to therein
(the “
Securities Purchase
Agreement
”).
(a)
Mechanics of
Exercise
.
Subject to the
terms and conditions hereof, this Warrant may be exercised by the Holder on any
day on or after the Issuance Date, in whole or in part, by (i) delivery
(whether via facsimile or otherwise) of a written notice, in the form attached
hereto as
Exhibit A
(the
“
Exercise Notice
”), of
the Holder’s election to exercise this Warrant and (ii) payment to the
Company of an amount equal to the then-applicable Exercise Price multiplied by
the number of whole Warrant Shares as to which this Warrant is being exercised
(the “
Aggregate Exercise
Price
”) in cash or wire transfer of immediately available funds. The
Holder shall not be required to deliver the original of this Warrant in order to
effect an exercise hereunder until the Holder has purchased all the Warrant
Shares available hereunder and this Warrant has been exercised in full, in which
case, the Holder shall surrender this Warrant to the Company for cancellation as
soon as practicable following the delivery of the applicable Exercise Delivery
Documents (as defined below). Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original of this Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares.
Execution and delivery of the Exercise Notice for all of the Warrant Shares
shall have the same effect as cancellation of the original of this Warrant after
delivery of the Warrant Shares in accordance with the terms hereof. On or before
the second (2
nd
)
Trading Day following the date on which the Company has received each of the
fully completed Exercise Notice and the Aggregate Exercise Price (the “
Exercise Delivery Documents
”),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder. On or before the third
(3
rd
)
Trading Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “
Share Delivery Date
”), the
Company shall issue and deliver to the Holder or, at Holder’s instruction
pursuant to the Exercise Notice, Holder’s agent or designee, in each case, sent
by reputable overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company’s share register in the name of
the Holder or its designee (as indicated in the Exercise Notice), for the number
of shares of Series D Preferred Stock to which the Holder is entitled pursuant
to such exercise. Upon delivery of the Exercise Delivery Documents,
the Holder shall be deemed for all corporate purposes to have become the holder
of record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of the certificates evidencing
such Warrant Shares. If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than three (3) Business Days after any
exercise and at its own expense, issue and deliver to the Holder (or its
designee) a new Warrant (in accordance with Section 7(d)) representing the right
to purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to
which this Warrant is exercised. No fractional shares of Series D
Preferred Stock are to be issued upon the exercise of this Warrant, but rather
the number of shares of Series D Preferred Stock to be issued shall be rounded
up to the nearest whole number. The Company shall pay any and all transfer taxes
which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant; provided, however, that in the event certificates
for Warrant Shares are to be issued in a name other than the name of the Holder,
the applicable Exercise Notice shall be accompanied by the Assignment Form
attached hereto as
Exhibit
B
duly executed by the Holder, and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
(b)
Exercise Price.
For
purposes of this Warrant, “
Exercise Price
” means $1,000,
subject to adjustment as provided herein.
(c)
Disputes
. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 13.
(d)
Insufficient Authorized
Shares
. The Company shall at all times keep reserved for issuance under
this Warrant a number of shares of Series D Preferred Stock as shall be
necessary to satisfy the Company’s obligation to issue shares of Series D
Preferred Stock hereunder. If, notwithstanding the foregoing, and not in
limitation thereof, at any time while any of the Series B Warrants remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Series D Preferred Stock to satisfy its obligation to
reserve for issuance upon exercise of the Series B Warrants at least a number of
shares of Series D Preferred Stock equal to the number of shares of Series D
Preferred Stock as shall from time to time be necessary to effect the exercise
of all of the Series B Warrants then outstanding (the “
Required Reserve Amount
”) (an
“
Authorized Share
Failure
”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Series D Preferred Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount
for all the Series B Warrants then outstanding. Without limiting the generality
of the foregoing sentence, as soon as practicable after the date of the
occurrence of an Authorized Share Failure, but in no event later than sixty (60)
days after the occurrence of such Authorized Share Failure, the Company shall
hold a meeting of its stockholders for the approval of an increase in the number
of authorized shares of Series D Preferred Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Series D Preferred Stock and to cause its board
of directors to recommend to the stockholders that they approve such
proposal.
2.
ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
.
The Exercise Price and number
of Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 2.
(a)
Stock Dividends and
Splits.
If the Company, at any time on or after the date of
the Securities Purchase Agreement, (i) pays a stock dividend on its then
outstanding shares of Series D Preferred Stock or otherwise makes a distribution
on any class of capital stock that is payable in shares of Series D Preferred
Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its then outstanding shares of Series D Preferred Stock into a larger
number of shares or (iii) combines (by combination, reverse stock split or
otherwise) its then outstanding shares of Series D Preferred Stock into a
smaller number of shares, then in each such case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Series D Preferred Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Series D Preferred Stock
outstanding immediately after such event. Any adjustment made
pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause (ii) or
(iii) of this paragraph shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment
under this paragraph occurs during the period that an Exercise Price is
calculated hereunder, then the calculation of such Exercise Price shall be
adjusted appropriately to reflect such event.
(b)
Number of Warrant
Shares.
Simultaneously with any adjustment to the Exercise Price pursuant
to paragraph (a) of this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such
adjustment.
(c)
Other Events.
In the
event that the Company (or any direct or indirect subsidiary thereof) shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions, then the Company’s Board of
Directors shall in good faith determine and implement an appropriate adjustment
in the Exercise Price and the number of Warrant Shares (if applicable) so as to
protect the rights of the Holder; provided that no such adjustment pursuant to
this Section 2(c) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section 2, provided
further that if the Holder does not accept such adjustments as appropriately
protecting its interests hereunder against such dilution, then the Company’s
Board of Directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company.
(d)
Calculations.
All
calculations under this Section 2 shall be made to the nearest cent or the
nearest 1/100
th
of a
share, as applicable. The number of shares of Series D Preferred Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company.
3.
RIGHTS UPON
DISTRIBUTION OF ASSETS
. If the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to all the
holders of shares of Series D Preferred Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “
Distribution
”), at any time
after the issuance of this Warrant, then, in each such case, this Warrant shall
represent the right to acquire, in addition to the number of Warrant Shares
receivable upon exercise of this Warrant, and without payment of any additional
consideration therefor, the dividend or other distribution of the Company’s
assets that the Holder would have received in such Distribution if the Holder
were the holder of record of the Warrant Shares at the time of such Distribution
(provided, however, that to the extent that the Holder’s right to participate in
any such Distributions would result in the Holder exceeding the Maximum
Percentage (as defined in the Certificate of Determination), then the Holder
shall not be entitled to participate in such Distribution to such extent (or the
beneficial ownership of any such shares of Common Stock as a result of such
Distribution to such extent) and such Distribution to such extent shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Maximum
Percentage).
4.
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PURCHASE RIGHTS;
FUNDAMENTAL TRANSACTIONS
.
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(a)
Purchase Rights
.
In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to all the
record holders of any class of shares of Series D Preferred Stock (the “
Purchase Rights
”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Series D Preferred Stock acquirable
upon complete exercise of this Warrant immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of shares of
Series D Preferred Stock are to be determined for the grant, issue or sale of
such Purchase Rights (provided, however, that to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder
exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial ownership of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage).
(b)
Fundamental
Transactions
.
The Company shall
not enter into or be party to a Fundamental Transaction unless the Successor
Entity assumes in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents (as defined in the Securities
Purchase Agreement) in accordance with the provisions of this Section 4(b)
pursuant to written agreements in form and substance satisfactory to the Holder
and approved by the Holder prior to such Fundamental Transaction, including
agreements to deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant, including, without limitation, which is
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Series D Preferred Stock acquirable and receivable upon exercise
of this Warrant prior to such Fundamental Transaction, and with an exercise
price which applies the exercise price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Series D Preferred
Stock pursuant to such Fundamental Transaction and the value of such shares of
capital stock, such adjustments to the number of shares of capital stock and
such exercise price being for the purpose of protecting the economic value of
this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is satisfactory in form and substance to the Holder.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of Series D
Preferred Stock (or other securities, cash, assets or other property (except
such items still issuable under Sections 3 and 4(a) above, which shall continue
to be receivable thereafter)) issuable upon the exercise of this Warrant prior
to such Fundamental Transaction, such shares of capital stock of the Successor
Entity (including its Parent Entity) which the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction had this Warrant
been exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant. In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Series D
Preferred Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Series D Preferred Stock (a “
Corporate Event
”), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the
consummation of the Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Series D Preferred Stock (or other securities, cash,
assets or other property (except such items still issuable under Sections 3 and
4(a) above, which shall continue to be receivable thereafter)) issuable upon the
exercise of this Warrant prior to such Fundamental Transaction, such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have
been entitled to receive upon the happening of such Fundamental Transaction had
this Warrant been exercised immediately prior to such Fundamental Transaction
(without regard to any limitations on the exercise of this Warrant). Provision
made pursuant to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Holder. The provisions of this Section 4 shall
apply similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied as if this Warrant (and any such subsequent
warrants) were fully exercisable (provided that the Holder shall continue to be
entitled to the benefit of the Maximum Percentage, applied however with respect
to shares of capital stock registered under the 1934 Act and thereafter
receivable upon exercise of this Warrant (or any such other warrant)).
5.
NONCIRCUMVENTION
. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value or stated value (other than in
connection with a stock split or combination of the Series D Preferred Stock) of
any shares of Series D Preferred Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, (ii) shall take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Series D Preferred
Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the
Series B Warrants are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued shares of Series D Preferred Stock,
solely for the purpose of effecting the exercise of the Series B Warrants, the
maximum number of shares of Series D Preferred Stock as shall from time to time
be necessary to effect the exercise of the Series B Warrants then
outstanding.
6.
WARRANT HOLDER NOT DEEMED A
STOCKHOLDER
. Except as otherwise specifically provided herein, the
Holder, solely in such Person’s capacity as a holder of this Warrant, shall not
be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person’s capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
7.
REISSUANCE OF
WARRANTS
.
(a)
Transfer of
Warrant
.
If this Warrant is to be transferred, the Holder shall surrender this Warrant to
the Company together with a written assignment of this Warrant substantially in
the form attached hereto duly executed by the Holder or its agent or attorney
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section
7
(d)
)
to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b)
Lost, Stolen or Mutilated
Warrant.
Upon receipt by the Company of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant (as
to which a written certification and the indemnification contemplated below
shall suffice as such evidence), and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
.
This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no warrants for
fractional shares of Series D Preferred Stock shall be given.
(d)
Issuance of New
Warrants
.
Whenever the
Company is required to issue a new Warrant pursuant to the terms of this
Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii)
shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Series D Preferred Stock underlying the other new Warrants issued in connection
with such issuance, does not exceed the number of Warrant Shares then underlying
this Warrant), (iii) shall have an issuance date, as indicated on the face of
such new Warrant which is the same as the Issuance Date, and (iv) shall have the
same rights and conditions as this Warrant.
8.
NOTICES
. Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder (at its last
address as it shall appear upon the Warrant register of the Company) with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (at its last address as it shall appear upon the Warrant register
of the Company) (i) promptly following each adjustment of the Exercise Price and
the number of Warrant Shares, setting forth in reasonable detail, and
certifying, the calculation of such adjustment(s) and (ii) at least ten (10)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to all the holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder and (iii) at least ten (10) Trading Days prior to the
consummation of any Fundamental Transaction. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of its subsidiaries, the Company shall
simultaneously file such notice with the SEC (as defined in the Securities
Purchase Agreement) pursuant to a Current Report on Form 8-K.
9.
AMENDMENT AND
WAIVER
. Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder. The Holder
shall be entitled, at its option, to the benefit of any amendment of any other
similar warrant issued under the Securities Purchase Agreement. No waiver shall
be effective unless it is in writing and signed by an authorized representative
of the waiving party.
10.
SEVERABILITY
. If
any provision of this Warrant or the application thereof becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.
11.
GOVERNING LAW
. This
Warrant shall be governed by and construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.
12.
CONSTRUCTION;
HEADINGS
. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the
Holder.
13.
DISPUTE RESOLUTION
.
In the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares (as the case may be), the Company
or the Holder (as the case may be) shall submit the disputed determinations or
arithmetic calculations (as the case may be) via facsimile within five (5)
Business Days of receipt of the applicable notice giving rise to such dispute to
the Company or the Holder (as the case may be). If the Holder and the Company
are unable to agree upon such determination or calculation (as the case may be)
of the Exercise Price or the number of Warrant Shares (as the case may be)
within three (3) Business Days of such disputed determination or arithmetic
calculation being submitted to the Company or the Holder (as the case may be),
then the Company shall, within ten (10) days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and
the Holder of the results no later than twenty (20) days from the time it
receives such disputed determinations or calculations (as the case may be). Such
investment bank’s or accountant’s determination or calculation (as the case may
be) shall be binding upon all parties absent demonstrable error.
14.
REMEDIES, CHARACTERIZATION,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required. The issuance of shares and certificates for
shares as contemplated hereby upon the exercise of this Warrant shall be made
without charge to the Holder or such shares for any issuance tax or other costs
in respect thereof, provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.
15.
TRANSFER
. This
Warrant may not be offered for sale, sold, transferred or assigned without the
prior written consent of the Company.
