STOCK PURCHASE AGREEMENT DATED AS OF MARCH 15, 2005 BETWEEN CLEVELAND BIOLABS, INC. AND THE PURCHASERS PARTY HERETO
DATED
AS OF MARCH 15, 2005 BETWEEN
CLEVELAND
BIOLABS, INC.
AND
THE
PURCHASERS PARTY HERETO
TABLE
OF CONTENTS
| Page | ||
|
Section
1.
|
Authorization
and Closing
|
1
|
|
1A.
|
Authorization
of the Series A Preferred Stock
|
1
|
|
1B.
|
Purchase
and Sale of the Series A Preferred Stock
|
1
|
|
1C.
|
The
Closings
|
1
|
|
1D.
|
Termination
|
1
|
|
Section
2.
|
Conditions
of each Purchaser’s Obligation
|
2
|
|
2A.
|
Certificate
of Designation and Certificate of Incorporation
|
2
|
|
2B.
|
Representations
and Warranties; Covenants
|
2
|
|
2C.
|
Qualifications
|
2
|
|
2D.
|
Rights
Agreement
|
2
|
|
2E.
|
Opinion
of the Company’s Counsel
|
3
|
|
2F.
|
Secretary’s
Certificate
|
3
|
|
2G.
|
Reservation
of Common Stock
|
3
|
|
2H.
|
No
Material Adverse Change
|
3
|
|
2I.
|
Minimum
Investment
|
3
|
|
2J.
|
Stock
Split
|
3
|
|
2K.
|
No
Litigation
|
3
|
|
2L.
|
Convertible
Debt
|
3
|
|
2M.
|
IP
Comfort Letter
|
4
|
|
2N.
|
Stockholder
Waiver
|
4
|
|
2O.
|
CCF
Development Plan
|
4
|
|
2P.
|
Other
Documents
|
4
|
|
Section
3.
|
Conditions
of the Company’s Obligation
|
4
|
|
3A.
|
Release
of Escrow
|
4
|
|
3B.
|
Minimum
Investment
|
4
|
|
3C.
|
Delivery
of Documents
|
4
|
|
Section
4.
|
Covenants
|
4
|
|
4A.
|
Affirmative
Covenants
|
4
|
|
4B.
|
Current
Public Information
|
5
|
|
4C.
|
Public
Disclosures
|
6
|
|
4D.
|
Information
and Inspection Rights
|
6
|
|
4E.
|
Blue
Sky Filings
|
7
|
|
4F.
|
Use
of Proceeds
|
7
|
|
4G.
|
Integration
|
7
|
|
4H.
|
Reservation
of Shares
|
7
|
|
4I.
|
Trading
Market
|
8
|
|
4J.
|
Conduct
of Business by the Company
|
8
|
|
4K.
|
Notification
|
10
|
|
4L.
|
Reasonable
Efforts
|
10
|
i
|
4M.
|
Additional
Covenants
|
10
|
|
4N.
|
Transfer
Agent
|
11
|
|
4O.
|
Insurance
|
11
|
|
Section
5.
|
Representations
and Warranties of the Company
|
11
|
|
5A.
|
Organization,
Corporate Power and Licenses
|
11
|
|
5B.
|
Capital
Stock and Related Matters
|
11
|
|
5C.
|
Validity
of Shares; Exemption from Registration
|
12
|
|
5D.
|
Authorization:
No Breach or Violation
|
12
|
|
5E.
|
Financial
Statements
|
13
|
|
5F.
|
Absence
of Undisclosed Liabilities
|
13
|
|
5G.
|
No
Material Adverse Change
|
14
|
|
5H.
|
Contracts
and Commitments
|
14
|
|
5I.
|
Litigation,
etc
|
14
|
|
5J.
|
Brokerage
|
15
|
|
5K.
|
Governmental
Consent, etc
|
15
|
|
5L.
|
Employees
Employee Matters
|
15
|
|
5M.
|
Compliance
with Laws and Constituent Documents
|
16
|
|
5N.
|
Affiliated
Transactions
|
16
|
|
5O.
|
Disclosure
|
16
|
|
5P.
|
Patents,
Copyrights, Trademarks
|
16
|
|
5Q.
|
No
Other Registration Rights
|
18
|
|
5R.
|
Title
to Property and Assets
|
18
|
|
5S.
|
Taxes
|
18
|
|
5T.
|
Solvency:
Going Concern
|
19
|
|
5U.
|
Investment
Company
|
19
|
|
5V.
|
Application
of Takeover Protections
|
19
|
|
5W.
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
▇▇
|
|
▇▇.
|
▇▇▇▇▇▇▇
Corrupt Practice
|
20
|
|
Section
6.
|
Representations
and Warranties of the Purchasers
|
20
|
|
6A.
|
Authorization
|
20
|
|
6B.
|
Investment
Purpose
|
20
|
|
6C.
|
Accredited
Investor Status
|
20
|
|
6D.
|
Foreign
Investors
|
20
|
|
6E.
|
Reliance
on Exemptions
|
21
|
|
6F.
|
Information
|
21
|
|
6G.
|
No
Governmental Review
|
21
|
|
6H.
|
Transfer
or Resale
|
21
|
|
6I.
|
No
Public Market
|
21
|
|
6J.
|
Legends
|
21
|
|
6K.
|
Investment
Experience
|
22
|
|
Section
7.
|
Definitions
|
22
|
|
Section
8.
|
Miscellaneous
|
26
|
|
8A.
|
Expenses
|
26
|
|
8B.
|
Remedies
|
26
|
ii
|
8C.
|
Consent
to Amendments
|
26
|
|
8D.
|
Survival
of Representations and Warranties
|
26
|
|
8E.
|
Successors
and Assigns
|
27
|
|
8F.
|
Severability
|
27
|
|
8G.
|
Counterparts
|
27
|
|
8H.
|
Descriptive
Headings Interpretation
|
27
|
|
8I.
|
Generally
Accepted Accounting Principles
|
27
|
|
8J.
|
Governing
Law Jurisdiction
|
28
|
|
8K.
|
Notices
|
28
|
|
8L.
|
No
Strict Construction
|
29
|
|
8M.
|
Indemnification
|
29
|
|
8N.
|
Understanding
Among the ▇▇▇▇▇▇▇▇▇▇
|
▇▇
|
|
▇▇.
|
Entire
Agreement
|
30
|
|
8P.
|
Notice
Rescission and Withdrawal Right
|
30
|
|
8Q.
|
Replacement
of Securities
|
30
|
|
8R.
|
Payment
Set Aside
|
31
|
|
8S.
|
Adjustments
in Share Numbers and Prices
|
31
|
|
8T.
|
Further
Assurances
|
31
|
|
8U.
|
Reliance
|
31
|
iii
CLEVELAND
BIOLABS, INC.
THIS
STOCK PURCHASE AGREEMENT (this “Agreement”)
is
made as of March 15, 2005 between Cleveland BioLabs, Inc., a Delaware
corporation (the “Company”),
and
those purchasers signatory hereto (collectively, the “Purchasers”
and
each individually, a “Purchaser”).
Except as otherwise indicated herein, capitalized terms used herein are defined
in Section
7
hereof.
The
parties hereto agree as follows:
Section
1. Authorization
and Closing.
1A. Authorization
of the Series A Preferred Stock.
The
Company shall authorize the issuance and sale to the Purchasers of an aggregate
minimum of 2,500,000 and an aggregate maximum of 3,000,000 shares of its
Series
A Participating Convertible Preferred Stock, par value $.005 per share (the
“Series
A Preferred Stock”)
having
the rights and preferences set forth in the Certificate of Designation of
Series
A Participating Convertible Preferred Stock attached as Exhibit
A
hereto
(the “Certificate
of Designation”),
The
Series A Preferred Stock is convertible into shares of the Company’s Common
Stock, par value $0.005 per share (“Common
Stock”)
1B. Purchase
and Sale of the Series A Preferred Stock.
On each
Funding Date (as defined in Section
1C
below),
the Company shall sell to those Purchasers participating in such Funding
Date,
and subject to the terms and conditions set forth herein, such Purchasers
shall
purchase from the Company, the number of shares of the Series A Preferred
Stock
set forth on such Purchaser’s counterpart signature page hereto, at a purchase
price of $2.00 per share, for an aggregate maximum purchase price payable
by all
Purchasers collectively of up to $6,000,000, payable in accordance with
Section
1C.
1C. The
Closings.
One or
more closings of the purchases and sales of the Series A Preferred Stock
to the
Purchasers (each such closing, a “Closing”)
shall
take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or remotely via the exchange of executed documents
and other closing deliverables), on such date or dates as may agreed to by
the
Company and the Placement Agent in accordance with the Escrow Agreement (which
date or dates are each designated as a “Funding
Date”).
On
each Funding Date, the Company shall simultaneously sell to each Purchaser
participating thereat, and deliver stock certificates evidencing all of the
shares of the Series A Preferred Stock to be purchased by such Purchaser
hereunder, registered in such Purchaser’s name, upon payment of the amount
reflected on such Purchaser’s counterpart signature page as such Purchaser’s
aggregate purchase price therefore.
1D. Termination.
This
Agreement may be terminated with respect to a Purchaser at any time prior
to the
consummation of the Closing for such Purchaser under the following described
circumstances:
(i) upon
the
mutual written consent of the Company and such Purchaser; or
(ii) by
either
of the Company or such Purchaser if the Closing for such Purchaser shall
not
have been consummated on or before the Termination Date, provided that the
right
to terminate this Agreement under this subsection
1D(b)
shall
not be available to any party whose willful failure to fulfill any material
obligation under this Agreement has been the cause of, or resulted in, the
failure of such Closing to occur on or before such date.
If
the
Agreement is terminated with respect to any Purchaser pursuant to Section
1D,
the
funds held in Escrow with respect to such Purchaser shall be released and
delivered to the applicable Purchaser.
Section
2. Conditions
of each Purchaser’s Obligation.
With
respect to each Funding Date, the obligation of each Purchaser participating
thereat to purchase and pay for the Series A Preferred Stock is subject to
the
satisfaction or waiver by such Purchaser, at or prior to such Funding Date,
of
the following conditions:
2A. Certificate
of Designation and Certificate of Incorporation.
The
Company shall deliver to the Placement Agent, for the benefit of such Purchaser,
evidence that its Certificate of Incorporation, as amended to include the
provisions set forth in the Certificate of Designation (the “Amended
Certificate”)
has
been filed with the Secretary of State of Delaware and is in full force and
effect under the laws of the State of Delaware as of the applicable Funding
Date.
2B. Representations
and
Warranties; Covenants.
The
representations and warranties contained in Section 5 hereof shall be true
and
correct at and as of the applicable Funding Date as though then made, except
to
the extent of changes caused by the transactions expressly contemplated herein,
and the Company shall have performed in all material respects all of the
covenants required to be performed by it hereunder prior to the applicable
Funding Date. The Company shall have delivered to the Placement Agent, for
the
benefit of such Purchaser, a certificate, duly executed by a senior executive
officer of the Company, attesting to the satisfaction of the
foregoing.
2C. Qualifications.
All
filings with or notices to, and all authorizations, approvals or permits
of, any
governmental authority or regulatory body of the United States or of any
State
that are required in connection with the lawful issuance and sale of the
Series
A Preferred Stock pursuant to this Agreement, including, without limitation,
any
necessary filings or approvals under “blue sky” laws, shall have been obtained
and shall be effective as of the applicable Funding Date.
2D. Rights
Agreement.
The
Company and each person or entity who or which holds Common Stock of the
Company
as of the applicable Funding Date (other than other Purchasers, the Placement
Agent or Affiliates of the Placement Agent) shall have executed and delivered
to
the Placement Agent, for the benefit of the Purchaser, a rights agreement
in
form and substance as set forth in Exhibit
B
attached
hereto (as may be amended, restated and supplemented from time to time in
accordance with its terms, the “Rights
Agreement”)
and
the Rights Agreement shall be in full force and effect as of the applicable
Funding Date.
2
2E. Opinion
of the Company’s Counsel.
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, counsel for the Company, shall deliver to the Placement
Agent, for the benefit of the Placement Agent and such Purchaser, an opinion,
in
form and substance as set forth in Exhibit
C
attached
hereto.
2F. Secretary’s
Certificate.
The
Placement Agent shall have received, for the benefit of such Purchaser, from
the
Company’s Secretary a certificate having attached thereto: (i) the Amended
Certificate as in effect at the applicable Funding Date, (ii) the Bylaws
as in
effect at the applicable Funding Date, (iii) resolutions approved by the
Board
of Directors of the Company (the “Board”)
authorizing the transactions contemplated hereby, (iv) resolutions approved
by
the Company’s stockholders authorizing the filing of the Amended Certificate,
and (v) a good standing certificate with respect to the Company from the
State
of Delaware and each other state in which the Company does business or holds
assets or property, dated as of a recent date before the applicable Funding
Date.
2G. Reservation
of Common Stock.
The
Common Stock issuable upon conversion of the Series A Preferred Stock shall
have
been duly authorized and reserved for issuance upon such
conversion.
2H. No
Material Adverse Change.
From
the date of this Agreement to the applicable Funding Date, there shall have
been
no material adverse change in the business, operations or financial condition
of
the Company.
2I. Minimum
Investment.
The
aggregate purchase price paid, or to be paid, collectively by the Purchasers
signatory to this Agreement shall be at least $5,000,000.
2J. Stock
Split.
On or
prior to the initial Funding Date, the Company shall have effected a 596
for 1
stock split, effected in the form of a dividend (the “Stock
Split”).
2K. No
Litigation.
No
suit, action or other proceeding, or injunction, order, decree or judgment
relating thereto, shall be threatened or shall be pending in which it is
sought
to restrain or prohibit or to obtain damages or other relief in connection
with
the transactions contemplated by this Agreement or the other Transaction
Documents that would reasonably be expected to have a material adverse effect
on
the Company, its business, properties, assets, results of operation, prospects,
condition (financial or otherwise) or liabilities (a “Material
Adverse Effect”)
and no
injunction, judgment, order, decree or ruling with respect thereto shall
be in
effect.
2L. Convertible
Debt.
As of
the initial Funding Date, (a) the Convertible Debt shall be cancelled, (b)
such
cancellation of indebtedness shall be accepted by the Company as payment
of the
purchase price for shares of Series A Preferred Stock at $2.00 per share,
(c)
the Company shall be released and forever discharged from all of its obligations
pursuant to the Convertible Debt, and (d) the Company shall have delivered
to
the Placement Agent, for the benefit of such Purchaser, satisfactory evidence
of
the foregoing.
3
2M. IP
Comfort Letter.
Howrey,
▇▇▇▇▇, ▇▇▇▇▇▇ & White, LLP, counsel to the Company for Intellectual Property
matters, shall deliver to the Placement Agent, for the benefit of the Placement
Agent and such Purchaser, a letter, in form and substance as set forth in
Exhibit
D
attached
hereto.
2N. Stockholder
Waiver.
Each
person or entity who or which holds Common Stock of the Company as of the
applicable Funding Date (other than other Purchasers, the Placement Agent
or
Affiliates of the Placement Agent) shall have waived any and all breaches,
violations, conflicts, defaults and events of default, any and all notice
requirements and any and all preemptive rights, antidilution rights, adjustment
rights and rights for issuance of additional securities caused by, arising
out
of, or resulting from the Company’s execution, delivery and performance of this
Agreement and the other Transaction Documents, and satisfactory evidence
of such
waiver shall have been delivered to the Placement Agent, for the benefit
of such
Purchaser.
2O. CCF
Development Plan.
The
Placement Agent shall have received, for the benefit of such Purchaser,
satisfactory evidence of the agreement between the Company and The Cleveland
Clinic Foundation (“CCF”)
regarding the extension of time allotted to prepare and submit a “development
plan” as required by that certain Exclusive License Agreement, dated July 1,
2004, between the Company and CCF.
2P. Other
Documents.
All
other documents, instruments and writings reasonably required by the Placement
Agent or such Purchaser in connection with the transactions contemplated
hereby
shall have been delivered to the Placement Agent, for the benefit of such
Purchaser.
Section
3. Conditions
of the Company’s Obligation.
With
respect to each Funding Date, the obligation of the Company to issue and
sell
the shares of Series A Preferred Stock to each Purchaser participating thereat
is subject to the satisfaction or waiver by the Company, at or prior to such
Funding Date, of the following conditions:
3A. Release
of Escrow.
On such
Funding Date, the purchase price payable by such Purchaser participating
in such
Funding Date shall be released from Escrow and delivered to the
Company.
3B. Minimum
Investment.
The
aggregate purchase price paid, or to be paid, collectively by the Purchasers
signatory to this Agreement shall be at least $5,000,000.
3C. Delivery
of Documents.
Each
Purchaser shall have executed and delivered to the Company, a Purchaser
Questionnaire, attached hereto in the form of Exhibit
E,
this
Agreement, the Rights Agreement and the other documents required to be delivered
by the Purchasers as set forth in the PPM.
Section
4. Covenants.
4A. Affirmative
Covenants.
The
Company shall:
4
(i) within
one business day following each Funding Date, deliver or cause to be delivered
to each Purchaser participating in such Funding Date, one or more stock
certificates evidencing the shares of Series A Preferred Stock purchased
by such
Purchaser at such Funding Date;
(ii) at
all
times cause to be done all things necessary to maintain, preserve and renew
its
corporate existence and all material licenses, authorizations and permits
necessary to the conduct of its businesses;
(iii) pay
and
discharge when payable all Taxes and all other material assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all material claims for labor, materials or supplies
which
if unpaid would by law become an Encumbrance upon any of its property, unless
and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance
with
GAAP) have been established on its books with respect thereto;
(iv) promptly
pay, or cause to be paid, when due, in conformance with customary trade terms,
all other material indebtedness incident to the operations of the
Company;
(v) comply
in
all material respects with all applicable laws, rules and regulations of
all
governmental authorities;
(vi) apply
for
and continue in force with good and responsible insurance companies adequate
insurance covering risks of such types and in such amounts as are customary
for
corporations of similar size engaged in similar lines of business;
(vii) maintain
proper books of record and account which present fairly in all material respects
its financial condition and results of operations and make provisions on
its
financial statements for all such proper reserves as in each case are required
in accordance with GAAP;
(viii) enter
into and maintain nondisclosure and nonsolicitation agreements with all of
its
key employees;
(ix) duly
observe and comply with the Amended Certificate and Bylaws of the Company;
and
(x) use
reasonable best efforts to facilitate the transfer or surrender of stock
in the
Company, and to replace certificates of stock if lost or damaged.
4B. Current
Public Information.
At all
times after the Company has filed a registration statement with the Securities
and Exchange Commission pursuant to the requirements of either the Securities
Act or the Securities Exchange Act, or following a Triggering Event, the
Company
shall use reasonable best efforts to file all reports required to be filed
by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder
and
shall take such further action as any holder or holders of Underlying Common
Stock may reasonably request, all to the extent required to enable such holders
to sell Underlying Common Stock pursuant to an effective registration statement
and/or Rule 144 adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the Securities and Exchange Commission.
Upon request, the Company shall deliver to any holder of Series A Preferred
Stock or Underlying Common Stock a written statement as to whether it has
complied with such requirements.