16.
CERTAIN
DEFINITIONS
. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) “
Business Day
” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
(b) “
Certificate of Determination
”
has the meaning set forth in the Securities Purchase Agreement.
(c) “
Common Stock
” means
(i) the Company’s shares of common stock, no par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common
stock.
(d) “
Convertible Securities
” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
(e) “
Expiration Date
” means the
date that is the sixtieth (60
th
)
calendar day following the Issuance Date or, if such date falls on a day other
than a Business Day or on which trading does not take place on the Principal
Market (a “
Holiday
”),
the next date that is not a Holiday; provided, however, that the Expiration Date
shall be extended one calendar day for each calendar day during the term of this
Warrant (as extended pursuant to this proviso) that the Registration Statement
(as defined in the Securities Purchase Agreement) is not effective (or the
prospectus contained therein is not available for use) for all of the Securities
(as defined in the Certificate of Determination).
(f) “
Fundamental Transaction
” means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (3) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock (for clarification purposes,
excluding customary stock splits and stock dividends), or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.
(g) “
Options
” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.
(h) “
Parent Entity
” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
(i) “
Person
” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(j) “
Principal Market
” means The
OTC Bulletin Board.
(k) “
Series D Preferred Stock
”
means (i) the Company’s shares of Series D Convertible Preferred Stock and
(ii) any capital stock into which such preferred stock shall have been changed
or any share capital resulting from a reclassification of such preferred
stock.
(l) “
Successor Entity
” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.
(m) “
Trading Day
” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).
[
signature page
follows
]
IN WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase Series D Convertible Preferred Stock
to be duly executed as of the Issuance Date set out above.
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NUTRACEA
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By:
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Name:
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Title:
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EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE SERIES D CONVERTIBLE PREFERRED STOCK
NUTRACEA
The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Series D Convertible Preferred Stock (“
Warrant Shares
”) of NutraCea,
a California corporation (the “
Company
”), evidenced by
Warrant to Purchase Series D Convertible Preferred Stock No. _______ (the “
Warrant
”). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1.
Payment of Exercise
Price
. The Holder shall pay the Aggregate Exercise Price in
the sum of $___________________ to the Company in accordance with the terms of
the Warrant.
2.
Qualified
Institutional/Accredited Investor
. If the Holder is a resident
of (or, in the case of an entity, such entity’s principal place of business is
located in) any State other than New York or California, the Holder hereby
represents that the Holder is a “qualified institutional investor” as defined in
Section 2(g) of the Securities Purchase Agreement, except that if the Holder is
a resident of (or, in the case of an entity, such entity’s principal place of
business is located in) the State of Illinois, the Holder hereby represents that
the Holder is an “accredited investor” as that term is defined in Rule 501 of
the rules and regulations promulgated under the Securities Act of 1933, as
amended.
3.
Delivery of
Warrant Shares
. The Company shall deliver to Holder, or its
designee or agent as specified below, __________ Warrant Shares in accordance
with the terms of the Warrant. Delivery shall be made to Holder, or
for its benefit, to the following address:
Date:
_______________
___
,
______
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Name
of Registered Holder
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By:
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Name:
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Title:
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Series D
Preferred Stock in accordance with the terms of the Warrant.
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NUTRACEA
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By:
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Name:
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Title:
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EXHIBIT
B
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this form
and supply required information.
Do not
use this form to exercise the warrant.)
FOR VALUE
RECEIVED, [all of the] [_______] shares of the foregoing Warrant and all rights
evidenced thereby [with respect to such shares] are hereby assigned to
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Dated:
______________
,
_______
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Holder’s
Signature:
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Holder’s
Address:
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NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or any change
whatsoever.
Exhibit 4.3
[FORM
OF SERIES C WARRANT]
NUTRACEA
Warrant
To Purchase Common Stock
Warrant
No.:
C- ___________
Date of
Issuance: October ___, 2008 (“
Issuance Date
”)
NutraCea,
a California corporation (the “
Company
”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, _________________, the registered holder hereof or its
permitted assigns (the “
Holder
”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “
Warrant
”), at any time or
times on or after the Issuance Date, but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), ______________ (subject to adjustment as
provided herein) fully paid and nonassessable shares of Common Stock (as defined
below)
(the “
Warrant Shares
”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 16. This Warrant is one of the warrants to
purchase Common Stock (the “
SPA
Warrants
”) issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of October 16, 2008, by and among the Company and
the investors referred to therein (the “
Securities Purchase
Agreement
”).
(a)
Mechanics of
Exercise
. Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the Issuance Date, in whole or in part, by
(i) delivery (whether via facsimile or otherwise) of a written notice, in
the form attached hereto as
Exhibit A
(the “
Exercise Notice
”), of the
Holder’s election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the then-applicable Exercise Price multiplied by
the number of Warrant Shares as to which this Warrant is being exercised (the
“
Aggregate Exercise
Price
”) in cash or wire transfer of immediately available funds or, (B)
if permitted pursuant to Section 1(d) of this Warrant, by notifying the Company
that this Warrant is being exercised pursuant to a Cashless Exercise (as defined
in Section 1(d)). The Holder shall not be required to deliver the original of
this Warrant in order to effect an exercise hereunder until the Holder has
purchased all the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation as soon as practicable following the delivery of the
applicable Exercise Delivery Documents (as defined below). Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original of this
Warrant and issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. Execution and delivery of the Exercise
Notice for all of the Warrant Shares shall have the same effect as cancellation
of the original of this Warrant after delivery of the Warrant Shares in
accordance with the terms hereof. On or before the second (2
nd
)
Trading Day following the date on which the Company has received each of the
fully completed Exercise Notice and the Aggregate Exercise Price (or notice of a
Cashless Exercise, if applicable) (the “
Exercise Delivery Documents
”),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “
Transfer
Agent
”). On or before the third (3
rd
)
Trading Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “
Share Delivery Date
”), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company (“
DTC
”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at Holder’s instruction
pursuant to the Exercise Notice, Holder’s agent or designee, in each case, sent
by reputable overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company’s share register in the name of
the Holder or its designee (as indicated in the Exercise Notice), for the number
of shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be). If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3)
Business Days after any exercise and at its own expense, issue and deliver to
the Holder (or its designee) a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all
transfer taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, the applicable Exercise Notice shall be accompanied by the
Assignment Form attached hereto as
Exhibit B
duly executed by the
Holder, and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental
thereto.
(b)
Exercise
Price
. For
purposes of this Warrant, “
Exercise Price
” means $0.55,
subject to adjustment as provided herein.
(c)
Company’s Failure to Timely
Deliver Securities
. If
within three (3) Trading Days after the Company’s receipt of the applicable
Exercise Delivery Documents, the Company shall fail to issue and deliver a
certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance account with DTC for the
number of shares of Common Stock to which the Holder is entitled upon such
Holder’s exercise hereunder (as the case may be), and if on or after such third
(3
rd
)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “
Buy-In
”), then, in addition to
all other remedies available to the Holder, the Company shall, within three (3)
Business Days after the Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased (the “
Buy-In
Price
”), at which point the Company’s obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon such Holder’s exercise hereunder (as the case may be)
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock times
(B) the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice.
(d)
Cashless
Exercise
.
Notwithstanding anything contained herein to the contrary (other than Section
1(f) below), if at the time of exercise hereof the Registration Statement (as
defined in the Securities Purchase Agreement) is not effective (or the
prospectus contained therein is not available for use) and all of the Warrant
Shares are not then registered for resale into the market at market prices from
time to time on an effective registration statement for use on a continuous
basis (or the prospectus contained therein is not available for use), the Holder
may, in its sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (a “
Cashless
Exercise
”):
Net
Number =
(A x B) - (A
x C)
B
For
purposes of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then being
exercised.
B= the
Closing Sale Price of the Common Stock on the Trading Day immediately preceding
the date of the Exercise Notice.
C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.
(e)
Disputes
. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof (including, without limitation, under Section 1(h)), the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section
13.
(f)
Limitations on
Exercises
. Notwithstanding anything to the contrary contained in this
Warrant, this Warrant shall not be exercisable by the Holder hereof to the
extent (but only to the extent) that, if exercisable by the Holder, the Holder
or any of its affiliates would beneficially own in excess of [4.9%][9.9%]
(the “
Maximum
Percentage
”) of the outstanding shares of Common Stock. To the
extent the above limitation applies, the determination of whether this Warrant
shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable
securities owned by the Holder) and of which such securities shall be
exercisable (as among all such securities owned by the Holder) shall, subject to
such Maximum Percentage limitation, be determined on the basis of the first
submission to the Company for conversion, exercise or exchange (as the case may
be). No prior inability to exercise this Warrant pursuant to this paragraph
shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of exercisability.
For the purposes of this paragraph, beneficial ownership and all determinations
and calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined by the Holder in accordance with
Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement)
and the rules and regulations promulgated thereunder. The provisions of this
paragraph shall be implemented in a manner otherwise than in strict conformity
with the terms of this paragraph to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such Maximum
Percentage limitation. The limitations contained in this paragraph shall apply
to a successor Holder of this Warrant. The holders of Common Stock shall be
third party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within two (2) Business Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Securities Purchase Agreement. [By
written notice to the Company, the Holder may increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.9% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61
st
) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.][HOLDER MAY ELECT WHICH BRACKETED PROVISIONS APPLY PRIOR TO ISSUANCE]
Each delivery of an Exercise Notice by the Holder will constitute a
representation by the Holder that it has evaluated the limitation set forth in
this paragraph and determined that issuance of the full number of Warrant Shares
requested by the Holder in such Exercise Notice is permitted under this
paragraph.
(g)
Insufficient Authorized
Shares
. The
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock as shall be necessary to satisfy the Company’s
obligation to issue shares of Common Stock hereunder (without regard to any
limitation otherwise contained herein with respect to the number of shares of
Common Stock that may be acquirable upon exercise of this Warrant). If,
notwithstanding the foregoing, and not in limitation thereof, at any time while
any of the SPA Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the SPA Warrants at
least a number of shares of Common Stock equal to the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the SPA Warrants then outstanding (the “
Required Reserve Amount
”) (an
“
Authorized Share
Failure
”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for all
the SPA Warrants then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
(h)
Issuance
Limit
.
Notwithstanding anything to the contrary contained in this Warrant (but subject
to Section 1(f)), the maximum number of Warrant Shares for which this Warrant
may be exercised at any specific time by the Holder shall be equal to the
quotient of (i) the Current Available Amount as of such time over (ii) the
Exercise Price then in effect as of such time. The foregoing determination shall
be made upon each receipt of Exercise Delivery Documents hereunder and no
inability to exercise as of any specific time as a result of this Section 1(h)
shall affect any future determination of exercisability as of any other time. In
the event that the Holder shall sell or otherwise transfer all or any portion of
this Warrant, the Company’s Board of Directors shall in good faith make
equitable adjustments with respect to the Current Available Amount (and the
components thereof) to properly give effect to such sale of transfer, provided
further that if the Holder does not accept such adjustments, then the Company’s
Board of Directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company.
2.
ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
.
The Exercise Price and number
of Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 2.
(a)
Stock Dividends and
Splits
. If
the Company, at any time on or after the date of the Securities Purchase
Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its then outstanding shares of Common Stock into a larger
number of shares or (iii) combines (by combination, reverse stock split or
otherwise) one or more classes of its then outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event.
(b)
Adjustment Upon Issuance of
Shares of Common Stock
. If and
whenever on or after the date of the Securities Purchase Agreement the Company
issues or sells, or in accordance with this Section 2 is deemed to have issued
or sold, any shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company, but excluding
any Excluded Securities (as defined in the Certificate of Determination) issued
or sold or deemed to have been issued or sold) for a consideration per share
(the “
New Issuance
Price
”) less than a price equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “
Applicable Price
”) (the
foregoing a “
Dilutive
Issuance
”), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance
Price. For purposes of determining the adjusted Exercise Price under this
Section 2(b), the following shall be applicable:
(i)
Issuance of
Options
. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(b)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock (a) upon the granting or sale of the Option, (b) upon
exercise of the Option and (c) upon conversion, exercise or exchange of any
Convertible Security issuable upon exercise of such Option. Except as
contemplated below, no further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.
(ii)
Issuance of Convertible
Securities
. If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 2(b)(ii), the “lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock (a) upon the issuance or sale of the Convertible Security
and (b) upon conversion, exercise or exchange of such Convertible Security.
Except as contemplated below, no further adjustment of the Exercise Price shall
be made upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(b), except as contemplated below, no further
adjustment of the Exercise Price shall be made by reason of such issue or
sale.
(iii)
Change in Option Price or
Rate of Conversion
. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(b)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(b) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect.
(iv)
Calculation of Consideration
Received
. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01. If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the amount of
consideration received by the Company. If any shares of Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of publicly
traded securities, in which case the amount of consideration received by the
Company for such securities will be the average VWAP of such security for the
five (5) Trading Day period immediately preceding the date of receipt. If any
shares of Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or publicly traded securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “
Valuation
Event
”), the fair value of such consideration will be determined within
five (5) Trading Days after the tenth (10
th
) day
following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. The determination of such appraiser
shall be final and binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.