5
4C. Public
Disclosures.
Except
in connection with a registration statement filed pursuant to, and to the
limited extent permitted by, the Rights Agreement, the Company shall not
disclose any Purchaser’s (or any of its Affiliate’s) name or identity as an
investor in the Company in any press release or other public announcement
or in
any document or material filed with any governmental entity, without the
prior
written consent of such Purchaser, unless such disclosure is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case prior to making such disclosure the Company shall
give written notice to such Purchaser, describing in reasonable detail the
proposed content of such disclosure and shall permit such Purchaser to review
and comment upon the form and substance of such disclosure.
4D. Information
and Inspection Rights.
(i) Following
the initial Funding Date, the Company will (a) maintain a standard system
of
accounting, established and administered in accordance with GAAP, (b) prepare
all of its financial statements in accordance with GAAP, except that interim
financial statements may lack footnotes normally contained therein and will
be
subject to normal year-end audit adjustments, and (c) furnish to each Purchaser
and each such Purchaser’s successors, assigns and transferees if and for so long
as such person or entity holds shares of Series A Preferred Stock and/or
Underlying Common Stock:
| (a) |
within
90 days alter the end of each fiscal year of the Company, an audited
balance sheet of the Company as of the end of such fiscal year
and the
related audited statements of income, stockholders’ equity and cash flows
for the fiscal year then ended, prepared in accordance with GAAP
and
certified by a firm of independent public accountants selected
by the
Board;
|
| (b) |
within
45 days alter the end of each fiscal quarter of the Company, an
unaudited
balance sheet of the Company as of the end of such fiscal quarter
and the
related unaudited statements of income, and cash flows for the
fiscal
quarter then ended, prepared in accordance with GAAP and certified
by the
Chief Financial Officer of the
Company;
|
| (c) |
promptly,
following its receipt, delivery or other notice thereof, as the
case may
be (A) copies of pleadings or other written notice of any claim
or
litigation, pending or threatened, by or against the Company, (B)
notice
of any breach of or default under any material contract or commitment
of
the Company’s, or (C) the occurrence of an event which may reasonably be
expected to cause a Material Adverse
Effect;
|
6
| (d) |
with
reasonable promptness, such other notices, information and data
(A) as the
Company delivers to the holders of its Common Stock, or (B) as
the
Company’s Board in its reasonable good faith judgment, deems material to
its business or operations; and
|
| (e) |
any
other information reasonably requested by any such
holder.
|
(ii) The
Company will permit any holder of Series A Preferred Stock and/or Underlying
Common Stock, its employees, counsel and other authorized representatives,
to
visit and inspect any of the properties of the Company, including their
respective books of account and other records (and make copies thereof and
take
extracts therefrom), and to discuss the Company’s affairs, finances and accounts
with the Company’s officers, key employees and independent public accountants,
all at such reasonable times during normal business hours and as often as
such
Person may reasonably request, upon reasonable prior notice to the
Company.
(iii) The
rights of holders of Series A Preferred Stock and/or Underlying Common Stock
set
forth in Sections 4D(a) and (b) above shall be suspended during any period
that
the Company is subject to and in compliance with the reporting requirements
of
Section 13(a) or 15(d) of the Securities Exchange Act.
4E. Blue
Sky Filings.
The
Company shall file all applicable federal and state securities laws filings
required in connection with the sale of the Series A Preferred Stock to the
Purchasers pursuant to this Agreement.
4F. Use
of
Proceeds.
The
Company shall use the net proceeds from the sale of the shares of Series
A
Preferred Stock hereunder as set forth in the PPM.
4G. Integration.
The
Company shall not, and shall use reasonable best efforts to ensure that no
Affiliate of the Company shall sell, offer for sale or solicit offers to
buy or
otherwise negotiate in respect of any security of the Company that would
be
integrated with the offer or sale of the Series A Preferred Stock in a manner
that would require the registration under the Securities Act of the sale
of the
Series A Preferred Stock to the Purchasers pursuant to this
Agreement.
4H. Reservation
of Shares.
The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may
be
required to fulfill its obligations in full under the Transaction Documents.
In
the event that at any time the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations in full under the
Transaction Documents, the Company shall promptly take such actions as may
be
required to increase the number of authorized shares.
7
4I. Trading
Market.
As soon
as practicable following a Triggering Event, the Company shall use reasonable
best efforts to apply to have the Common Stock (including, without limitation,
the Common Underlying Common Stock) listed upon the American Stock Exchange
or
included for quotation on the Nasdaq National Stock Market.
4J. Conduct
of Business by the Company.
The
Company covenants and agrees that, between the date hereof and the Termination
Date, or if later, the Final Funding Date, if any, except as expressly required
or permitted by this Agreement or the other Transaction Documents or as
disclosed in the PPM, the Company shall not conduct any business or take
any
action other than in the ordinary course of its business (as described in
the
PPM) or in connection with the maintenance and preservation of its corporate
existence or the compliance with applicable laws (including federal and state
securities laws) unless a Majority of the Purchasers shall otherwise agree
by
written consent or by telephonic conference call. By way of amplification
and
not limitation, except as expressly required or permitted by this Agreement
or
the other Transaction Documents, or as disclosed in the PPM, the Company
shall
not, between the date hereof and the Termination Date, or if later, the Final
Funding Date, if any, directly or indirectly do, or propose to do, any of
the
following without the prior written consent of a Majority of the
Purchasers:
(i) amend
or
otherwise change the Certificate of Incorporation or By-laws or alter through
merger, liquidation, reorganization, restructuring or in any other fashion
the
corporate structure or ownership of the Company;
(ii) issue,
sell, transfer, pledge, dispose of or encumber, or authorize the issuance,
sale,
transfer, pledge, disposition or encumbrance of, any shares of capital stock
of
any class, or any options, warrants, convertible securities or other rights
of
any kind to acquire any shares of capital stock, or any other ownership interest
of the Company; or sell, transfer, pledge, dispose of or encumber, or authorize
the sale, transfer, pledge, disposition or encumbrance of any assets of the
Company other than in the ordinary course of business (as described in the
PPM)
or redeem, purchase or otherwise acquire, directly or indirectly, any of
the
capital stock of the Company;
(iii) declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or
other securities or property or any combination thereof) in respect of any
of
its capital stock or other equity interests, split, combine or reclassify
any of
its capital stock or other securities or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or amend the terms of, repurchase, redeem
or
otherwise acquire any of its securities, or propose to do any of the
foregoing;
(iv) sell,
transfer, lease, license, sublicense, mortgage, pledge, dispose of, encumber,
grant or otherwise dispose of any material properties or assets other than
in
the ordinary course of business (as described in the PPM), or amend or modify
in
any way any existing agreements with respect to any material properties or
assets other than in the ordinary course of business;
(v) purchase,
acquire (by merger, consolidation, acquisition of stock or other securities
or
assets or otherwise), lease, license, sublicense or otherwise obtain any
interest in any properties or assets other than in the ordinary course of
business and consistent with past practice; incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for, the obligations of any Person,
or
make any loans, advances or enter into any financial commitments, in each
case
other than in the ordinary course of business and consistent with past
practice;
8
(vi) change
any accounting policies or procedures (including procedures with respect
to
reserves, revenue recognition, payments of accounts payable and collection
of
accounts receivable) unless required by statutory accounting principles or
GAAP;
(vii) create,
incur, suffer to exist or assume any liability or obligation (absolute, accrued,
contingent or otherwise) or any lien on any of its material assets other
than in
the ordinary course of business and consistent with past practice;
(viii) engage
in
any transaction, or enter into any agreement, arrangement, or understanding
with, directly or indirectly, any related party, other than those existing
as of
the date hereof;
(ix) fail
to
maintain in full force and effect all self-insurance and insurance, as the
case
may be, currently in effect;
(x) hire
or
terminate any senior level or key employee or consultant; increase the
compensation (including, without limitation, bonus) payable or to become
payable
to its officers or employees, or grant any severance or termination pay or
stock
options to, or enter into any employment or severance agreement with any
director, officer or other senior level or key employee of the Company, or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock or other equity option, restricted stock
or
other restricted security, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy
or arrangement for the benefit of any current or former directors, officers
or
employees;
(xi) (A)
enter
into any material agreement, contract or commitment of any kind or nature
whatsoever other than in the ordinary course of business (as described in
the
PPM), or (B) modify, amend or transfer or terminate any material agreement
to
which the Company is a party or waive, release or assign any material rights
or
claims thereunder other than in the ordinary course of business (as described
in
the PPM);
(xii) pay,
discharge, satisfy or settle any litigation or waive, assign or release any
rights or claims, or pay, discharge or satisfy any liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) other
than
in the ordinary course of business (as described in the PPM);
(xiii) issue
any
press release or make any public announcement which has not been approved
by the
Placement Agent; or
9
(xiv) authorize,
recommend, propose or announce an intention to do any of the foregoing, or
agree
or enter into anjy agreement, contract commitment or arrangement to do any
of
the foregoing.
4K. Notification.
Between
the date of this Agreement and the Termination Date, or if later, the Final
Funding Date, if any, the Company will promptly notify the Purchasers in
writing
of the following:
(i) any
fact
or any condition that causes any of the Company’s representations and warranties
in this Agreement to be materially inaccurate as of the date of this Agreement,
or if the Company becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would cause any such representation
or
warranty to be materially inaccurate had such representation and warranty
been
made as of the time of the occurrence or discovery of such fact or condition;
or
(ii) any
fact
or circumstance which might reasonably be expected to delay or prevent the
closing of the transactions contemplated by this Agreement.
4L. Reasonable
Efforts.