(v)
Record Date
. If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase (as the case may
be).
(c)
Number of Warrant
Shares
.
Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
(a) or (b) of this Section 2, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment (without regard to
any limitations on exercise contained herein).
(d)
Other
Events
. In the
event that the Company (or any direct or indirect subsidiary thereof) shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors shall in good faith
determine and implement an appropriate adjustment in the Exercise Price and the
number of Warrant Shares (if applicable) so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section 2(d) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2, provided further that if the
Holder does not accept such adjustments as appropriately protecting its
interests hereunder against such dilution, then the Company’s Board of Directors
and the Holder shall agree, in good faith, upon an independent investment bank
of nationally recognized standing to make such appropriate adjustments, whose
determination shall be final and binding and whose fees and expenses shall be
borne by the Company.
(e)
Calculations
. All
calculations under this Section 2 shall be made to the nearest cent or the
nearest 1/100
th
of a
share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
3.
RIGHTS UPON
DISTRIBUTION OF ASSETS
. If the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to all the
holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “
Distribution
”), at any time
after the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, that to the extent that the Holder’s right
to participate in any such Distributions would result in the Holder exceeding
the Maximum Percentage, then the Holder shall not be entitled to participate in
such Distribution to such extent (or the beneficial ownership of any such shares
of Common Stock as a result of such Distribution to such extent) and such
Distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).
4.
|
PURCHASE RIGHTS;
FUNDAMENTAL TRANSACTIONS
.
|
(a)
Purchase
Rights
. In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to all the
record holders of any class of shares of Common Stock (the “
Purchase Rights
”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise
hereof, including without limitation, the Maximum Percentage) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, that to the extent that the
Holder’s right to participate in any such Purchase Right would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such Purchase Right to such extent (or beneficial ownership of
such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage).
(b)
Fundamental
Transactions
. The
Company shall not enter into or be party to a Fundamental Transaction unless the
Successor Entity assumes in writing all of the obligations of the Company under
this Warrant and the other Transaction Documents (as defined in the Securities
Purchase Agreement) in accordance with the provisions of this Section 4(b)
pursuant to written agreements in form and substance satisfactory to the Holder
and approved by the Holder prior to such Fundamental Transaction, including
agreements to deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant, including, without limitation, which is
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction), and
which is satisfactory in form and substance to the Holder. Upon the occurrence
of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property (except such items still issuable under Sections
3 and 4(a) above, which shall continue to be receivable thereafter)) issuable
upon the exercise of this Warrant prior to such Fundamental Transaction, such
shares of Common Stock (or its equivalent) of the Successor Entity (including
its Parent Entity) which the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction had this Warrant been exercised
immediately prior to such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant), as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “
Corporate
Event
”), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the shares of the Common Stock (or
other securities, cash, assets or other property (except such items still
issuable under Sections 3 and 4(a) above, which shall continue to be receivable
thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the Warrant been exercised immediately prior
to such Fundamental Transaction (without regard to any limitations on the
exercise of this Warrant). Provision made pursuant to the preceding sentence
shall be in a form and substance reasonably satisfactory to the Holder. The
provisions of this Section 4 shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied as if this
Warrant (and any such subsequent warrants) were fully exercisable and without
regard to any limitations on the exercise of this Warrant (provided that the
Holder shall continue to be entitled to the benefit of the Maximum Percentage,
applied however with respect to shares of capital stock registered under the
1934 Act and thereafter receivable upon exercise of this Warrant (or any such
other warrant)).
(c)
Black Scholes
Value
.
Notwithstanding the foregoing and the provisions of Section 4(b) above, in the
event of a Fundamental Transaction (other than a Fundamental Transaction
resulting solely from a merger or consolidation in which the Company is the
surviving entity, the Common Stock continues to be publicly traded on an
Eligible Market following such merger or consolidation and an amount of shares
of Common Stock which is less than 20% of the Company’s issued and outstanding
shares of Common Stock outstanding immediately prior to such merger or
consolidation are issued in connection with such merger or consolidation), at
the request of the Holder delivered before the ninetieth (90
th
) day
after the consummation of such Fundamental Transaction, the Company or the
Successor Entity (as the case may be) shall purchase this Warrant from the
Holder by paying to the Holder cash in an amount equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction.
5.
NONCIRCUMVENTION
. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6.
WARRANT HOLDER NOT
DEEMED A STOCKHOLDER
. Except as otherwise specifically provided herein,
the Holder, solely in such Person’s capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person’s capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
7.
REISSUANCE OF
WARRANTS
.
(a)
Transfer of
Warrant
. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b)
Lost, Stolen or Mutilated
Warrant
. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant (as to which a written
certification and the indemnification contemplated below shall suffice as such
evidence), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, that
no warrants for fractional shares of Common Stock shall be given.
(d)
Issuance of New
Warrants
.
Whenever the Company is required to issue a new Warrant pursuant to the terms of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.
8.
NOTICES
. Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder (at its last
address as it shall appear upon the Warrant register of the Company) with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (at its last address as it shall appear upon the Warrant register
of the Company) (i) promptly following each adjustment of the Exercise Price and
the number of Warrant Shares, setting forth in reasonable detail, and
certifying, the calculation of such adjustment(s) and (ii) at least ten (10)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to all the holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder and (iii) at least ten (10) Trading Days prior to the
consummation of any Fundamental Transaction. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of its subsidiaries, the Company shall
simultaneously file such notice with the SEC (as defined in the Securities
Purchase Agreement) pursuant to a Current Report on Form 8-K.
9.
AMENDMENT AND
WAIVER
. Except as otherwise provided herein, the provisions of
this Warrant (other than Section 1(f)) may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. The Holder shall be entitled, at its option, to the benefit of any
amendment of any other similar warrant issued under the Securities Purchase
Agreement. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
10.
SEVERABILITY
. If
any provision of this Warrant or the application thereof becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.
11.
GOVERNING LAW
. This
Warrant shall be governed by and construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.
12.
CONSTRUCTION;
HEADINGS
. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the Holder.
13.
DISPUTE RESOLUTION
.
In the case of a dispute as to the determination of the Exercise Price or fair
market value or the arithmetic calculation of the Warrant Shares (as the case
may be), the Company or the Holder (as the case may be) shall submit the
disputed determinations or arithmetic calculations (as the case may be) via
facsimile within five (5) Business Days of receipt of the applicable notice
giving rise to such dispute to the Company or the Holder (as the case may be).
If the Holder and the Company are unable to agree upon such determination or
calculation (as the case may be) of the Exercise Price or fair market value or
the number of Warrant Shares (as the case may be) within three (3) Business Days
of such disputed determination or arithmetic calculation being submitted to the
Company or the Holder (as the case may be), then the Company shall, within ten
(10) days submit via facsimile (a) the disputed determination of the Exercise
Price or fair market value (as the case may be) to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and
the Holder of the results no later than twenty (20) days from the time it
receives such disputed determinations or calculations (as the case may be). Such
investment bank’s or accountant’s determination or calculation (as the case may
be) shall be binding upon all parties absent demonstrable error.
14.
REMEDIES, CHARACTERIZATION,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required. The issuance of shares and certificates for
shares as contemplated hereby upon the exercise of this Warrant shall be made
without charge to the Holder or such shares for any issuance tax or other costs
in respect thereof, provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.
15.
TRANSFER
. This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company so long as the Company receives written notice of such
sale, transfer or assignment within a reasonable amount of time thereafter that
contains the name(s) of the transferees or assignees and the rights so sold,
transferred or assigned.
16.
CERTAIN
DEFINITIONS
. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) “
Aggregate Face Exercise
Amount
” is equal to $_____________.
(b) “
Aggregate Series B Face Exercise
Amount
” is equal to $_____________.
(c) “
Black Scholes Value
” means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg determined as of the day of closing
of the applicable Fundamental Transaction for pricing purposes and reflecting
(i) a risk-free interest rate corresponding to the U.S. Treasury rate for a
period equal to the remaining term of this Warrant as of such date of request,
(ii) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable Fundamental
Transaction and (iii) the underlying price per share used in such calculation
shall be the sum of the price per share being offered in cash, if any, plus the
value of any non cash consideration, if any, being offered in such Fundamental
Transaction.
(d) “
Bloomberg
” means Bloomberg
Financial Markets.
(e) “
Business Day
” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
(f) “
Certificate of Determination
”
has the meaning set forth in the Securities Purchase Agreement.
(g) “
Closing Sale Price
” means, for
any security as of any date, the last closing trade price for such security on
the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price, then the last trade price of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
trade price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.
(h) “
Common Stock
” means
(i) the Company’s shares of common stock, no par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common
stock.
(i)
“
Convertible Securities
”
means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of Common
Stock.
(j) “
Current Available Amount
” is,
as of the applicable time of determination, equal to (i) the product of (1) the
Aggregate Face Exercise Amount times (2) the Series B Multiplier minus (ii) the
Prior Aggregate Exercise Amount.
(k) “
Eligible Market
” means The New
York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market or the Principal Market.
(l) “
Expiration Date
” means the
date that is the sixty two (62) month anniversary of the Issuance Date or, if
such date falls on a day other than a Business Day or on which trading does not
take place on the Principal Market (a “
Holiday
”), the next date that
is not a Holiday.
(m) “
Fundamental Transaction
” means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (3) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock (for clarification purposes,
excluding customary stock splits and stock dividends), or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.
(n) “
Options
” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.
(o) “
Parent Entity
” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
(p) “
Person
” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(q) “
Principal Market
” means The
OTC Bulletin Board.
(r) “
Prior Aggregate Exercise
Amount
” is, as of the applicable time of determination, equal to the
total aggregate Exercise Price theretofore actually paid (whether in cash or by
delivery of notice of a Cashless Exercises) with respect to the Series C
Warrants initially issued to
_________________
(and not including the exercise
in question).
(s) “
Series B Prior Aggregate Exercise
Amount
” is, as of the applicable time of determination, equal to the
total aggregate Exercise Price (as defined in the Series B Warrants) theretofore
actually paid for prior or concurrent exercises with respect to the Series B
Warrants initially issued to
_________________
.
(t) “
Series B Multiplier
” is equal
to the quotient of (i) the Series B Prior Aggregate Exercise Amount divided by
(ii) the Aggregate Series B Face Exercise Amount.
(u) “
Successor Entity
” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.
(v) “
Trading Day
” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).
(w) “
VWAP
” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.
[
signature page
follows
]
IN WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
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NUTRACEA
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By:
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Name:
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Title:
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EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
NUTRACEA
The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“
Warrant Shares
”) of NutraCea,
a California corporation (the “
Company
”), evidenced by
Warrant to Purchase Common Stock No. _______ (the “
Warrant
”). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1.
Form of Exercise
Price
. The Holder intends that payment of the Exercise Price
shall be made as:
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____________
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a
“
Cash
Exercise
” with respect to _________________ Warrant Shares;
and/or
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____________
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[if
permitted] a “
Cashless
Exercise
” with respect to _______________ Warrant
Shares.
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2.
Payment of Exercise
Price
. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3.
Qualified
Institutional/Accredited Investor
. If the Holder is a resident
of (or, in the case of an entity, such entity’s principal place of business is
located in) any State other than New York or California and is making a Cash
Exercise, the Holder hereby represents that the Holder is a “qualified
institutional investor” as defined in Section 2(g) of the Securities Purchase
Agreement, except that if the Holder is a resident of (or, in the case of an
entity, such entity’s principal place of business is located in) the State of
Illinois and is making a Cash Exercise, the Holder hereby represents that the
Holder is an “accredited investor” as that term is defined in Rule 501 of the
rules and regulations promulgated under the Securities Act of 1933, as
amended.
4.
Delivery of Warrant
Shares
. The Company shall deliver to Holder, or its designee
or agent as specified below, __________ Warrant Shares in accordance with the
terms of the Warrant. Delivery shall be made to Holder, or for its
benefit, to the following address:
Name of
Registered Holder
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _____________, 2008 from
the Company and acknowledged and agreed to by _______________.
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NUTRACEA
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By:
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Name:
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Title:
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EXHIBIT
B
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this form
and supply required information.
Do not
use this form to exercise the warrant.)
FOR VALUE
RECEIVED, [all of the] [_______] shares of the foregoing Warrant and all rights
evidenced thereby [with respect to such shares] are hereby assigned
to
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Holder’s
Signature:
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Holder’s
Address:
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NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or any change
whatsoever.