Between
the date of this Agreement and the Termination Date, or if later, the Final
Funding Date, if any, the Company will use reasonable best efforts to comply
with the provisions hereof and to consummate the transactions contemplated
hereby and to cause the conditions in Section 2 to be satisfied.
4M. Additional
Covenants.
After
the initial Funding Date and until the date which is 90 days following the
date
of a Triggering Event:
(i) the
Company shall not directly or indirectly do, or propose to take any action
which
could have or reasonably be expected to result in a Material Adverse
Effect;
(ii) unless
otherwise approved by a Majority of Purchasers, the Company shall not cause
or
permit (i) the sale, transfer, lease, license, sublicense, mortgage, pledge,
disposition or encumbrance of any of the Company’s assets, other than in the
ordinary course of the business consistent with past practice or as otherwise
disclosed in the PPM, or (ii) a merger, consolidation or similar transaction
involving the Company unless it shall constitute a Public Merger;
(iii) the
Company shall comply in all material respects with all applicable laws,
including, without limitation, federal and state securities laws;
and
(iv) the
Company shall not acquire any capital stock or other equity interests of
any
corporation, partnership, limited liability company or other business
association or entity unless the Company shall hold 100% of the outstanding
capital stock or other equity interests of such corporation, partnership,
limited liability company or other business association or entity.
10
4N. Transfer
Agent.
Prior
to a Triggering Event, the Company shall engage Continental Stock Transfer
&
Trust (or such other agent as the Company and the Placement Agent may agree)
as
the Company’s transfer agent.
4O. Insurance.
Within
60 days following the initial Funding Date, the Company shall obtain from,
and
shall thereafter maintain with, insurers of recognized financial responsibility
such general liability and other insurance policies of the kinds and in the
amounts as are prudent and customary in the businesses in which the Company
is
engaged.
Section
5. Representations
and Warranties of the Company.
As a
material inducement to each Purchaser to enter into this Agreement and purchase
the Series A Preferred Stock hereunder, the Company hereby represents and
warrants as of the date hereof that:
5A. Organization,
Corporate Power and Licenses.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is qualified to do business in
every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. The Company possesses all requisite corporate power and authority
and all material licenses, permits and authorizations (collectively,
“Permits”)
used
or necessary to own and operate its properties, to carry on its businesses
as
now conducted and presently proposed to be conducted and to carry out the
transactions contemplated by this Agreement and the other Transaction Documents.
No proceeding is pending or, to the Company’s knowledge, threatened, seeking the
revocation or limitation of any such Permit. The Company does not have any
subsidiaries
5B. Capital
Stock and Related Matters.
Immediately prior to the initial Funding Date, but following the consummation
of
the Stock Split, the authorized capital of the Company consists of 12,000,000
shares of Common Stock, of which 5,960,000 shares shall be issued and
outstanding, and 4,000,000 shares of preferred stock, of which 3,750,000
have
been designated as Series A Preferred Stock, none of which shall be issued
and
outstanding. The rights, privileges and preferences of the Series A Preferred
Stock will be as stated in the Certificate of Designation. Except for (i)
such
warrants as will be issued to the Placement Agent (as referenced in the PPM)
(the “Fee
Warrants”)
(ii)
the Convertible Debt, (iii) warrants to acquire 29,800 shares of Common Stock
issued to the Placement Agent in connection with the engagement of the Placement
Agent, (iv) warrants to acquire 264,624 shares of Common Stock issued to
ChemBridge Corporation, (v) $333,500 principal amount of debt convertible
into
shares of Common Stock at a conversion rate of $2.517 per share at any time
until maturity and payment of the debt or until mandatory conversion of such
debt upon consummation of an initial public offering or, at the option of
the
holder thereof, into Series A Preferred Stock at a conversion rate of $2.00
per
share upon the initial funding hereunder, (vi) any shares of Series A Preferred
Stock issued to any Purchaser, and (vii) rights under the Restricted Stock
and
Investor Rights Agreement between the Company and ChemBridge Corporation
(the
“ChemBridge
Agreement”),
there
are, and following the final Funding Date hereunder, will be, no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of
any
character whatsoever relating to, or securities, rights or obligations
convertible into 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 is or may become bound
to
issue additional shares of Common Stock, or securities or rights convertible
or
exchangeable into shares of Common Stock (collectively, “Equity
Rights”).
The
Company has reserved a sufficient number of shares of its equity securities
for
conversion or exercise in full of all such Equity Rights, including, without
limitation, the Series A Preferred Stock. Except as set forth in the ChemBridge
Agreement (which rights will be waived prior to the initial Funding Date),
there
are no securities of the Company which are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right
of
participation, or any similar right to participate in the transactions
contemplated by this Agreement or the other Transaction Documents. Except
for
anti-dilution provisions provided for in the outstanding Equity Rights, the
Certificate of Designation and the ChemBridge Agreement (which rights will
be
waived prior to the initial Funding Date), there are no anti-dilution or
price
adjustment provisions contained in any security issued by the Company or
other
agreement and the issue and sale of the Series A Preferred Stock and the
Underlying Common Stock will not, immediately or with the passage of time,
obligate the Company to issue shares of Common Stock or other securities
to any
Person (other than the Placement Agent, the Purchasers and the holder of
the
Convertible Debt) 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. Except as disclosed in the PPM under the heading “Principal and
Management Stockholders,” to the knowledge of the Company, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Securities Exchange Act) or has the right to acquire, by agreement with
or
by obligation binding upon the Company, beneficial ownership of in excess
of 5%
of the outstanding Common Stock, ignoring for such purposes any limitation
on
the number of shares that may be owned at any one time. Immediately following
the final Funding Date (assuming that a minimum of 2,500,000 shares of Series
A
Preferred Stock is issued and sold and that a maximum of 3,000,000 shares
of
Series A Preferred Stock is issued and sold), the Company’s issued and
outstanding shares of capital stock, on a fully diluted basis, shall be
allocated as set forth on the attached “Capitalization
Schedule.”
11
5C. Validity
of Shares; Exemption from Registration.
Upon
issuance in accordance with the terms hereof, the Series A Preferred Stock
will
be duly and validly issued (including, without limitation, issued in compliance
with applicable federal and state securities laws), fully paid and
non-assessable, free of all mortgages, pledges, liens, security interests,
encumbrances, leases, and charges (“Encumbrances”)
other
than those granted or created by a Purchaser, and will not be subject to
any
preemptive rights, rights of first refusal, redemption rights or other
restrictions on transfer, other than as imposed by applicable federal and
state
securities laws and other than those granted or created by a Purchaser. The
Underlying Common Stock issuable upon conversion of the Series A Preferred
Stock
have been duly and validly reserved and, when issued in accordance with the
terms thereof, will be validly issued (including, without limitation, issued
in
compliance with applicable federal and state securities laws), fully paid
and
nonassessable, free of all Encumbrances other than those granted or created
by a
Purchaser, and will not be subject to any preemptive rights, rights of first
refusal, redemption rights or other restrictions on transfer, other than
as
imposed by applicable federal and state securities laws and other than those
granted or created by a Purchaser.
5D. Authorization;
No Breach or Violation.
(i) The
execution, delivery and performance of this Agreement, the Rights Agreement
and
the other documents and instruments executed and delivered pursuant hereto
and
thereto (collectively, the “Transaction
Documents”)
and
the filing of the Certificate of Designation, have been duly authorized by
the
Company. This Agreement, each of the other Transaction Documents and the
Amended
Certificate each constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms.
12
(ii) The
execution and delivery by the Company of this Agreement and each of the other
Transaction Documents, the offering, sale and issuance of the Series A Preferred
Stock hereunder, the issuance of the Underlying Common Stock upon conversion
of
the Series A Preferred Stock, the adoption of the Certificate of Designation
and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Company, do not and shall not (i) conflict with or result in a breach
of
the terms, conditions or provisions of, (ii) constitute a default under,
(iii)
result in the creation of any Encumbrance upon the Company’s capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate
or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice
or
declaration to, or filing with, any court or administrative or governmental
body
or agency pursuant to, the Amended Certificate or the Bylaws, any Permit,
or any
law, statute, rule or regulation to which the Company is subject, or any
agreement, instrument, order, judgment or decree to which the Company is
party
or to which its properties or assets are subject.
5E. Financial
Statements.
Attached hereto as the “Financial
Statements Schedule”
is
the
audited balance sheet of the Company as of December 31, 2004 (the “Latest
Balance Sheet”
and
the
audited income statement of the Company for the year ended December 31, 2004
(the “Latest
Income Statement”)
which
Latest Balance Sheet and Latest Income Statement are accurate and complete
in
all material respects, are consistent with the books and records of the Company
(which, in turn, are accurate and complete in all material respects) and
have
been prepared in accordance with GAAP and present fairly the financial condition
of the Company as of the date set forth therein and the results of operations
of
the Company for the period set forth therein, respectively.
5F. Absence
of Undisclosed Liabilities.
Except
as set forth on the attached “Liabilities
Schedule,”
the
Company does not have any material obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known to
the
Company, whether due or to become due and regardless of when asserted) arising
out of transactions entered into at or prior to the date hereof, or any action
or inaction at or prior to the date hereof, or any state of facts existing
at or
prior to the date hereof other than: (i) liabilities set forth on the Latest
Balance Sheet (including any notes thereto), and (ii) liabilities and
obligations which have arisen after the date of the Latest Balance Sheet
in the
ordinary course of business, consistent in nature and amount with past practice
and which shall not exceed $350,000 in the aggregate (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit). Except as set forth in the Liabilities
Schedule, since December 31, 2004, the Company has paid all liabilities,
debts
and lease obligations in accordance with the applicable contractual agreement
with such third party creditors. Except as disclosed in the Liabilities
Schedule, the Company is not a guarantor or indemnitor of any indebtedness
of
any other person, firm or corporation.