Exhibit
5.1
October
20, 2008
NutraCea
5090
North 40
th
Street,
Fourth Floor
Phoenix,
Arizona 85018
Ladies
and Gentlemen:
We have
acted as counsel for NutraCea, a California corporation (the “Company”), in
connection with the registration under the Securities Act of 1933 (the “Act”) of
up to 5,000 shares of our Series D Convertible Preferred Stock (“Preferred
Stock”), warrants to purchase up to 5,000 shares of our Preferred Stock (“Series
B Warrants”), warrants to purchase up to 4,545,455 shares of our common stock
(“Series A Warrants”), warrants to purchase up to 4,545,455 shares
of our common stock (“Series C Warrants, and together with the Series
A Warrants and the Series B Warrants, the “Warrants”), up to 5,000 shares of
Preferred Stock issuable upon exercise of the Series B Warrant and up to
36,390,910 additional shares of our common stock (“Common Stock” and, together
with the Preferred Stock and Warrants, the “Securities”) issuable upon (1)
payment of dividends on the Preferred Stock (including shares of Preferred Stock
that may be issued upon exercise of the Series B Warrant), (2) the conversion of
the Preferred Stock (including shares of Preferred Stock that may be issued upon
exercise of the Series B Warrant), and (3) the exercise of the Series A Warrant
and Series C Warrant, in each case pursuant to the Registration Statement on
Form S-3 (File No. 333-148929) filed by the Company with the Securities and
Exchange Commission (the “Commission”) on January 30, 2008 and amended on March
28, 2008 (the “Registration Statement”) and related prospectus, dated
April 8, 2008 (the “Prospectus”), and the prospectus supplement, dated October
16, 2008, relating to the Securities, filed or to be filed by the Company with
the Commission pursuant to Rule 424(b) under the Act (the “Prospectus
Supplement”).
NutraCea
October
20, 2008
Page
2
We have reviewed, among other things,
(i) the Securities Purchase Agreement, dated October 16, 2008, among the
Company and the buyers party thereto (the “Purchase Agreement”), (ii) the
Articles of Incorporation of the Company, as in effect as of the date hereof,
(iii) the Bylaws of the Company, as in effect as of the date hereof,
(iv) the Certificate of Determination, Preferences and Rights of the Series
D Convertible Preferred Stock of NutraCea (the “Certificate of Determination”),
(v) the form of the Warrants, and (vi) the records of the corporate
proceedings and other actions taken or proposed to be taken by the Company in
connection with the authorization, issuance and sale of the Preferred Stock and
Warrants. We have made such other factual inquiries as we deemed necessary to
render this opinion.
We have
assumed that (i) the Registration Statement, and any amendments thereto,
will remain effective during the period when the Securities are offered, sold or
issued, including upon the conversion of the Preferred Stock or exercise of the
Warrants and (ii) the Warrants will be issued in the form we have reviewed
and will have been signed by a duly authorized signatory.
Based
upon the foregoing and our examination of such questions of law as we have
deemed necessary or appropriate for the purpose of our opinion, and subject to
the limitations and qualifications expressed herein, it is our opinion that
(a) the Preferred Stock and Warrants, when sold and delivered in accordance
with the Purchase Agreement and after receipt of payment therefor, will be
validly issued, fully paid and non-assessable, (b) the Common Stock, when
issued upon valid exercise of the Series A Warrants and Series C Warrant in
accordance with the terms of their underlying instruments and after receipt of
payment therefor, will be validly issued, fully paid and non-assessable,
(c) the Preferred Stock, when issued upon valid exercise of the Series B
Warrant in accordance with its terms and after receipt of payment therefor, will
be validly issued, fully paid and non-assessable and (d) the Common Stock,
when issued upon conversion of the Preferred Stock or payment of dividends
thereon in accordance with the Certificate of Determination will be validly
issued, fully paid and non-assessable.
NutraCea
October
20, 2008
Page
3
This
opinion is limited to matters governed by the California Corporations Code and
the laws of the State of California.
We
hereby consent to the filing of this opinion as an exhibit to a Form 8-K
incorporated by reference in the Registration Statement and to the use of our
name under the captions “Legal Matters” in the Prospectus Supplement and the
Prospectus. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated
thereunder.
Very
truly yours,
/s/
WEINTRAUB GENSHLEA CHEDIAK
WEINTRAUB
GENSHLEA CHEDIAK
law
corporation
Exhibit
10.1
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE
AGREEMENT
(the “
Agreement
”), dated as of
October 16, 2008, is by and among NutraCea, a California corporation with
offices located at 5090 N. 40th Street, Suite 400, Phoenix, Arizona 85018 (the
“
Company
”), and the
investors listed on the Schedule of Buyers attached hereto (individually, a
“
Buyer
” and
collectively, the “
Buyers
”).
RECITALS
A. The
Company has authorized a series of preferred stock entitled the “Series D
Convertible Preferred Stock” (the “
Preferred Stock
”), which
Preferred Stock shall be convertible into shares of the Company’s common stock,
no par value per share (the “
Common Stock
”), in accordance
with the terms of the Preferred Stock. The rights, preferences and
other terms and provisions of the Preferred Stock are set forth in the
Certificate of Determination, Preferences and Rights of Series D Convertible
Preferred Stock in the form attached hereto as
Exhibit
A
(the “
Certificate of
Determination
”). As used herein, the term “
Conversion Shares
” shall
include all shares of Common Stock issuable upon conversion of, or as dividends
on, the Preferred Stock in accordance with the Certificate of
Determination.
B. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the number of shares of Preferred Stock
set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers and
(ii) a warrant to acquire up to that number of additional shares of Common Stock
set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, in
the form attached hereto as
Exhibit
B
(the “
Series A
Warrants
”) (as
exercised, collectively, the “
Series A
Warrant Shares
”), (iii) a
warrant to acquire up to that number of additional shares of Preferred Stock set
forth opposite such Buyer’s name in column (5) on the Schedule of Buyers, in the
form attached hereto as
Exhibit
C
(the “
Series B
Warrants
”) (as exercised, collectively, the “
Series B
Warrant Shares
”) and (iv) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (6) on the Schedule of Buyers, in the
form attached hereto as
Exhibit
D
(the “
Series C
Warrants
”) (as exercised, collectively, the “
Series C
Warrant Shares
”). For purposes
of this Agreement, (i) the Series A Warrants, the Series B Warrants and the
Series C Warrants are collectively referred to herein as the “
Warrants
;” (ii) the Series A
Warrants and the Series C Warrants are collectively referred to herein as the
“
Common Stock
Warrants
;” and (iii) the
Series A Warrant Shares, the Series B Warrant Shares and the Series C Warrant
Shares are collectively referred to herein as the “
Warrant Shares
.”
C. The
Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “
Securities
.”
D. The
Company has filed a Registration Statement under the Securities Act of 1933, as
amended (the “
1933 Act
”)
on Form S-3, as amended (Registration Number 333-148929), which was declared
effective by the Securities and Exchange Commission (the “
SEC
”) on April 8, 2008 (the
“
Registration
Statement
”). The Company shall issue the Securities pursuant
to the Registration Statement.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:
1.
|
PURCHASE
AND SALE OF PREFERRED STOCK AND
WARRANTS.
|
(a)
Preferred Stock and
Warrants
. Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer,
and each Buyer severally, but not jointly, shall purchase from the Company on
the Closing Date (as defined below), the number of shares of Preferred Stock as
is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers,
at a purchase price of $1,000 per share, along with (i) the Series A Warrants to
acquire up to that number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers, (ii) the Series B
Warrants to acquire up to that number of Series B Warrant Shares as is set forth
opposite such Buyer’s name in column (5) on the Schedule of Buyers and (iii) the
Series C Warrants to acquire up to that number of Series C Warrant Shares as is
set forth opposite such Buyer’s name in column (6) on the Schedule of
Buyers.
(b)
Closing
. The closing
(the “
Closing
”) of the
purchase of the Preferred Stock and the Warrants by the Buyers shall occur at
the offices of Greenberg Traurig, LLP, 77 W. Wacker Drive, Suite 2400, Chicago,
Illinois 60601. The date and time of the Closing (the “
Closing Date
”) shall be 10:00
a.m., New York time, on the first (1
st
)
Business Day on which the conditions to the Closing set forth in Sections 6 and
7 below are satisfied or waived (or such later date as is mutually agreed to by
the Company and each Buyer). As used herein “
Business Day
” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.
(c)
Purchase Price
. The
aggregate purchase price for the Preferred Stock and the Warrants to be
purchased by each Buyer (the “
Purchase Price
”) shall be the
amount set forth opposite such Buyer’s name in column (7) on the Schedule of
Buyers. Each Buyer shall pay its respective Purchase Price for the Preferred
Stock and related Warrants to be purchased by such Buyer at the
Closing.
(d)
Form of Payment
. On
the Closing Date, (i) each Buyer shall pay its respective Purchase Price to the
Company for the Preferred Stock and the Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions and (ii) the
Company shall deliver to each Buyer (A) the number of shares of Preferred Stock
as is set forth opposite such Buyer’s name in column (3) of the Schedule of
Buyers, (B) a Series A Warrant pursuant to which such Buyer shall have the right
to acquire up to such number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) of the Schedule of Buyers, (C) a Series B
Warrant pursuant to which such Buyer shall have the right to acquire up to such
number of Series B Warrant Shares as is set forth opposite such Buyer’s name in
column (5) of the Schedule of Buyers and (D) a Series C Warrant pursuant to
which such Buyer shall have the right to acquire up to such number of Series C
Warrant Shares as is set forth opposite such Buyer’s name in column (6) of the
Schedule of Buyers, in all cases, duly executed on behalf of the Company and
registered in the name of such Buyer.
2.
|
BUYER’S
REPRESENTATIONS AND WARRANTIES.
|
Each
Buyer, severally and not jointly, represents and warrants to the Company with
respect to only itself that:
(a)
Organization;
Authority
. Such Buyer is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with the
requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents (as defined below) to which it is a
party and otherwise to carry out its obligations hereunder and
thereunder.
(b)
Validity;
Enforcement
. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and constitutes the legal, valid
and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(c)
No
Conflicts
. The execution, delivery and performance by such
Buyer of this Agreement and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(d)
Residency
. Such Buyer
is a resident of that jurisdiction specified below its address on the Schedule
of Buyers.
(e)
Own Account
. Such
Buyer is acquiring the Securities as principal for its own account and not with
a view to or for distributing or reselling such Securities or any part thereof
in violation of the Securities Act or any applicable state securities law, has
no present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law, and has no direct or
indirect arrangement or understandings with any other persons to distribute or
regarding the distribution of such Securities in violation of the Securities Act
or any applicable state securities law (this representation and warranty shall
not limit such Buyer’s right to sell the Securities in compliance with
applicable federal and state securities laws);
provided
,
however
, that by
making the representations herein, such Buyer does not agree, or make any
representation or warranty, to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in compliance with applicable federal and state securities
laws. Such Buyer is acquiring the Securities hereunder in the
ordinary course of its business. Buyer shall notify the Company in writing of
any transfers by the Buyer of any of the Preferred Stock or the Warrants and
such notification shall contain the name and address of the
transferee.
(f)
Experience of Such
Buyer
. Such Buyer, either alone or together with its advisors and
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Buyer is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment. The representations
contained in this Section 2(f), however, shall not modify, amend or affect such
Buyer’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby.
(g)
Buyer Status
. At the
time such Buyer was offered the Securities, it met, and as of the date hereof it
meets, the definition of “institutional investor,” “accredited investor” or
other similar term forth on
Exhibit
2(g)
that is applicable to it based on the state in which such Buyer is
located. Such Buyer is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.
(h)
Certain Trading
Activities
. Such Buyer has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Buyer,
engaged in any transactions in the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities) from the time
that such Buyer was first contacted by the Company or the Placement Agent (as
the case may be) regarding the investment in the Company contemplated by this
Agreement through the date of this Agreement. “
Short Sales
” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act (“
Regulation SHO
”) and all types
of direct and indirect stock pledges, forward sale contracts, options, puts,
calls, swaps and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker dealers or foreign
regulated brokers (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock). Such Buyer does not as of the
date hereof, and will not immediately following the Closing, own 10% or more of
the Company’s issued and outstanding shares of Common Stock (calculated based on
the assumption that all Equivalents (as defined below) owned by such Buyer,
whether or not presently exercisable or convertible, have been fully exercised
or converted (as the case may be) but taking into account any limitations on
exercise or conversion (including “blockers”) contained therein).
3.
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
|
The
Company represents and warrants to each of the Buyers that:
(a)
Organization and
Qualification
;
Subsidiaries
. Each of the Company and each of its “
Subsidiaries
” (which for
purposes of this Agreement means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest) are
entities duly organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted and as presently proposed to be conducted. Each of the Company
and its Subsidiaries is duly qualified as a foreign entity to do business and is
in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, “
Material Adverse Effect
” means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any of its Subsidiaries, taken as a
whole, (ii) the legality, validity or enforceability of the transactions
contemplated hereby or in the other Transaction Documents or (iii) the authority
or ability of the Company to perform its obligations under the Transaction
Documents (as defined below). Other than the Subsidiaries, there is no Person in
which the Company, directly or indirectly, owns capital stock or holds an equity
or similar interest. Except as set forth in Section 3(a) of the
disclosure letter delivered by the Company to the Buyers concurrently with the
execution of this Agreement (the “
Disclosure Letter
”), the
Company has no Subsidiaries.