13
5G. No
Material Adverse Change.
Since
December 31, 2004, the Company has conducted its business in the ordinary
course
and there has been no material adverse change in the financial condition,
operating results, assets, operations, employee relations or customer or
supplier relations of the Company. Since December 31, 2004, (a) the Company
has
not altered its method of accounting or the identity of its auditors, (b)
the
Company has not declared or made any dividend or distribution of cash or
other
property to its stockholders, other than the Stock Split, or purchased, redeemed
or made any agreements to purchase or redeem any shares of its capital stock,
and (c) other than in connection with the Stock Split, the Company has not
issued any equity securities to any officer, director or Affiliate.
5H. Contracts
and Commitments.
(i) Except
as
expressly contemplated by this Agreement or as set forth on the attached
“Contracts
Schedule,”
the
Company is not a party to or bound by any written or oral contract or agreement,
except for those contracts or agreements which can be terminated by the Company
on no more than 30 days’ notice without penalty or further expense and which do
not exceed $50,000 in the aggregate.
(ii) All
of
the contracts, agreements and instruments set forth on the Contracts
Schedule
are
valid, binding and enforceable in accordance with their respective terms.
The
Company has performed all material obligations required to be performed by
it
and is not in default under or in breach of nor in receipt of any claim of
default or breach under any contract, agreement or instrument identified
on the
Contracts
Schedule.
No
event has occurred which with the passage of time or the giving of notice
or
both would result in a default, breach or event of noncompliance by the Company
under any material contract; the Company does not have any present expectation
or intention of not fully performing all such obligations; the Company does
not
have knowledge of any breach or anticipated breach by the other parties to
any
contract; and the Company is not a party to any materially adverse contract
or
commitment.
(iii) The
Placement Agent’s special counsel has been supplied with a true and correct copy
of each of the written instruments, plans, contracts and agreements and an
accurate description of each of the oral arrangements, contracts and agreements
which are referred to on the Contracts
Schedule
together
with all amendments, waivers or other changes thereto.
(iv) The
Company does not have any agreement or understanding with any Purchaser or
any
Affiliate of any Purchaser other than as contemplated by this Agreement and
the
other Transaction Documents.
5I. Litigation,
etc.
There
are no actions, suits, proceedings or orders pending or, to the best of the
Company’s knowledge, threatened against or affecting the Company or any of its
properties or assets, or pending or threatened by the Company against any
third
party, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality (including, without
limitation, any actions, suit, proceedings or investigations with respect
to the
transactions contemplated by this Agreement); and there is no basis for any
of
the foregoing. There is no action, suit or proceeding which the Company intends
to initiate. The Company is not subject to any judgment, order or decree
of any
court or other governmental agency. Neither the Company nor to the best of
the
Company’s knowledge, any director or officer thereof, is or has been the subject
of any action, suit, proceeding or order 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 there is no currently pending
investigation by the Securities and Exchange Commission involving the Company,
or to the Company’s best knowledge, any current or former director or officer of
the Company, and to the Company’s best knowledge, there is no such threatened
investigation.
5J. Brokerage.
Except
for fees and commissions payable to the Placement Agent and/or its designees,
which fees and commissions are set forth in the PPM, (a) the Company has
not
retained a finder or broker in connection with the transactions contemplated
by
this Agreement, (b) there are no claims for brokerage commissions, finders’ fees
or similar compensation in connection with the transactions contemplated
by this
Agreement, and (c) the Purchasers shall have no obligation with respect to
and
the Company shall indemnify and save them harmless from, any fees or with
respect to any claims (other than such fees or commissions owed by a Purchaser
pursuant to written agreements executed by such Purchaser which fees or
commissions shall be the sole responsibility of such Purchaser) made by or
on
behalf of other Persons engaged by the Company for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
14
5K. Governmental
Consent, etc.
No
permit, consent, approval or authorization of, or declaration to or filing
with,
any governmental or regulatory authority is required in connection with the
execution, delivery and performance by the Company of this Agreement or the
other Transaction Documents, or the consummation by the Company of any other
transactions contemplated hereby or thereby, other than (a) the filing with
the
Securities and Exchange Commission of (i) one or more registration statements
in
accordance with the requirements of the Rights Agreement and (ii) a Notice
of
Sale of Securities on Form D within 15 days following each Funding Date,
(b)
filings required by state securities laws, which the Company will promptly,
and
in any event prior to the due date prescribed by applicable law make (at
the
sole expense of the Company) in order to permit the holders of the shares
of
Series A Preferred Stock and/or Underlying Common Stock to resell such shares
to
Persons in any State in the U.S., and (c) those that have been made or obtained
prior to the date of this Agreement.
5L. Employees
Employee Matters.
The
Company has complied in all material respects with all laws relating to the
employment of labor (including, without limitation, provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment
of
social security and other taxes), and the Company is not aware that it has
any
material labor relations problems (including, without limitation, any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). The Company nor, to the best of the Company’s knowledge,
any of its employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements relating to,
affecting or in conflict with the present or proposed business activities
of the
Company, except for agreements between the Company and its present and former
employees all of which are described on the Contracts
Schedule.
Except
as set forth on the Contracts
Schedule,
the
Company has no employment contracts with any of its employees not expressly
terminable at will and no collective bargaining agreements covering any of
its
employees. Further, the Company has no policies, procedures or handbooks
providing for other than at-will employment. The Company is not aware that
any
employee of the Company has plans to terminate his or her employment
relationship with the Company, nor does the Company have a present intention
to
terminate the employment of any employee. To the Company’s knowledge, none of
the current or former officers or other key employees of the Company have
been
arrested or convicted of any felony and no such person has declared bankruptcy
nor has any such person been an officer or director of any company or other
organization that has declared bankruptcy. Except as set forth in the
Liabilities Schedule, the Company has no liabilities to employees arising
from
deferred compensation. The Company does not contribute to or participate
in any
employee benefit plan subject to the Employee Retirement Income Security
Act of
1974, as amended other than a medical benefit plan with respect to which
the
Company has made all required contributions and has complied with all applicable
laws]. To the Company’s best knowledge, none of its current or former officers,
directors, consultants or employees is currently, has in the past, or has
plans
in the future, to engage in a line of business which is competitive with
the
Company.
15
5M. Compliance
with Laws and Constituent Documents.
The
Company is in compliance in all material respects with all applicable laws,
regulations, orders, judgments and decrees. The Company is not in violation
of
any of the provisions of its Certificate of Incorporation or
Bylaws.
5N. Affiliated
Transactions.
Except
as set forth on the attached “Affiliated
Transactions Schedule,”
no
executive officer, or, to the Company’s knowledge, no director, employee,
shareholder or Affiliate of the Company or any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Company (other than for services
as
employees, officers and directors) or has any material interest in any material
property used by the Company.
5O. Disclosure.
Neither
this Agreement nor any of the exhibits, schedules, attachments, written
statements, documents, certificates or other items supplied to the Purchasers
by
or on behalf of the Company (including, without limitation, the Confidential
Offering Memorandum dated February 18, 2005 relating to the offering and
sale of
the Series A Preferred Stock (the “PPM”)
with
respect to the transactions contemplated hereby contain any untrue statement
of
a material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading.
5P. Patents,
Copyrights, Trademarks.
(i) The
PPM
accurately describes (a) all issued Patents and registrations and applications
for all Patents, Trademarks and Copyrights owned by or licensed to the Company
relating to Intellectual Property, and (b) all material contracts, agreements
and arrangements relating to Intellectual Property (whether in writing or
oral)
to which the Company is a party, by which any of its respective assets or
properties are bound or which are used or necessary in the business of the
Company as currently conducted or as proposed to be conducted. As used herein,
the term “Intellectual
Property”
means
(1) all Compounds and/or uses thereof and inventions (whether patentable
or
unpatentable and whether or not reduced to practice) and all improvements
thereon, (ii) all patents, patent applications and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof (collectively, “Patents”),
(iii)
all trademarks, service marks, trade dress, logos, trade names and corporate
names (collectively, “Trademarks”)
including all goodwill associated therewith, and all applications, registrations
and renewals in connection therewith, (iv) all copyrightable works, all
copyrights and all applications, registrations and renewals in connection
therewith (collectively, “Copyrights”),
(v)
all mask works and all applications, registrations and renewals in connection
therewith, (vi) all trade secrets and confidential business information
(including, without limitation, ideas, research and development, data, results,
know-how, formulas, compositions, manufacturing and production processes
and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (vii) all computer software (including data and related
documentation) and (viii) all other proprietary tights.
16
(ii) The
Company owns, is licensed to use, or otherwise has the right to use all Company
Intellectual Property and all such Company Intellectual Property will be
owned
or available for use by the Company following each Funding Date and for the
foreseeable future. The Company has taken all necessary and reasonable best
actions to maintain and protect its material owned or licensed Company
Intellectual Property. To the best of the Company’s knowledge, there is
patentable subject matter relating to the Company’s currently contemplated
aminoacridine and flagellin products disclosed in the patent applications
prosecuted by the Company. As used herein, “Company
Intellectual Property”
means
all Intellectual Property used or held for use by the Company in the conduct
of
its business as currently conducted or as proposed to be conducted.
(iii) To
the
best knowledge of the Company, the Company has not infringed upon or
misappropriated any Intellectual Property rights of third parties related
to the
products set forth on the Products
Schedule
and/or
the uses thereof, and the continued operation of the Company as currently
conducted and as proposed to be conducted related to the products set forth
on
the Products
Schedule
does not
infringe upon or misappropriate or otherwise violate any Intellectual Property
rights of third parties. To the Company’s best knowledge, no Person has
infringed upon or misappropriated or otherwise violated any Company Intellectual
Property.