(b)
Authorization; Enforcement;
Validity
. The Company has the requisite power and authority to enter into
and, except as set forth in Section 3(b) of the Disclosure Letter, perform its
obligations under this Agreement and the other Transaction Documents and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Transaction Documents by
the Company, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Preferred Stock and the reservation for issuance and issuance of the
Conversion Shares issuable upon conversion of, or as dividends on, the Preferred
Stock, the issuance of the Warrants and the reservation for issuance and
issuance of the Warrant Shares issuable upon exercise of the Warrants) have been
duly authorized by the Company’s board of directors and (other than the filing
with the SEC of a final prospectus supplement relating to the transactions
contemplated hereby (the “
Prospectus Supplement
”)) no
further filing, consent or authorization is required by the Company, its board
of directors or its stockholders or other governing body or regulatory
authority. This Agreement and the other Transaction Documents to which the
Company is a party have been (or upon delivery will have been) duly executed and
delivered by the Company and when delivered in accordance with the terms hereof
and thereof, will constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “
Transaction
Documents
” means, collectively, this Agreement, the Warrants, the
Certificate of Determination, the Irrevocable Transfer Agent Instructions (as
defined in Section 5(b)) and each of the other agreements and instruments
entered into by the parties hereto in connection with the transactions
contemplated hereby and thereby. The Company has no reason to believe that it
will be unable to comply with any of its obligations under any of the
Transaction Documents (including, without limitation, as a result of application
of Section 500 or Section 501 of the California Corporations Code).
(c)
Issuance of
Securities
. The issuance of the Preferred Stock and the Warrants are duly
authorized and, when issued and paid for in accordance with the terms of the
Transaction Documents, shall be validly issued, fully paid and non-assessable
and free from all taxes, liens, charges and other encumbrances imposed by the
Company. As of the Closing, the Company shall have reserved from its duly
authorized capital stock not less than 133% of the sum of (i) the maximum number
of Conversion Shares issuable upon conversion of the Preferred Stock (assuming
for purposes hereof that the Preferred Stock is convertible at the initial
Conversion Price (as defined in the Certificate of Determination) and without
taking into account any limitations on the conversion of the Preferred Stock set
forth in the Certificate of Determination and assuming that the Series B Warrant
Shares are outstanding as of the Closing) and (ii) the maximum number of Warrant
Shares issuable upon exercise of the Common Stock Warrants (without regard to
any limitations on the exercise of the Common Stock Warrants set forth therein).
Upon (i) conversion of the Preferred Stock in accordance with the Certificate of
Determination, (ii) issuance as dividends on the Preferred Stock in accordance
with the Certificate of Determination or (iii) exercise of the Warrants in
accordance with the Warrants (as the case may be), the Conversion Shares and the
Warrant Shares, as applicable, when issued, will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances imposed by the Company, with the holders being
entitled to all rights accorded to a holder of Common Stock. The
Preferred Stock and Warrants are being issued, and the Conversion Shares and the
Warrant Shares have been registered by the Company under the 1933 Act. The
Registration Statement is effective and available for the issuance of the
Securities thereunder and the Company has not received any notice that the SEC
has issued or intends to issue a stop-order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently, or intends or
has threatened in writing to do so. The “Plan of Distribution” section under the
Registration Statement permits the issuance of the Securities hereunder. Upon
issuance in accordance with the terms of the Transaction Documents, the
Conversion Shares and the Warrant Shares issuable upon exercise of the Common
Stock Warrants will be freely tradable without restriction. At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at the Closing Date, the Registration Statement and any
amendments thereto conformed and will conform in all material respects to the
requirements of the 1933 Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the final prospectus included in the Registration Statement (the “
Prospectus
”) and any
amendments or supplements thereto, at the time the Prospectus or any amendment
or supplement thereto was issued and at the Closing Date, conformed and will
conform in all material respects to the requirements of the 1933 Act and did not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d)
No Conflicts
. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Preferred Stock, the
Warrants, the Conversion Shares and Warrant Shares and the reservation for
issuance of the Conversion Shares and Warrant Shares) will not (i) result in a
violation of the Articles of Incorporation (as defined in Section 3(r)) or other
organizational documents of the Company or any of its Subsidiaries or Bylaws (as
defined in Section 3(r)) of the Company, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) subject to the
making of the Required Filings by the Company, result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign, federal and
state securities laws and regulations and the rules and regulations of the OTC
Bulletin Board (the
“Principal
Market
”)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected except, in the case of clause (ii) or (iii) above, to the extent
such violations that could not reasonably be expected to have a Material Adverse
Effect.
(e)
Consents
. The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person (including, without
limitation, the Financial Industry Regulatory Authority) in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case, in accordance with the terms hereof or
thereof, other than (i) the filing with the SEC of the Prospectus Supplement,
(ii) the filing with the SEC of the 8-K Filing, (iii) such filings as are
required to be made under applicable state securities laws (collectively, “
Required Filings
”) and (iv) as
set forth in Section 3(e) of the Disclosure Letter. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain on or before the Closing Date pursuant to the preceding sentence have
been obtained or effected on or prior to the Closing Date, and neither the
Company nor any of its Subsidiaries are aware of any facts or circumstances
which might prevent the Company from obtaining or effecting any of the
registration, application or filings pursuant to the preceding sentence.
Required Filings to be made after the Closing Date shall be made in compliance
with the terms of this Agreement and applicable federal and state securities
laws. The Company is not in violation of the requirements of the
Principal Market and has no knowledge of any facts or circumstances which could
reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.
(f)
Acknowledgment Regarding
Buyer’s Purchase of Securities
. The Company acknowledges and agrees that
each Buyer is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby and that no Buyer is (i) an officer or director of the Company or
any of its Subsidiaries, (ii) an “affiliate” (as defined in Rule 144) of the
Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial
owner” of more than 10% of the shares of Common Stock (as defined for purposes
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “
1934 Act
”)). The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company or any of its Subsidiaries (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer’s purchase of
the Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(g)
Placement Agent’s
Fees
. Neither the Company nor any of its Subsidiaries has engaged any
placement agent (other than Rodman & Renshaw LLC (the “
Placement Agent
”)) or other
agent in connection with the sale of the Securities. The Company
shall be responsible for the payment of any placement agent’s fees, financial
advisory fees or broker’s commissions owed to the Placement Agent or to any
other Person pursuant to any other agreements entered into by the Company
relating to or arising out of the transactions contemplated
hereby. Buyer shall have no obligation with respect to any fees or
with respect to any claims (other than such fees or commissions owed by such
Buyer pursuant to agreements entered into by such Buyer, which fees or
commissions shall be the sole responsibility of such Buyer) made by or on behalf
of other Persons for fees or the type contemplated in this Section that may be
due in connection with the transactions contemplated by the Transaction
Documents.
(h)
No Integrated
Offering
. None of the Company, the Subsidiaries or any of their
affiliates, nor any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities
to require approval of stockholders of the Company under any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated. None of the Company, its
Subsidiaries, their affiliates nor any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would cause the
offering of any of the Securities to be integrated with other
offerings.
(i)
Dilutive Effect
. The
Company understands and acknowledges that the number of Conversion Shares and
Warrant Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Conversion Shares upon conversion
of the Preferred Stock and the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement, the Certificate of Determination and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
(j)
Application of Takeover
Protections; Rights Agreement
. The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Articles of Incorporation or other organizational documents or the
laws of the jurisdiction of its incorporation or otherwise which is or could
become applicable to any Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of shares of Common Stock or a change in
control of the Company or any of its Subsidiaries.
(k)
SEC Documents; Financial
Statements
. During the two (2) years prior to the date hereof, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein being referred
to herein as the “
SEC
Documents
”). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of each of the SEC Documents
not available on the EDGAR system. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect as of the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). No other information
provided by or on behalf of the Company to the Buyers which is not included in
the SEC Documents contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein not
misleading, in the light of the circumstance under which they are or were
made.
(l)
Absence of Certain
Changes
. Since the date of the Company’s most recent audited or reviewed
financial statements contained in the Form 10-K, except as disclosed in
subsequent SEC Documents filed prior to the date hereof, there has been no
material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of its
Subsidiaries. Since the date of the Company’s most recent audited
financial statements contained in the Form 10-K, except as disclosed in a
subsequent SEC Documents filed prior to the date hereof, neither the Company nor
any of its Subsidiaries has (i) declared or paid any dividends other than by
Subsidiaries to the Company, (ii) sold any material assets, individually or in
the aggregate, outside of the ordinary course of business or (iii) made any
material capital expenditures, individually or in the aggregate. Neither the
Company nor any of its Subsidiaries has taken any steps to seek protection
pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, liquidation or winding up, nor does the Company or any
Subsidiary have any knowledge or reason to believe that any of their respective
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated basis, are not
as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(l), “
Insolvent
” means, on a
consolidated basis, (i) the present fair saleable value of the Company’s and its
Subsidiaries’ assets is less than the amount required to pay the Company’s and
its Subsidiaries’ total Indebtedness (as defined in Section 3(s)), (ii) the
Company and its Subsidiaries are unable to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company and its Subsidiaries intend to incur
or believe that they will incur debts that would be beyond their ability to pay
as such debts mature. Neither the Company nor any of its Subsidiaries has
engaged in business or in any transaction, and is not about to engage in
business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital. For purposes
of this Agreement: (x) “
Indebtedness
” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) other than trade
payables entered into in the ordinary course of business, (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person that
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “
Contingent
Obligation
” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) “
Person
” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(m)
No Undisclosed Events,
Liabilities, Developments or Circumstances
. No event, liability,
development or circumstance has occurred or exists, or is reasonably expected to
exist or occur with respect to the Company, any of its Subsidiaries or their
respective business, properties, liabilities, prospects, operations (including
results thereof) or condition (financial or otherwise), that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which either (i) except as set
forth in Section 3(m) of the Disclosure Letter, has not been publicly announced
or contained in the SEC Documents or (ii) could reasonably result in a Material
Adverse Effect or a material adverse effect on any Buyer’s investment
hereunder.
(n)
Conduct of Business;
Regulatory Permits
. Neither the Company nor any of its Subsidiaries is in
violation of any term of or in default under its Articles of Incorporation, any
certificate of determination of any other outstanding series of preferred stock
of the Company or any of its Subsidiaries or Bylaws or their organizational
charter, certificate of formation or certificate of incorporation or bylaws,
respectively. Neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that could reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2006, (i) the Common Stock has been designated for
quotation on the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) the Company has received
no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal
Market. The Company and each of its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any written notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.
(o)
Foreign Corrupt
Practices
. Neither the Company nor any of the Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(p)
Sarbanes-Oxley Act
.
Except as set forth in Section 3(p) of the Disclosure Letter, the Company and
each Subsidiary is in material compliance with all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.
(q)
Transactions With
Affiliates
. Except as set forth in the SEC Documents, none of the
officers or directors of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer or director or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner, in each case in excess of $120,000 other
than for (i) payment of salary or bonuses for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) other
employee benefits, including stock option agreements under any stock option plan
of the Company and restricted stock agreements under any restricted stock plan
of the Company.
(r)
Equity
Capitalization
. The capitalization of the Company as of the
date hereof is as described in Section 3(r)(i) of the Disclosure Letter. No
shares of Common Stock are held in treasury. All of such outstanding shares are
duly authorized and have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. 3,079,853 shares of the Company’s issued and
outstanding Common Stock on the date hereof are as of the date hereof owned by
Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and
calculated based on the assumption that only officers, directors and holders of
at least 10% of the Company’s issued and outstanding Common Stock are
“affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its Subsidiaries.
To the Company’s knowledge, as of the date hereof no Person owns 10% or more of
the Company’s issued and outstanding shares of Common Stock (calculated based on
the assumption that all Equivalents, whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may
be) taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding that such identified Person is a
10% stockholder for purposes of federal securities laws). Except as disclosed in
Section 3(r)(ii) of the Disclosure Letter: (i) none of the Company’s or any
material Subsidiary’s capital stock is subject to preemptive rights or any other
similar rights or any liens suffered or permitted by the Company or any
Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts filed in connection with the
Company or any of its Subsidiaries; (v) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except as contemplated by
this Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix)
neither the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect. The Company has furnished to the Buyers true, correct and
complete copies of the Company’s Articles of Incorporation, as amended and as in
effect on the date hereof, including, without limitation, any certificates of
determination contained therein or attached thereto (the “
Articles
of Incorporation
”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “
Bylaws
”).
(s)
Indebtedness and Other
Contracts
. Except as disclosed in the SEC Documents or in Section 3(s) of
the Disclosure Letter, neither the Company nor any of its Subsidiaries (i) has
any outstanding Indebtedness (as defined below), (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse
Effect.
(t)
Absence of
Litigation
. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’
officers or directors which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company or any current or former director
or officer of the Company. The SEC has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company under the 1934 Act or the 1933 Act.
(u)
Insurance
. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such Subsidiary has any reason to believe
that it will be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(v)
Employee
Relations
. Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or employs any member of a union.
The Company believe that its and its Subsidiaries’ relations with their
respective employees are good. No executive officer (as defined in Rule 501(f)
promulgated under the 1933 Act) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer or other key employee (as the case may be) does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters. The Company and its Subsidiaries are
in compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(w)
Title
. The Company
and its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case, free and clear of all liens, encumbrances and defects except such as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them 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 buildings by the
Company or any of its Subsidiaries.
(x)
Intellectual Property
Rights
. The Company and its Subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, original
works, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights and all applications and
registrations therefor (“
Intellectual Property Rights
”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted, unless failure to own or possess such rights
or licenses would not reasonably be likely to result in a Material Adverse
Effect. None of the Company’s or its Subsidiaries’ Intellectual
Property Rights have expired, terminated or been abandoned, or are expected to
expire, terminate or be abandoned, within three years from the date of this
Agreement, unless such expiration, termination or abandonment would not
reasonably be likely to result in a Material Adverse Effect. The
Company has no knowledge of any infringement by the Company or any of its
Subsidiaries of Intellectual Property Rights of others. There is no
claim, action or proceeding being made or brought, or to the knowledge of the
Company or any of its Subsidiaries, being threatened, against the Company or any
of the Subsidiaries regarding their material Intellectual Property
Rights. The Company is not aware of any facts or circumstances that
reasonably could be expected to give rise to any of the foregoing infringements
or claims, actions or proceedings. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(y)
Environmental Laws
.
The Company and its Subsidiaries (i) are in compliance with all Environmental
Laws (as defined herein), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval where, in each of the foregoing clauses
(i), (ii) and (iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse
Effect. The term “
Environmental Laws
” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “
Hazardous Materials
”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
(z)
Subsidiary
Rights
. Except as disclosed in Section 3(z) of the Disclosure Letter, the
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa)
Tax Status
. Except
for matters that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, the Company and each of its
Subsidiaries (i) has timely made or filed all foreign, federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, (ii) has timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and (iii) has set aside on its books provision reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the Company’s knowledge and except as
set forth in Section 3(aa) of the Disclosure Letter, there are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company and its Subsidiaries know of no
basis for any such claim. The Company is not operated in such a
manner as to qualify as a passive foreign investment company, as defined in
Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(bb)
Internal Accounting
and Disclosure Controls
. Except as set forth in the Company’s Form 10-K
for the year ended December 31, 2007 and any of the Company’s Form 10-Q’s
covering periods in 2008, the Company maintains internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is
effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, including that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that
are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. Except as set forth in the Company’s Form 10-K for the year ended
December 31, 2007 and any of the Company’s Form 10-Qs covering periods in 2008,
neither the Company nor any of its Subsidiaries has received any notice or
correspondence from any accountant or other Person relating to any potential
material weakness or significant deficiency in any part of the Company’s
internal control over financial reporting.
(cc)
Off Balance Sheet
Arrangements
. There is no transaction, arrangement, or other relationship
between the Company or any of its Subsidiaries and an unconsolidated or other
off balance sheet entity that is required to be disclosed by the Company in its
1934 Act filings and is not so disclosed or that otherwise could be reasonably
likely to have a Material Adverse Effect.
(dd)
Investment Company
Status
. The Company is not, and upon consummation of the sale of the
Securities will not be, an “investment company,” an affiliate of an “investment
company,” a company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act
of 1940, as amended.
(ee)
Acknowledgement Regarding
Buyers’ Trading Activity
. It is understood and acknowledged by the
Company (i) that following the public disclosure of the transactions
contemplated by the Transaction Documents, in accordance with the terms thereof,
none of the Buyers have been asked by the Company or any of its Subsidiaries to
agree, nor has any Buyer agreed with the Company or any of its Subsidiaries, to
desist from purchasing or selling, long and/or short, securities of the Company,
or “derivative” securities based on securities issued by the Company or to hold
the Securities for any specified term; (ii) that any Buyer, and counter parties
in “derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Stock which were
established prior to such Buyer’s knowledge of the transactions contemplated by
the Transaction Documents, and (iii) that each Buyer shall not be deemed to have
any affiliation with or control over any arm’s length counter party in any
“derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) one or
more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares or
Conversion Shares, as applicable, deliverable with respect to the Securities are
being determined and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other
Transaction Document or any of the documents executed in connection herewith or
therewith.
(ff)
Manipulation of
Price
. Neither the Company nor any of its Subsidiaries has, and, to the
knowledge of the Company, no Person acting on their behalf has, (i) taken,
directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or any
of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities (other than the Placement Agent), or (iii) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company or any of its Subsidiaries.
(gg)
U.S. Real Property Holding
Corporation
. Neither the Company nor any of its Subsidiaries is, or has
ever been, and so long as any of the Securities are held by any of the Buyers,
shall become, a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
and each Subsidiary shall so certify upon any Buyer’s request.
(hh)
Registration
Eligibility
. The Company is eligible to register the issuance of the
Securities to the Buyers using Form S-3 promulgated under the 1933
Act.
(ii)
Transfer Taxes
. On
the Closing Date, all stock transfer or other taxes (other than income or
similar taxes) which are required to be paid in connection with the sale and
transfer of the Securities to be sold to each Buyer hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with.
(jj)
Bank Holding Company
Act
. Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the “
BHCA”
) and to regulation by
the Board of Governors of the Federal Reserve System (the “
Federal
Reserve”
). Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
(kk)
Disclosure
. The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. All written materials provided to the
Buyers regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the Disclosure Letter and the
Schedules to this Agreement, furnished by or on behalf of the Company or any of
its Subsidiaries is true and correct and does not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company or any of
its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, liabilities,
prospects, operations (including results thereof) or conditions (financial or
otherwise), which, under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the Company but which
has not been so publicly announced or disclosed, other than the transactions
contemplated hereby. The Company acknowledges and agrees that no Buyer makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
2.
(ll)
FDA
. As to each
product subject to the jurisdiction of the U.S. Food and Drug Administration
(the “
FDA
”) under the
Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder
(the “
FDCA
”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by
the Company or any of its Subsidiaries (each such product, a “
Food Product
”), such Food
Product is being manufactured, packaged, labeled, tested, distributed, sold
and/or marketed by the Company or such Subsidiary (as the case may be) in
compliance with all applicable requirements under FDCA and similar laws, rules
and regulations relating to registration, investigational use, premarket
clearance, licensure, or application approval, good manufacturing practices,
good laboratory practices, good clinical practices, product listing, quotas,
labeling, advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company’s
knowledge, threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or investigation)
against the Company or any of its Subsidiaries, and none of the Company or any
of its Subsidiaries has received any written notice, warning letter or other
communication from the FDA or any other governmental entity, which (i) contests
the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the sale
of, or the labeling and promotion of any Food Product, (ii) withdraws its
approval of, requests the recall, suspension, or seizure of, or withdraws or
orders the withdrawal of advertising or sales promotional materials relating to,
any Food Product, (iii) imposes a clinical hold on any clinical investigation by
the Company or any of its Subsidiaries, (iv) enjoins production at any facility
of the Company or any of its Subsidiaries, (v) enters or proposes to enter into
a consent decree of permanent injunction with the Company or any of its
Subsidiaries or (vi) otherwise alleges any violation of any laws, rules or
regulations by the Company or any of its Subsidiaries, and which, either
individually or in the aggregate, would have a Material Adverse Effect. The
properties, business and operations of the Company subject to the jurisdiction
of the FDA have been and are being conducted in all material respects in
accordance with all applicable laws, rules and regulations of the FDA. The
Company has not been informed by the FDA that the FDA will prohibit the
marketing, sale, license or use in the United States of any product proposed to
be developed, produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being developed or
proposed to be developed by the Company.
(a)
Commercially Reasonably Best
Efforts
. Each party shall use commercially reasonable best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
(b)
Securities
Compliance
. The Prospectus Supplement, containing all
information required by SEC rules and regulations, shall be filed in accordance
with Rule 424 under the 1933 Act. The Company shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities
(and the issuance of the Securities pursuant to the Registration Statement) to
the Buyers or subsequent holders. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to, qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing Date.
(c)
Registration Statement;
Reporting Status
. Until the date on which the Buyers shall have sold all
of the Securities (the “
Reporting Period
”), the
Company shall (i) maintain the effectiveness of the Registration Statement to
cover the issuance of all Securities and (ii) timely file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would no longer
require or otherwise permit such termination. If at any time
following the date hereof the Registration Statement is not effective or is not
otherwise available for the issuance of the Securities, the Company shall
immediately notify the holders of Preferred Stock and/or Warrants (as the case
may be) in writing that the Registration Statement is not then effective and
thereafter shall promptly notify such holders when the Registration Statement is
effective again and available for the issuance of the Securities.
(d)
Use of Proceeds
. The
Company shall use the proceeds from the sale of the Securities solely (i) to pay
legal fees and expenses incurred in connection with the transactions
contemplated by this Agreement, (ii) to pay the placement fee owed to the
Placement Agent in connection with the transactions contemplated by this
Agreement, (iii) for capital improvements to the Company’s Brazilian facilities
(it being understood that $3,000,000 of such proceeds shall be used for such
capital improvements) and (iv) for general working capital
purposes.
(e)
Financial
Information
. The Company agrees to send the following to each Buyer
during the Reporting Period (i) unless the following are filed with the SEC
through EDGAR and are available to the public through the EDGAR system, within
one (1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments
filed pursuant to the 1933 Act, and (ii) unless the following are filed with the
SEC through EDGAR and are available to the public through the EDGAR system,
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.
(f)
Listing
. The
Company shall promptly secure the listing of all of the Conversion Shares and
Warrant Shares issuable upon exercise of the Common Stock Warrants upon each
national securities exchange and automated quotation system, if any, upon which
the shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing of all such Securities from time to
time issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system. The Company shall maintain
the Common Stock’s authorization for quotation on the Principal Market, the New
York Stock Exchange, the Nasdaq Global Market or the Nasdaq Global Select Market
(each, an “
Eligible
Market
”). The Company shall not take any action which could be reasonably
expected to result in the delisting or suspension of the Common Stock on an
Eligible Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g)
Fees
. The
Company shall reimburse Cranshire Capital, L.P. (“
Cranshire
”) or its designee(s)
(in addition to any other expense amounts paid to any Buyer prior to the date of
this Agreement) for all costs and expenses incurred by it or its affiliates in
connection with the transactions contemplated by the Transaction Documents
(including, without limitation, all legal fees and disbursements in connection
therewith, documentation and implementation of the transactions contemplated by
the Transaction Documents and due diligence in connection therewith), which
amount shall be withheld by Cranshire from its Purchase Price at the Closing or
paid by the Company upon termination of this Agreement so long as such
termination did not occur as a result of a material breach by Cranshire of any
of its obligations hereunder (as the case may be). The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby (including,
without limitation, the Placement Agent) incurred by the Company. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment. Except as
otherwise set forth in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Securities to the
Buyers.
(h)
Pledge of Securities
.
The Company acknowledges and agrees that the Securities may be pledged by a
Buyer in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. No Buyer effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a
Buyer. Notwithstanding the foregoing, if the Securities so pledged
are Preferred Stock or Warrants, and such Securities are subsequently acquired
by the pledgee upon default, then such Buyer will provide the Company with
written notice of the transfer and the names of the record holders of such
Securities within a reasonable amount of time after such Securities are
transferred. Additionally, the transferee shall agree to be bound by the
provisions of the Transaction Documents if the transferee will obtain any rights
under the Transaction Documents.
(i)
Disclosure of Transactions
and Other Material Information
. The Company shall, on or before
8:30 a.m., New York time, on the second (2
nd
)
Business Day after the date of this Agreement, issue a press release (the “
Press Release
”) reasonably
acceptable to each Buyer disclosing all the material terms of the transactions
contemplated by the Transaction Documents. On or before 8:30 a.m.,
New York time, on the second (2
nd
)
Business Day following the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching this Agreement, the Certificate of Determination and the form of
the Warrants (including all attachments, the “
8-K Filing
”). From and after
the issuance of the Press Release, the Company shall have disclosed all
material, nonpublic information delivered to any of the Buyers by the Company or
any of its Subsidiaries, or any of their respective officers, directors,
employees or agents (if any) in connection with the transactions contemplated by
the Transaction Documents. The Company shall not, and the Company shall cause
each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents not to, provide any Buyer with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the issuance of the Press Release without the express prior written
consent of such Buyer, except as expressly contemplated by Section 4(n)(viii).
If a Buyer has, or believes it has, received any material, nonpublic information
regarding the Company or any of its Subsidiaries in breach of the immediately
preceding sentence, such Buyer shall provide the Company with written notice
thereof in which case the Company shall, within one (1) Trading Day of the
receipt of such notice, make a public disclosure of all such material, nonpublic
information so provided. In the event of a breach of any of the
foregoing covenants by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents (as determined in the
reasonable good faith judgment of such Buyer), in addition to any other remedy
provided herein or in the Transaction Documents, such Buyer shall have the right
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, any of the Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents, for any such
disclosure of such information. Subject to the foregoing, neither the Company,
its Subsidiaries nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided
,
however
, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions (i)
in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the
case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its
release). Without the prior written consent of any applicable Buyer,
the Company shall not (and shall cause each of its Subsidiaries and affiliates
to not) disclose the name of such Buyer in any filing (other than the 8-K
Filing), announcement, release or otherwise, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents
(including signature pages thereto) with the SEC and (b) to the extent such
disclosure is required by law or Principal Market regulations, in which case the
Company shall provide the applicable Buyers with prior notice of such disclosure
permitted hereunder.