(iv) Except
as
disclosed in the PPM, with respect to each item of Company Intellectual
Property: (i) the Company possesses all right, title (if owned) and interest
in
and to the item, free and clear of any Encumbrance (other than, in the case
of
licensed Intellectual Property, restrictions created by the licenses
themselves); (ii) the item of Company Intellectual Property is not subject
to
any outstanding order, injunction, judgment, decree or ruling of any Regulatory
Authority (other than the applicable patent and trademark prosecution protection
proceedings themselves); and (iii) none of the Patents disclosed in the PPM
have
been abandoned. As used herein, the term “Regulatory
Authority”
means
any applicable government regulatory authority, domestic or foreign, involved
in
granting approvals for the manufacturing, marketing, reimbursement and/or
pricing of any Product of the Company; the term “Product”
means
preparations in final form for sale by prescription, over-the-counter or
any
other method that contains Compound or one or more active ingredients; the
term
“Compound”
means
compound or compounds or uses thereof described in the PPM as belonging or
licensed to the Company or claimed by the Company in one or more of Patents
or
applications therefor.
17
(v) The
rights to all inventions of any of the Company’s employees or consultants,
former employees or consultants made while employed or retained by the Company,
or prior to their employment with or retention by the Company, which are
utilized by the Company in the conduct of the Company’s business as presently
conducted or as proposed to be conducted have been fully assigned or licensed
to
the Company.
(vi) Except
as
set forth on the Contracts
Schedule
and
described in the PPM, there are no outstanding options, licenses or agreements
of any kind relating to the Company Intellectual Property, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect thereto (other than such licenses or agreements arising from the
purchase of “off the shelf” or standard products).
5Q. No
Other Registration Rights.
Except
as provided under the Rights Agreement or as described in the PPM, the Company
is not under any obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued pursuant
to
this or any other existing agreement.
5R. Title
to Property and Assets.
Except
as provided in Section 5P with respect to Intellectual Property, the Company
has
good and valid title or valid leasehold interest in and to all of the properties
and assets used by the Company, in each case subject to no Encumbrance other
than Permitted Encumbrances. All material assets and properties used or
necessary by the Company in its business are in good operating condition
and
repair (except for normal wear and tear), are suitable for the purposes used
and
are adequate and sufficient for the operations of the Company as currently
conducted and as proposed to be conducted. Any personal or real property
held
under lease or license by the Company are held by it under valid, subsisting
and
enforceable leases or licenses of which the Company is in compliance.
“Permitted
Encumbrances”
shall
mean (i) any lien for taxes not yet due or delinquent or (ii) any statutory
lien
arising in the ordinary course of business by operation of law with respect
to a
liability that is not yet due or delinquent.
5S. Taxes.
The
Company has accurately prepared and timely filed all income and other tax
returns, if any, that are required to be filed by or on behalf of the Company,
its business or assets, and has paid, or made provision for the payment of,
all
taxes that have become due and owing, including any assessment that has been
or
may be received from any taxing authority for the period through the date
of
this Agreement. There are no outstanding agreements by the Company for the
extension of time for the assessment of any tax. None of the Company’s tax
returns has been or, to the Company’s knowledge, is now under audit or
investigation by any tax authority. No deficiency assessment or proposed
adjustment of the Company’s taxes (if any) is pending, and the Company has no
knowledge of any proposed liability for any tax to be imposed upon the Company’s
properties or assets for which there is not an adequate reserve reflected
on
Latest Balance Sheet.
18
5T. Solvency;
Going Concern.
(i) Following
the consummation of the transactions contemplated hereby, (i) the Company’s fair
saleable value of its assets in an orderly liquidation
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; (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; and (iv) the Company’s total indebtedness shall not exceed $800,000
in the aggregate (exclusive of the Convertible Debt). 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).
(ii) Following
consummation of the transactions contemplated hereby (after taking into account
the proceeds received by the Company from the sale of the Series A Preferred
Stock) the Company has no knowledge or reason to believe that the Company’s
independent public accountants will issue an audit letter containing a “going
concern” opinion with respect to the Company.
5U. Investment
Company.
The
Company is not, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
5V. Application
of Takeover Protections.
There
is no 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 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 the Company’s issuance of the Series A Preferred Stock and/or
Underlying Common Stock and the Purchasers’ ownership thereof.
5W. Private
Placement.
Based
in part on the representations made by each of the Purchasers in Section
6 of
this Agreement, the offer and sale of the Series A Preferred Stock to each
of
the Purchasers will be exempt from the registration requirements of Section
5 of
the Securities Act. The acquisition by the Purchasers of the Series A Preferred
Stock will not be “integrated” with any other offering or sale of securities of
the Company required to be registered under the Securities Act, or the rules
and
regulations promulgated thereunder. Neither the Company nor any Person acting
on
the Company’s behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or
advertising.
19
5X. Foreign
Corrupt Practice.
Neither
the Company nor any director, officer, agent, employee or other person acting
on
behalf of the Company has, in the course of his actions for, or on behalf
of,
the Company used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity;
made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate find; violated or is in violation of
any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any
bribe,
rebate, payoff; influence payment, kickback or other unlawful payment to
any
foreign or domestic government official or employee.
Section
6. Representations
and Warranties of the Purchasers.
Each
Purchaser hereby represents and warrants (as to itself only) to the Company
that:
6A. Authorization.
If such
Purchaser is an entity, it is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, such Purchaser
has
full power and authority to enter into this Agreement and the other Transaction
Documents
and has
duly authorized, executed and delivered the same. If such Purchaser is an
individual, he or she has reached the age of majority in the jurisdiction
in
which he or she resides and has executed and delivered this agreement and
the
other Transaction Documents. This Agreement and the Transaction Documents,
when
executed and delivered by such Purchaser, will constitute valid and legally
binding obligations of the Purchaser, enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of
general
application affecting enforcement of creditors’ rights generally, or (b) as
limited by laws relating to the availability of a specific performance,
injunctive relief, or other equitable remedies, or (c) to the extent the
indemnification provisions contained in this Agreement and the other Transaction
Documents may be limited by applicable Federal or state securities laws,
public
policy and other equitable considerations.
6B. Investment
Purpose.
Such
Purchaser (i) is acquiring the Series A Preferred Stock and (ii) upon conversion
of the Series A Preferred Stock, will acquire the Underlying Common Stock
then
issuable (the Series A Preferred Stock and the Underlying Common Stock
collectively are referred to herein as the “Securities”),
for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant
to
sales registered or exempted under the Securities Act.
6C. Accredited
Investor Status.
Such
Purchaser is an “accredited investor” as that term is defined in Rule 501(a)(3)
of Regulation D promulgated under the Securities Act and as described in
the
PPM.
6D. Foreign
Investors.
If the
Purchaser is not a United States person (as defined by Section 7701(a)(30)
of
the Internal Revenue Code of 1986, as amended), such Purchaser hereby represents
that it has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Securities
or any use of this Agreement, including (i) the legal requirements within
its
jurisdiction for the purchase of the Securities, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other
tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale, or transfer of the Securities. Such Purchaser’s subscription and payment
for and continued beneficial ownership of the Securities, will not violate
any
applicable securities or other laws of the Purchaser’s
jurisdiction.
20
6E. Reliance
on Exemptions.
Such
Purchaser understands that the Securities are being offered and sold to it
in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying
in part
upon the truth and accuracy of, and such Purchaser’s compliance with, the
representations, warranties and agreements of such Purchaser set forth herein
in
order to determine the availability of such exemptions and the eligibility
of
such Purchaser to acquire such securities.
6F. Information.
Such
Purchaser has been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer
and
sale of the Securities which have been requested by such Purchaser. Such
Purchaser has been afforded the opportunity to ask questions of the Company.
Such Purchaser understands that its investment in the Securities involves
a high
degree of risk. Such Purchaser has sought such accounting, legal and tax
advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities. Notwithstanding the foregoing,
in
entering into this Agreement, such Purchaser represents that it is relying
solely on the representations, warranties, covenants and agreements set forth
in
this Agreement, the other Transaction Documents and the PPM, which documents
supersede and replace any other written or oral information communicated
to such
Purchaser, whether by email, power-point presentation or otherwise.
6G. No
Governmental Review.
Such
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
6H. Transfer
or Resale.
Such
Purchaser understands that except as provided in the Rights Agreement: (i)
the
Securities have not been and are not being registered under the Securities
Act
or any state securities laws, and may not be offered for sale, sold, assigned
or
transferred unless (A) subsequently registered thereunder or (B) sold in
reliance on an exemption therefrom; and (ii) neither the Company nor any
other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder. Such Purchaser is able to bear the economic risk
of
its investment in the Securities for an indefinite period of time.
6I. No
Public Market.
Such
Purchaser understands that no public market now exists for any of the Securities
issued by the Company, and that, subject to the provisions of the Rights
Agreement, the Company has made no assurances that a public market will ever
exist for the Securities.
21
6J. Legends.
Such
Purchaser understands that the certificates representing the Securities and
any
securities issued in respect of or exchange or conversion for the Securities,
may bear one or all of the following legends:
(i) “THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. ANY SUCH
SALE
OR DISTRIBUTION MAY BE EFFECTED ONLY PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR
IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING
THE
FOREGOING, THE SHARES REPRESENTED HEREBY MAY BE PLEDGED IN CONNECTION WITH
A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
SUCH
SHARES.”
(ii) Any
legend required by the Transaction Documents.
(iii) Any
legend required by the Blue Sky laws of any state to the extent such laws
are
applicable to the shares represented by the certificate so
legended.
6K. Investment
Experience.
Such
Purchaser understands that the purchase of Securities involves substantial
risk
including the possibility of complete loss of investment. Such Purchaser:
(i)
has experience as an investor in securities of companies in the development
stage and acknowledges that such Purchaser is able to fend for itself, can
bear
the economic risk of such Purchaser’s investment in the Securities and has such
knowledge and experience in financial or business matters that such Purchaser
is
capable of evaluating the merits and risks of this investment in the Securities
and protecting its own interests in connection with this investment and/or
(ii)
has a preexisting personal or business relationship with the Company and
certain
of its officers, directors or controlling persons of a nature and duration
that
enables such Purchaser to be aware of the character, business acumen and
financial circumstances of such person. Further, such Purchaser is aware
of no
publication of any advertisement in connection with the transactions
contemplated by this Agreement.
Section
7. Definitions.
For the
purposes of this Agreement, the following terms have the meanings set forth
below:
“Affiliate”
of
any
particular Person means any other Person controlling, controlled by or under
common control with such particular Person, where “control” means the
possession, directly or indirectly, of the power to direct the management
and
policies of a Person whether through the ownership of voting securities,
contract or otherwise. In addition, “Affiliates”
of
a
Person include any Affiliate of a Person or its Affiliates’ partners, members or
shareholders who received shares of the Series A Preferred Stock or Underlying
Common Stock pursuant to a distribution from or a liquidation of such Person
or
such Affiliate.
“Affiliated
Transactions Schedule”
shall
have the meaning specified in Section
5N
hereof.
“Agreement”
shall
have the meaning specified in the Preamble hereto.
22
“Amended
Certificate”
shall
have the meaning specified in Section
2A.
“Board”
shall
have the meaning specified in Section
2F
hereof.
“Bylaws”
shall
mean the Company’s bylaws, as amended, restated or supplemented.
“CCF”
shall
have the meaning specified in Section
20
hereof.
“Certificate
of Designation”
shall
have the meaning specified in Section
1A
hereof.
“ChemBridge
Agreement”
shall
have the meaning specified in Section
5B
hereof.
“Closing”
shall
have the meaning specified in Section
1C
hereof.
“Common
Stock”
shall
have the meaning specified in Section
1A
hereof.
“Company”
shall
have the meaning specified in the Preamble hereto and, subject to Section
8E
hereof, shall include any successor entity.
“Company
Intellectual Property”
shall
have the meaning specified in Section
5P
hereof.
“Compound”
shall
have the meaning specified in Section
5P
hereof.
“Convertible
Debt”
shall
mean an aggregate of $50,000 in principal amount of 5% convertible notes,
dated
as of May 11, 2004, made by the Company to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, which principal
amount is convertible into 25,000 shares of the Series A Preferred
Stock.
“Contracts
Schedule”
shall
have the meaning specified in Section
5H
hereof.
“Copyrights”
shall
have the meaning specified in Section
5P
hereof.
“Encumbrances”
has
the
meaning set forth in Section
5C
hereof.
“Equity
Rights”
has
the
meaning set forth in Section
5B
hereof.
“Escrow”
means
the escrow account established and maintained pursuant to the Escrow
Agreement.
“Escrow
Agreement”
means
the escrow agreement, dated as of February 16, 2005, by and among the Company,
the Placement Agent and Continental Stock Transfer and Trust
Company.
“Financial
Statements Schedule”
shall
have the meaning specified in Section
5E
hereof.
“Fee
Warrants”
shall
have the meaning specified in Section
5B
hereof.
“Funding
Date”
shall
have the meaning specified in Section
1C
hereof.
“GAAP”
means
generally accepted United States accounting principles, consistently
applied.
23
“Indemnified
Liabilities”
shall
have the meaning specified in Section
8M
hereof.
“Indemnitees”
shall
have the meaning specified in Section
8M
hereof.
“Intellectual
Property”
shall
have the meaning specified in Section
5P
hereof.
“Investment
Data”
shall
have the meaning specified in Section
8N
hereof.
“Investment
Banking Agreement”
shall
mean that certain Investment Banking Agreement, dated as of September 30,
2004,
by and between the Company and the Placement Agent, as the same may be
amended.
“Latest
Balance Sheet”
shall
have the meaning specified in Section
5E
hereof.
“Latest
Income Statement”
shall
have the meaning specified in Section
5E
hereof.
“Liabilities
Schedule”
shall
have the meaning specified in Section
5F
hereof.
“Majority
of Purchasers”
means,
at the time of determination, Purchasers who have subscribed for or purchased
at
least 50.1% of the shares of Series A Preferred Stock which have, at such
time,
been subscribed for and/or purchased, pursuant to this Agreement.
“Material
Adverse Effect”
shall
have the meaning specified in Section
2K
hereof.
“New
York Courts”
shall
have the meaning specified in Section
8J
hereof.
“Patents”
shall
have the meaning specified in Section
5P
hereof.
“Person”
means
an individual, a partnership, a corporation, a limited liability company,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
“Permits”
shall
have the meaning set forth in Section
5A
hereof.
“Permitted
Encumbrance”
shall
have the meaning set forth in Section
5S
hereof.
“Placement
Agent”
means
Sunrise Securities Corp.
“PPM”
shall
have the meaning set forth in Section
5O
hereof.
“Product”
shall
have the meaning specified in Section
5P
hereof.
“Products
Schedule”
shall
have the meaning specified in Section
5P
hereof.
“Public
Merger”
shall
have the meaning specified in the Certificate of Designation.
“Purchaser”
shall
have the meaning specified in the Preamble hereto.
“Proceeding”
shall
have the meaning specified in Section
8J
hereof.
24
“Qualified
IPO”
shall
have the meaning specified in the Certificate of Designation.
“Regulatory
Authority”
shall
have the meaning specified in Section
5P
hereof.
“Resale
Registration”
shall
have the meaning specified in the Certificate of Designation.
“Rights
Agreement”
shall
have the meaning specified in Section
2D
hereof.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal law then in
force.
“Securities
and Exchange Commission”
includes any governmental body or agency succeeding to the functions
thereof.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended, or any similar federal law
then
in force.
“Series
A Preferred Stock”
shall
have the meaning specified in Section
lA
hereof.
“Stock
Split”
shall
have the meaning set forth in Section
2J
hereof.
“Tax”
or
“Taxes”
means
federal, state, county, local, foreign or other income, gross receipts, ad
valorem, franchise, profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated and
other
taxes of any kind whatsoever (including, without limitation, deficiencies,
penalties, additions to tax, and interest attributable thereto) whether disputed
or not.
“Termination
Date”
means
March 31, 2005, or such later date as may be mutually agreed to in writing
by
the Company and the Placement Agent.
“Trademarks”
shall
have the meaning specified in Section
5P
hereof.
“Transaction
Documents”
has
the
meaning set forth in Section
5D
hereof.
“Triggering
Event”
shall
mean the first to occur of a Qualified IPO, Public Merger and Resale
Registration.
“Underlying
Common Stock”
means
(i) the Common Stock issued or issuable upon conversion of the Series A
Preferred Stock and (ii) any Common Stock issued or issuable with respect
to the
securities referred to in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this Agreement, any
Person who holds any shares of Series A Preferred Stock shall be deemed to
be
the holder of the Underlying Common Stock obtainable upon conversion of the
Series A Preferred Stock in connection with the transfer thereof or otherwise
regardless of any restriction or limitation on the conversion of the Series
A
Preferred Stock, such Underlying Common Stock shall be deemed to be in
existence, and such Person shall be entitled to exercise the rights of a
holder
of Underlying Common Stock hereunder.
25
Section
8. Section
8. Miscellaneous.
8A. Expenses.
The
Company shall pay the fees and expenses of its own advisors, counsel,
accountants and other experts, and, to the extent provided in the Investment
Banking Agreement, the fees and expenses of the Placement Agent’s advisors,
counsel, accountants and other experts, and all other expenses incurred by
the
Company incident to the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Transaction Documents. The Company
shall pay all stamp and other taxes and duties levied in connection with
the
issuance of the Securities under this Agreement. The Company shall pay, and
hold
each Purchaser and all holders of Series A Preferred Stock and Underlying
Common
Stock harmless against liability for the payment of the fees and expenses
incurred with respect to the enforcement of the rights (in connection with
a
breach or threatened breach by the Company) granted under this Agreement,
the
other Transaction Documents, the Amended Certificate or the Certificate of
Designation.
8B. Remedies.
Each
holder of the Series A Preferred Stock and Underlying Common Stock shall
have
all rights and remedies set forth in this Agreement, the other Transaction
Documents, the Amended Certificate and the Certificate of Designation (or
as may
be amended) 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 tights 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, the other Transaction Documents, the Amended
Certificate and the Certificate of Designation and to exercise all other
tights
granted by law. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action
for
specific performance of any such obligation the defense that a remedy at
law
would be adequate.
8C. Consent
to Amendments.
Except
as otherwise expressly provided herein, the provisions of this Agreement
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 a Majority of the Purchasers. No other course
of
dealing between the Company and any Purchaser or other holder of Securities
or
any delay in exercising any rights hereunder or under the Amended Certificate
or
the Certificate of Designation (as may be amended) shall operate as a waiver
of
any rights of any such Purchasers or holders.
8D. Survival
of Representations and Warranties.
All
representations and warranties contained herein or made in writing by any
party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation made by any Purchaser or on its behalf; provided
that all of the representations and warranties contained herein, other than
those contained in Sections 5A, 5B, 5C, 5D, 5J and 5P (each of which shall
survive indefinitely), shall survive until the date which is the later of
(a) 90
days following a Triggering Event, and (b) the first year anniversary of
the
date of this Agreement.
26
8E. Successors
and Assigns.