(j)
Additional Issuance of
Securities
. Except as set forth on Schedule 4(j), the Company agrees that
for the period commencing on the date hereof and ending ninety (90)
days after the Closing
Date (the “
Restricted
Period
”), neither the
Company nor any of its Subsidiaries shall directly or indirectly issue, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
issuance, offer, sale, grant or any option to purchase or other disposition of)
any of their respective equity or equity equivalent securities, including,
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time and under any circumstances convertible
into or exchangeable for, or otherwise entitles the holder thereof to receive,
capital stock and other securities of the Company (including, without
limitation, any securities of the Company or any Subsidiary which entitle the
holder thereof to acquire Common Stock at any time, including without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common
Stock) (collectively with such capital stock or other securities of the Company,
“
Equivalents
”) (any such
issuance, offer, sale, grant, disposition or announcement being referred to as a
“
Subsequent Placement
”).
Notwithstanding the foregoing, this Section 4(j) shall not apply in respect of
the issuance of (A) shares of Common Stock or standard options to purchase
Common Stock issued to directors, officers, employees or consultants of the
Company in connection with their service as directors or officers of the
Company, their employment by the Company or their retention as consultants by
the Company pursuant to an equity compensation program or other contract or
arrangement approved by the board of directors of the Company (or the
compensation committee of the board of directors of the Company), provided that
all such issuances of shares of Common Stock (including, shares of Common Stock
issuable upon exercise of such standard options) after the date hereof pursuant
to this clause (A) that are not described in clause (B) below do not, in the
aggregate, exceed more than 5% of the Common Stock issued and outstanding
immediately prior to the date hereof (as adjusted for any stock dividend, stock
split, stock combination or other similar transaction) (excluding, for purposes
of the foregoing 5% calculation, shares of Common Stock issuable upon exercise
of such standard options issued after the date hereof that have been terminated
or forfeited), provided further that all such issuances must be for
consideration per share or have an exercise price (as the case may be) (as
determined pursuant to the provisions of Section 3(f)(i) of the Series A
Warrants) greater than or equal to the fair market value of the Common Stock on
the date of such issuance; (B) shares of Common Stock issued upon the conversion
or exercise of Equivalents issued prior to the date hereof, provided that such
Equivalents have not been amended since the date hereof to increase the number
of shares issuable thereunder or to lower the exercise or conversion price
thereof or otherwise materially change the terms or conditions thereof in any
manner that adversely affects any of the Buyers (it being understood that the
adjustment of the exercise or conversion price thereof pursuant to anti-dilution
provisions contained therein as of the date of this Agreement that are triggered
by the transactions contemplated hereby shall not be deemed to be an amendment;
any such adjustments, however, shall be described in Section 3(r)(ii) of the
Disclosure Letter); (C) the Conversion Shares; (D) the Warrant Shares; (E)
shares of Common Stock issued or issuable as a dividend on Common Stock; (F) up
to 1,090,910 shares of Common Stock issuable pursuant to warrants issued to the
Placement Agent in connection with the transactions contemplated by this
Agreement; (G) shares of Common Stock issued by the Company solely as a penalty
pursuant to the registration rights agreements entered into by the Company in
connection with the Company’s September 28, 2005, May 12, 2006 and February 15,
2007 private placement transactions; or (H) shares of Common Stock issued in
connection with strategic transactions or acquisitions (the primary purpose of
which is not to raise capital, and which are approved in good faith by the board
of directors of the Company), provided that (i) any such issuance after the date
hereof pursuant to this clause (H) shall only be to a Person that is, itself or
through its subsidiaries, an operating company in a business synergistic with
the business of the Company; (ii) all such issuances after the date hereof
pursuant to this clause (H) do not, in the aggregate, exceed more than 10% of
the shares of Common Stock issued and outstanding immediately prior to the date
hereof (as adjusted for any stock dividend, stock split, stock combination or
other similar transaction) and (iii) all such issuances after the date hereof
pursuant to this clause (H) must have a price per share (as determined pursuant
to the provisions of Section 3(f)(i) of the Series A Warrants) greater than or
equal to the fair market value of the Common Stock on the date of such issuance
(each of the foregoing in clauses (A) through (H), collectively the “
Excluded Securities
”).
Notwithstanding anything to the contrary set forth herein or in the Certificate
of Determination, with respect to clause (F) above, as well as clause (F) of the
definition of “Excluded Securities” in the Certificate of Determination, the
aggregate number of shares of Common Stock issuable pursuant to the
warrants issued to the Placement Agent in connection with the transactions
contemplated by this Agreement shall not exceed the sum of (i) 545,455 plus (ii)
an amount equal to 6% of the number of shares of Common Stock issuable upon
conversion of the shares of Preferred Stock actually issued upon exercise of the
Series B Warrants, determined on the dates such Series B Warrants are
exercised.
(k)
Reservation of
Shares
. So long as any shares of Preferred Stock or Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than 133% of (i)
the maximum number of shares of Common Stock issuable upon conversion of all the
Preferred Stock (assuming for purposes hereof, that the Preferred Stock
convertible at the Conversion Price (as defined in the Certificate of
Determination and assuming that the Series B Warrants Shares are outstanding as
of the Closing) and without regard to any limitations on the conversion of the
Preferred Stock set forth in the Certificate of Determination) and (ii) the
maximum number of shares of Common Stock issuable upon exercise of all the
Common Stock Warrants (without regard to any limitations on the exercise of the
Common Stock Warrants set forth therein).
(l)
Conduct of
Business
. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
(m)
Variable Rate
Transaction
. Until all of the shares of Preferred Stock have been
converted or redeemed in accordance with the terms of the Certificate of
Determination, the Company and each Subsidiary shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Placement
involving a “
Variable Rate
Transaction
.” The term “
Variable Rate Transaction
”
shall mean a transaction in which the Company or any Subsidiary (i) issues or
sells any Equivalents either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such Equivalents, or (B) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such
Equivalents or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common
Stock, other than pursuant to a customary price-based anti-dilution provision or
(ii) enters into any agreement (including, but not limited to, an equity line of
credit) whereby the Company or any material Subsidiary may sell securities at a
future determined price (other than standard and customary “preemptive” or
“participation” rights, or in transaction where the price of the securities is
determined at the time of closing of such transaction and such closing is
subject to customary closing conditions such as shareholder approval). Each
Buyer shall be entitled to obtain injunctive relief against the Company and its
Subsidiaries to preclude any such issuance, which remedy shall be in addition to
any right to collect damages.
(n)
Participation Right
.
Until all of the shares of Preferred Stock have been converted or redeemed in
accordance with the terms of the Certificate of Determination, neither the
Company nor any of its Subsidiaries shall, directly or indirectly, effect any
Subsequent Placement or any issuance of debt (excluding bona fide third-party
commercial bank debt) (such issuance of debt, a “
Debt Placement
”) unless the
Company shall have first complied with this Section 4(n). The Company
acknowledges and agrees that the right set forth in this Section 4(n) is a right
granted by the Company, separately, to each Buyer.
(i) The
Company shall deliver to each Buyer an irrevocable written notice (the “
Offer Notice
”) of any proposed
or intended issuance or sale or exchange (the “
Offer
”) of the securities
being offered (the “
Offered
Securities
”) in a Subsequent Placement or Debt Placement, which Offer
Notice shall (w) identify and describe the Offered Securities, (x) describe the
price and other terms upon which they are to be issued, sold or exchanged, and
the number or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the Persons (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue
and sell to or exchange with such Buyer in accordance with the terms of the
Offer all of the Offered Securities if the aggregate offering price for all the
Offered Securities in such Subsequent Placement or Debt Placement (as the case
may be) is less than or equal to $25,000,000 (or 25% of the Offered Securities
if the aggregate offering price for all the Offered Securities in such
Subsequent Placement or Debt Placement (as the case may be) is greater than
$25,000,000, as applicable),
provided
that the
number of Offered Securities which such Buyer shall have the right to subscribe
for under this Section 4(n) shall be (a) based on such Buyer’s pro rata portion
of the aggregate number of shares of Preferred Stock purchased hereunder by all
Buyers (the “
Basic
Amount
”), and (b) with respect to each Buyer that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase
or acquire should the other Buyers subscribe for less than their Basic Amounts
(the “
Undersubscription
Amount
”).
(ii) To
accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the fifth (5
th
)
Business Day after such Buyer’s receipt of the Offer Notice (the “
Offer Period
”), setting forth
the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and,
if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “
Notice of
Acceptance
”). If the Basic Amounts subscribed for by all Buyers are less
than the total of all of the Basic Amounts, then such Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for;
provided
,
however
, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “
Available Undersubscription
Amount
”), such Buyer who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts,
subject to rounding by the Company to the extent it deems reasonably necessary.
Notwithstanding the foregoing, if the Company desires to modify or amend the
terms and conditions of the Offer prior to the expiration of the Offer Period,
the Company may deliver to each Buyer a new Offer Notice and the Offer Period
shall expire on the fifth (5
th
)
Business Day after such Buyer’s receipt of such new Offer Notice.
(iii) The
Company shall have fifteen (15) Business Days from the expiration of the Offer
Period above to (A) offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by a
Buyer (the “
Refused
Securities
”) pursuant to a definitive agreement(s) (the “
Subsequent Placement
Agreement
”), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (B) publicly announce (a) the execution of such
Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.
(iv) In
the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(n)(iii) above), then such Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified in
its Notice of Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that such Buyer elected to purchase pursuant to
Section 4(n)(ii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section 4(n) prior to such reduction) and
(ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount
of Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 4(n)(i) above.
(v) Upon
the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, such Buyer shall acquire from the Company, and the Company
shall issue to such Buyer, the number or amount of Offered Securities specified
in its Notice of Acceptance. The purchase by such Buyer of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and such Buyer of a separate purchase agreement relating to such
Offered Securities that incorporates the terms of the Offer Notice and that is
reasonably satisfactory in form and substance to such Buyer and its
counsel.
(vi) Any
Offered Securities not acquired by a Buyer or other Persons in accordance with
this Section 4(n) may not be issued, sold or exchanged until they are again
offered to such Buyer under the procedures specified in this
Agreement.
(vii) The
Company and each Buyer agree that if any Buyer elects to participate in the
Offer, neither the Subsequent Placement Agreement with respect to such Offer nor
any other transaction documents related thereto (collectively, the “
Subsequent Placement
Documents
”) shall include any term or provision whereby such Buyer shall
be required to agree to any restrictions on trading as to any securities of the
Company owned by such Buyer prior to such Subsequent Placement or Debt
Placement.
(viii) Notwithstanding
anything to the contrary in this Section 4(n) and unless otherwise agreed to by
such Buyer, the Company shall either confirm in writing to such Buyer that the
transaction with respect to the Subsequent Placement or Debt Placement has been
abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case in such a manner such that such Buyer will not be in
possession of any material, non-public information, by the twelfth (12
th
)
Business Day following delivery of the Offer Notice. If by such twelfth (12
th
)
Business Day, no public disclosure regarding a transaction with respect to the
Offered Securities has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be deemed to be in
possession of any material, non-public information with respect to the Company
or any of its Subsidiaries. Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide such Buyer
with another Offer Notice and such Buyer will again have the right of
participation set forth in this Section 4(n). The Company shall not
be permitted to deliver more than one such Offer Notice (not including
subsequent Offer Notices relating to the same transaction) to such Buyer in any
sixty (60) day period.
(ix) The
restrictions contained in this Section 4(n) shall not apply in connection with
the issuance of any Excluded Securities. The Company shall not circumvent the
provisions of this Section 4(n) by providing terms or conditions to one Buyer
that are not provided to all.
(o)
Passive Foreign Investment
Company
. The Company shall conduct its business in such a
manner as will ensure that the Company will not be deemed to constitute a
passive foreign investment company within the meaning of Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended.
(p)
Restriction on Redemption
and Cash Dividends
. So long as any shares of Preferred Stock are
outstanding, the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or distribution on, the Common Stock without the prior
express written consent of the Required Holders (as defined in the Certificate
of Determination).
(q)
DTC Eligibility
. The
Company shall pay all fees to DTC (as defined below) required to be paid, and
shall take all other necessary actions, so that the Company is eligible to
participate in DTC’s Fast Automated Securities Transfer Program no later than
thirty (30) days after the Closing Date.
5.
|
REGISTER;
TRANSFER AGENT INSTRUCTIONS; NO
LEGENDS.
|
(a)
Register
. The Company
shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of
Securities), a register for the Preferred Stock and the Warrants in which the
Company shall record the name and address of the Person in whose name the
Preferred Stock and
the Warrants have been
issued (including the name and address of each transferee), the number of shares
of Preferred Stock held by such Person, the number of Conversion Shares issuable
upon conversion of the Preferred Stock and the number of Warrant Shares issuable
upon exercise of the Warrants held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection of
any Buyer or its legal representatives.