Except
as otherwise expressly provided herein, all covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto shall bind
and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not; provided, that the Company may not assign
its rights or obligations hereunder without the consent of a Majority of
the
Purchasers. In addition, and whether or not any express assignment has been
made, the provisions of this Agreement which are for any Purchaser’s benefit as
a purchaser or holder of shares of the Series A Preferred Stock or Underlying
Common Stock are also for the benefit of, and enforceable by, any subsequent
holder of such Series A Preferred Stock or such Underlying Common Stock.
The
rights and obligations of each Purchaser under this Agreement and the agreements
contemplated hereby may be assigned by such Purchaser at any time, in whole
or
in part, to any investment fund managed by such Purchaser, or any successor
thereto.
8F. Severability.
Whenever possible, each provision of this Agreement shall be interpreted
in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable
law,
such provision shall be ineffective only to the extent of such prohibition
or
invalidity, without invalidating the remainder of this Agreement.
8G. Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts, any
one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same Agreement.
Facsimile signatures shall be deemed originals for all purposes
hereunder.
8H. Descriptive
Headings; Interpretation.
The
descriptive headings of this Agreement are inserted for convenience only
and do
not constitute a substantive part of this Agreement. The use of the word
“including” in this Agreement shall be by way of example rather than by
limitation. Any reference to any federal, state, local or foreign statute
or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder and any applicable common law, unless the context requires otherwise.
Terms used with initial capital letters will have the meanings specified,
applicable to singular and plural forms, for all purposes of this Agreement.
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural, and vice
versa.
8I. Generally
Accepted Accounting Principles.
Where
any accounting determination or calculation is required to be made under
this
Agreement or the exhibits hereto, such determination or calculation (unless
otherwise provided) shall be made in accordance with GAAP, consistently applied,
except that if because of a change in GAAP the Company would have to alter
a
previously utilized accounting method or policy in order to remain in compliance
with GAAP, such determination or calculation shall continue to be made in
accordance with the Company’s previous accounting methods and
policies.
27
8J. Governing
Law; Jurisdiction.
The
corporate law of the State of Delaware shall govern all issues and questions
concerning the relative rights and obligations of the Company and its
stockholders. All other issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits
and
schedules hereto shall be governed by, and construed in accordance with,
the
laws of the State of New York, without giving effect to any choice of law
or
conflict of law rules or provisions (whether of the State of New York or
any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. In furtherance of the foregoing,
the internal law of the State of New York shall control the interpretation
and
construction of this Agreement (and all schedules and exhibits hereto), even
if,
under that jurisdiction’s choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply. Each party
agrees that any and all actions, claims, suits investigations or proceedings
(including, without limitation, an investigation or partial proceeding, such
as
a deposition), whether commenced or threatened (each a “Proceeding”),
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) may be commenced non-exclusively in the state and federal courts
sitting
in the City of New York, Borough of Manhattan (the “New
York Courts”).
Each
party hereto hereby irrevocably submits to the non-exclusive jurisdiction
of the
New York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction
of
any such New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
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. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL
BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE
TRANSACTIONS CONTEMPLATED HEREBY. IF ANY PARTY SHALL COMMENCE A PROCEEDING
TO
ENFORCE ANY PROVISIONS OF A TRANSACTION DOCUMENT, THEN THE PREVAILING PARTY
IN
SUCH PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS ATTORNEY’S FEES
AND OTHER COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION
AND
PROSECUTION OF SUCH PROCEEDING.
8K. Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been given (a) upon delivery, when delivered personally to
the
recipient, (b) on the next business day, if sent to the recipient by reputable
overnight courier service (charges prepaid), (c) on the third business day
after
the date of mailing, if mailed to the recipient by certified or registered
mail,
return receipt requested and postage prepaid, or (d) on the date sent, if
sent
by confirmed facsimile transmission if during the normal business hours of
the
recipient, and, if not, on the next business day, provided, that such facsimile
transmission is followed by delivery via another method permitted hereby.
Such
notices, demands and other communications shall be sent to each Purchaser
at the
address indicated for such Purchaser on such Purchaser’s counterpart signature
page hereto and to the Company at the address indicated below:
28
Cleveland
BioLabs, Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇ Rosenman LLP
▇▇▇
▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or
to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
8L. No
Strict Construction.
The
parties hereto have participated jointly in the negotiation and drafting
of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions
of
this Agreement.
8M. Indemnification.
In
consideration of each Purchaser’s execution and delivery of this Agreement and
acquiring the Series A Preferred Stock hereunder and in addition to all of
the
Company’s other obligations under this Agreement and the other Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless
each
such Purchaser and each such Purchaser’s officers, directors, managers,
partners, stockholders, members, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Indemnities”)
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 and costs of investigation (the “Indemnified
Liabilities”)
incurred by the Indemnitees or any of them as a result of, or arising out
of, or
relating to any misrepresentation in or breach of any of the representations
and
warranties or any nonfulfillment or breach of any covenant or agreement on
the
part of the Company under this Agreement or any other Transaction Document,
provided that the Company shall not be liable to an Indemnitee under this
Section 8M for any liability if such liability is caused solely by such
Indemnitee’s fraud, willful misconduct or gross negligence or default or breach
under this Agreement. 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.
29
8N. Understanding
Among the Purchasers.
The
obligations of each Purchaser under this Agreement and any other Transaction
Document are several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under this Agreement or any other Transaction
Document. Each Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in
any
proceeding for such purpose. Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of a Purchaser arising
directly or indirectly, under this Agreement or any other Transaction Document
of any and every nature whatsoever shall be satisfied solely out of the assets
of such Purchaser, and that no trustee, officer, other investment vehicle
or any
other Affiliate of such Purchaser or any investor, shareholder or holder
of
shares of beneficial interest of such a Purchaser shall be personally liable
for
any liabilities of such Purchaser. The determination of each Purchaser to
purchase shares of the Series A Preferred Stock pursuant to this Agreement
has
been made by such Purchaser independent of any other Purchaser and independent
of any statements or opinions as to the advisability of such purchase or
as to
the properties, business, prospects or condition (financial or otherwise)
of the
Company which may have been made or given to such Purchaser by any other
Purchaser or by any agent or employee of any other Purchaser. Each Purchaser
acknowledges and agrees that no other Purchaser shall be responsible in any
way
or held liable or accountable to any extent for any information, documents,
materials, analysis, projections, plans or other data (or compilations thereof)
relating to the Company or the transactions contemplated hereby (collectively,
“Investment
Data”)
provided to such Purchaser by any other Purchaser, and each Purchaser agrees
to
hold harmless and not make any claims against any other Purchaser with respect
to any Investment Data provided to such Purchaser by such other
Purchaser.
8O. Entire
Agreement.
This
Agreement, together with the other Transaction Documents, the PPM and the
Exhibits and Schedules hereto and thereto, contain the entire understanding
of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits
and
schedules.
8P. Notice
Rescission and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) this Agreement or any other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option hereunder
or thereunder and the Company does not timely perform its related obligations
within the periods therein provided, then such Purchaser 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.
8Q. Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction.
30
8R. Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
this Agreement or any other Transaction Document or a Purchaser enforces
or
exercises its 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, 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.
8S. Adjustments
in Share Numbers and Prices.
In the
event of any stock split (other than the Stock Split), subdivision, dividend
or
distribution payable in shares of Common Stock (or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly shares of Common Stock), combination or other similar
recapitalization or event occurring after the date hereof but prior to the
initial Funding Date, each reference in this Agreement and each other
Transaction Document to a number of shares or a price per share shall be
amended
to appropriately account for such event.
8T. Further
Assurances.
Each
party agrees to execute such other documents, instruments, agreements and
consents, and take such other actions as may be reasonably requested by the
other parties hereto to effectuate the purposes of this Agreement.
8U. Reliance.
The
Company acknowledges and agrees that, in accepting shares of the Company’s
Common Stock and/or Fee Warrants as partial consideration for services rendered
to the Company in connection with the transactions contemplated hereby, the
Placement Agent and/or its designees are entitled to rely on and enforce
the
Company’s representations and warranties, covenants and agreements and as if a
party hereto.
(The
remainder of this page is left intentionally blank.)
(Counterpart
signature pages to follow.)
31
COMPANY
COUNTERPART TO
IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the date
first set forth above.
| CLEVELAND BIOLABS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
President
and Chief Executive Officer
|
||
PURCHASER
COUNTERPART TO
IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the date
first set forth above.
|
INDIVIDUAL:
|
||
|
Number
of Shares of Series A
Preferred
Stock Subscribed for
|
Print
Name
|
|
|
Aggregate
Purchase Price
(i.e.,
Number of Shares x $2.00)
|
Signature
|
|
|
ADDRESS
FOR NOTICES:*
|
Social
Security Number
|
|
|
ENTITY:
|
||
|
Attention:
|
||
|
Telephone:
|
Print
Entity Name
|
|
|
Facsimile:
|
||
|
*Individuals
should list their primary residence; Entities should list their
principal
place of business
|
Signature
|
|
|
Name
and Title of Signatory
|
||
|
Tax
ID Number
|
2
LIST
OF EXHIBITS
|
Exhibit
A
|
-
|
Certificate
of Designation
|
|
Exhibit
B
|
-
|
Rights
Agreement
|
|
Exhibit
C
|
-
|
Opinion
of Company Counsel
|
|
Exhibit
D
|
-
|
IP
Comfort Letter of Company Counsel
|
|
Exhibit
E
|
-
|
Purchaser
Questionnaire
|
LIST
OF DISCLOSURE SCHEDULES
|
Capitalization
Schedule
|
|
Financial
Statements Schedule
|
|
Liabilities
Schedule
|
|
Contracts
Schedule
|
|
Affiliated
Transactions Schedule
|
|
Products
Schedule
|
3