(b)
Transfer Agent
Instructions
. The Company shall issue irrevocable instructions to its
transfer agent and any subsequent transfer agent in the form acceptable to the
Buyers (the “
Irrevocable
Transfer Agent Instructions
”) to issue certificates (free of any
restrictive or other legends) or credit shares to the applicable balance
accounts at The Depository Trust Company (“
DTC
”), registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares and the
Warrant Shares issuable upon exercise of the Common Stock Warrants in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Stock, issuance of Common Stock as dividends on the
Preferred Stock or the exercise of the Common Stock Warrants (as the case may
be). The Company represents and warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b) will be
given by the Company to its transfer agent with respect to the Securities, and
that the Securities shall be freely transferable on the books and records of the
Company. If a Buyer effects a sale, assignment or transfer of the Securities,
the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates (free of any restrictive or other
legends) or credit shares to the applicable balance accounts at DTC in such name
and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b), that
a Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required. The Company shall cause its counsel to
issue the legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Company’s transfer agent on the Closing Date and such other
legal opinions as the transfer agent may require from time to time in order to
ensure that the Securities are issued free of any restrictive or other legends.
Any fees (with respect to the transfer agent, counsel to the Company or
otherwise) associated with the issuance of such opinions shall be borne by the
Company.
(c)
Legends
. The
certificates or other instruments representing the Securities shall not bear any
restrictive or other legends.
6.
|
CONDITIONS
TO THE COMPANY’S OBLIGATION TO
SELL.
|
(a) The
obligation of the Company hereunder to issue and sell the Preferred Stock
and the related Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions,
provided
that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in their sole discretion by providing each Buyer with prior written
notice thereof:
(i)
Such Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.
(ii)
Such Buyer shall have delivered to the Company the Purchase Price (less, in the
case of Cranshire, the amounts withheld pursuant to Section 4(g)) for the
Preferred Stock and the related Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) the
aggregate Purchase Price hereunder for all Buyers shall be no less than
$5,000,000.
(iv) Each
and every representation and warranty of such Buyer shall be true and correct as
of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and such Buyer shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by such Buyer at or prior to the Closing Date.
7.
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CONDITIONS
TO EACH BUYER’S OBLIGATION TO
PURCHASE.
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(a) The
obligation of each Buyer hereunder to purchase its shares of Preferred
Stock
and its
related Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions,
provided
that these
conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(i) The
Company shall have duly executed and delivered to such Buyer each of the
Transaction Documents and the Company shall have duly executed and delivered to
such Buyer a certificate representing the number of shares of Preferred Stock
set forth across from such Buyer’s name in column (3) of the Schedule of
Buyers
and the
related Warrants (for such number of shares of Common Stock as is set forth
across from such Buyer’s name in columns (4), (5) and (6) of the Schedule of
Buyers) being purchased by such Buyer at the Closing pursuant to this
Agreement.
(ii) Such
Buyer shall have received the opinion of Weintraub Genshlea Chediak Law
Corporation, the Company’s counsel, dated as of the Closing Date, in the form
reasonably acceptable to such Buyer.
(iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in form acceptable to such Buyer, which instructions shall
have been delivered to and acknowledged in writing by the Company’s transfer
agent.
(iv) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its material Subsidiaries
in each such entity’s jurisdiction of formation issued by the Secretary of State
(or comparable office) of such jurisdiction of formation as of a date within ten
(10) days of the Closing Date.
(v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company’s and each material Subsidiary’s qualification as a foreign corporation
and good standing issued by the Secretary of State (or comparable office) of
each jurisdiction in which the Company and each Subsidiary is so qualified, as
of a date within ten (10) days of the Closing Date.
(vi) The
Company shall have delivered to such Buyer a certified copy of the Articles of
Incorporation as certified by the California Secretary of State within ten (10)
days of the Closing Date.
(vii) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s board of
directors in a form reasonably acceptable to such Buyer, (ii) the Articles of
Incorporation, and (iii) the Bylaws, each as in effect at the Closing, and (iv)
the number of shares of Common Stock outstanding on the day immediately
preceding the Closing Date, each in the form acceptable to such
Buyer.
(viii) Each
and every representation and warranty of the Company shall be true and correct
as of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and the Company shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. Such Buyer shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer in the form
acceptable to such Buyer.
(ix) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum maintenance requirements of the Principal
Market.
(x) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities, including
without limitation, those required by the Principal Market.
(xi) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents.
(xii) Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse
Effect.
(xiii) The
Company shall have obtained approval of the Principal Market to list the
Conversion Shares and the Warrant Shares issuable upon exercise of the Common
Stock Warrants to the extent such approval is required by the Principal
Market.
(xiv) (A)
The Registration Statement shall remain effective at all times up to and
including the Closing Date and the issuance of the Securities to the Buyers may
be made thereunder; (B) the Prospectus Supplement shall have been delivered to
the Buyers; (C) neither the Company nor any of the Buyers shall have received
notice that the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the Registration Statement either, temporarily or
permanently, or intends or has threatened to do so; and (D) no other suspension
of the use or withdrawal of the effectiveness of the Registration Statement or
Prospectus shall exist.
(xv) The
Company shall have delivered to such buyer the Prospectus and Prospectus
Supplement (unless the conditions set forth under Rule 172 under the 1933 Act
have been satisfied).
In the
event that the Closing shall not have occurred with respect to a Buyer on or
before ten (10) days from the date hereof due to the Company’s or such Buyer’s
failure to satisfy the conditions set forth in Sections 6 and 7 above (and a
non-breaching party’s failure to waive such unsatisfied condition(s)), any such
non-breaching party at any time shall have the right to terminate its
obligations under this Agreement with respect to such breaching party on or
after the close of business on such date without liability of such non-breaching
party to any other party;
provided
,
however
, that the
abandonment of the sale and purchase of the Preferred Stock and the Warrants
shall be applicable only to such non-breaching party providing such written
notice;
provided
further
, notwithstanding any such termination the Company shall remain
obligated to reimburse the non-breaching Buyers for the expenses described in
Section 4(g) above. Nothing contained in this Section 8 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents.
(a)
Governing Law; Jurisdiction;
Jury Trial
. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(b)
Counterparts
. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original
thereof.
(c)
Headings; Gender
. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms “
including
,” “
includes
,” “
include
” and words of
like import shall be construed broadly as if followed by the words “without
limitation.” The terms “
herein
,” “
hereunder
,” “
hereof
” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.
(d)
Severability
. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e)
Entire Agreement;
Amendments
. This Agreement, the other Transaction Documents and the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Buyers, the Company, their affiliates and Persons acting
on their behalf with respect to the matters contained herein and therein
(provided that the foregoing shall not have any effect on any agreements any
Buyer has entered into with the Company or any of its Subsidiaries prior to the
date hereof with respect to any prior investment made by such Buyer in the
Company), and this Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended or waived other than by an instrument in writing
signed by the Company and the holders of all of the then outstanding shares of
Preferred Stock, and any amendment or to, or waiver of any provision of, this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities, as applicable,
provided
that any
party may give a waiver in writing as to itself. No such amendment or waiver
(unless given pursuant to the foregoing proviso) shall be effective to the
extent that it applies to less than all of the holders of the shares of
Preferred Stock then outstanding. No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration also is offered
to all of the parties to the Transaction Documents, holders of the Preferred
Stock or holders of the Warrants (as the case may be). The Company has not,
directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, no
Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company, any Subsidiary or otherwise.
(f)
Notices
. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) Business Day after deposit with an overnight courier service with next day
delivery specified, in each case, properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:
If to the
Company:
NutraCea
5090 N.
40th Street , Suite 400
Phoenix,
AZ 85018
Telephone: (602)
522-3000
Facsimile: (602)
522-3001
Attention: Chief
Executive Officer
With a
copy (for informational purposes only) to:
Weintraub
Genshlea Chediak Law Corporation
400
Capitol Mall
Sacramento,
CA 95814
Telephone: (916)
558-6164
Facsimile: (916)
446-1611
Attention: Christopher
Chediak, Esq.
Michael
DeAngelis, Esq.
If to the
Transfer Agent:
American
Stock Transfer & Trust
59 Maiden
Lane, Plaza Level - Lobby
New York,
NY 10038
Telephone:
718 921 8143
Facsimile:
718-921-8116
Attention:
Joe Wolf, Vice President
If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers,
with a
copy (for informational purposes only) to:
Greenberg
Traurig, LLP
77 W.
Wacker Drive, Suite 2400
Chicago,
Illinois 60602
Telephone: (312)
456-8400
Facsimile: (312)
456-8435
Attention: Peter
H. Lieberman, Esq.
Todd A.
Mazur, Esq.
or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party ten (10) days prior to the effectiveness of such change;
provided
, that
Greenberg Traurig, LLP shall only be provided copies of notices sent to
Cranshire. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g)
Successors and
Assigns
. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns, including any
purchasers of any of the Securities. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
holders of all of the aggregate number of shares of Common Stock (or securities
issued in exchange for Common Stock) issued and issuable under the Transaction
Documents, including, without limitation, by way of a Fundamental Transaction
(as defined in the Certificate of Determination) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Certificate of Determination and Warrants). A Buyer may assign some
or all of its rights hereunder in connection with a transfer of any of its
Securities without the consent of the Company, provided the Company receives
written notice of the rights assigned and the name of such assignee within a
reasonable amount of time after such assignment and such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Buyers.” After such
assignment, the assignee shall be deemed to be a Buyer hereunder with respect to
such assigned rights.
(h)
No Third Party
Beneficiaries
. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person, other
than the Indemnitees referred to in Section 9(k).
(i)
Survival
. The
representations, warranties, agreements and covenants shall survive the Closing;
provided that the survival period for the representations and warranties of the
Company shall continue only for forty-eight (48) months following the Closing
Date. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j)
Further Assurances
.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated
hereby.
(k)
Indemnification
.
(i) In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “
Indemnitees
”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “
Indemnified Liabilities
”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in any of the Transaction Documents, (b) any breach of any covenant,
agreement or obligation of the Company contained in any of the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure properly made by such Buyer pursuant to Section 4(i), or
(iv) the status of such Buyer or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the Transaction Documents,
except, with respect to clause (c), to the extent such Indemnified Liability
arises solely from an Indemnitee’s gross negligence or willful misconduct. The
Company shall reimburse the Indemnitees, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Indemnified Liabilities. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(ii) Promptly
after receipt by an Indemnitee under this Section 9(k) of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against the Company under this Section
9(k), deliver to the Company a written notice of the commencement thereof, and
the Company shall have the right to participate in, and, to the extent the
Company so desires, to assume control of the defense thereof with counsel
mutually satisfactory to the Company and the Indemnitee; provided, however, that
an Indemnitee shall have the right to retain its own counsel with the fees and
expenses of such counsel to be paid by the Company if: (i) the Company has
agreed in writing to pay such fees and expenses; (ii) the Company shall have
failed promptly to assume the defense of such Indemnified Liability and to
employ counsel reasonably satisfactory to such Indemnitee in any such
Indemnified Liability; or (iii) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnitee and the Company (in which case, if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided
further, that in the case of clause (iii) above the Company shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for such Indemnitee. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the Company
all information reasonably available to the Indemnitee which relates to such
action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 9(k), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.
(iii) The
indemnification required by this Section 9(k) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Liabilities are incurred.
(iv) The
indemnity agreement contained herein shall be in addition to (A) any cause of
action or similar right of the Indemnitee against the Company or others, and (B)
any liabilities the Company may be subject to pursuant to the law.
(l)
Construction
. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. For clarification purposes, the Recitals are part
of this Agreement and are hereby incorporated by reference.
(m)
Remedies
. Each
Buyer and each holder of any Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.
(n)
Withdrawal Right
.
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Transaction Documents, whenever any Buyer exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights
(o)
Payment Set Aside
. To
the extent that the Company makes a payment or payments to any Buyer hereunder
or pursuant to any of the other Transaction Documents or any of the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
(p)
Independent Nature of
Buyers’ Obligations and Rights
. The obligations of each Buyer
under the Transaction Documents are several and not joint with the obligations
of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the Buyers are in
any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group, and the Company shall not assert any such claim, with respect to
such obligations or the transactions contemplated by the Transaction Documents.
The decision of each Buyer to purchase Securities pursuant to the Transaction
Documents has been made by such Buyer independently of any other Buyer. Each
Buyer acknowledges that no other Buyer has acted as agent for such Buyer in
connection with such Buyer making its investment hereunder and that no other
Buyer will be acting as agent of such Buyer in connection with monitoring such
Buyer’s investment in the Securities or enforcing its rights under the
Transaction Documents. The Company and each Buyer confirms that each Buyer has
independently participated with the Company in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors.
Each Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.
The use of a single agreement to effectuate the purchase and sale of the
Securities contemplated hereby was solely in the control of the Company, not the
action or decision of any Buyer, and was done solely for the convenience of the
Company and not because it was required or requested to do so by any
Buyer. It is expressly understood and agreed that each provision
contained in this Agreement and in each other Transaction Document is between
the Company and a Buyer, solely, and not between the Company and the Buyers
collectively and not between and among the Buyers.
[
signature pages
follow
]
IN WITNESS WHEREOF,
each Buyer
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.
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COMPANY:
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NUTRACEA
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By:
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Name:
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Title:
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IN WITNESS WHEREOF,
Buyer and
the Company have caused their respective signature page to this Agreement to be
duly executed as of the date first written above.
EXHIBITS
Exhibit
A
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Form
of Certificate of Determination
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Exhibit
B
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Form
of Series A Warrant
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Exhibit
C
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Form
of Series B Warrant
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Exhibit
D
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Form
of Series C Warrant
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