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EXHIBIT 10.19
Dated the 31 of August, 2000
PHARMAPRINT INC
("Company")
and
CAPITAL ALERT INVESTMENTS LTD
("Subscriber")
***************************************************
SHARE SUBSCRIPTION AGREEMENT
(PharmaPrint Inc)
***************************************************
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TABLE OF CONTENTS
PAGE
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1. INTERPRETATION -1-
2. AGREEMENT TO SUBSCRIBE AND ALLOT SHARES -2-
3. SUBSCRIPTION PRICE -3-
4. ALLOTMENT OF SUBSCRIPTION SHARES -3-
5. CONDITIONS PRECEDENT -4-
6. WARRANTIES AND UNDERTAKINGS BY THE COMPANY -5-
7. SUBSCRIBER'S ACKNOWLEDGMENT -7-
8. FURTHER AGREEMENTS -8-
9. ASSIGNMENT -8-
10. REMEDIES FOR BREACH -8-
11. LEGAL COSTS AND FEES -8-
12. ENTIRE AGREEMENT -8-
13. PREVIOUS AGREEMENT -8-
14. TIME OF THE ESSENCE -9-
15. COUNTERPARTS -9-
16. GOVERNING LAW; ARBITRATION -9-
17. ANNOUNCEMENT -9-
18. NOTICES -9-
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THIS AGREEMENT is made the 31 day of August, 2000 BETWEEN:
(1) PHARMAPRINT INC, a company incorporated under the laws of the Delaware,
United States of America and having its registered office situated at ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇.▇.▇. ("Company"); and
(2) CAPITAL ALERT INVESTMENTS LTD, a company incorporated under the laws of
British Virgin Islands and having its registered address at PO Box 957, Offshore
Incorporations Center, Road Town, Tortola, British Virgin Islands
("Subscriber").
WHEREAS:
A. The Company is a company duly incorporated under the laws of Delaware, U.S.A.
and the particulars of which as at the date hereof are set out in Schedule 1
hereto.
B. The Subscriber is desirous of (i) subscribing for 3,750,000 shares of common
stock of the Company and has applied to the Company for the issue and allotment
of shares in the Company and (ii) obtaining an option to acquire an additional
2,500,000 shares of common stock of the Company, which the Company has agreed to
issue and grant, respectively, in the manner as hereinafter appearing.
NOW IT IS AGREED as follows:
1. INTERPRETATION
1.01 In this Agreement the following words and expression shall have the
following meanings:
"Allotment" means allotment of the Subscription Shares pursuant to Clause 4.01
hereof;
"Allotment Date" means ten (10) days after the Subscription Price has been fully
paid by the Subscriber to the Company;
"Board" means the Board of Directors of the Company from time to time;
"Disclosed Matters" means the matters, transactions, dealings, acts and things
disclosed by the Company to the Subscriber prior to the signing hereof, as set
out in Schedule 2 hereto;
"Further Issue" means the issue of shares in the Company after the date of this
Agreement (whether by way of a single issue or multiple issues) to any third
party or parties at such price and upon such terms as the Company may in its
absolute discretion deem fit;
"Hong Kong" means the Hong Kong Special Administrative Region of the People's
Republic of China;
"Management Accounts" means the audited accounts (if any) and the unaudited
management accounts of the Company comprising a balance sheet as at the
Management Accounts Date and a
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profit and loss statement for the corresponding year end; copies of which are
annexed hereto as Schedule 3 hereto;
"Management Accounts Date" means March 31, 2000;
"Register of Members" means the Register of Members kept by the Company and
wherein the names and particulars of the registered shareholders of the Company
are written;
"Share" means the common stock of the Company;
"Share Options" means the following options to purchase registerable shares of
the Company's common stock within five (5) years from the date of this Agreement
granted by the Company as follows:
(i) to the Subscriber for 500,000 shares at an exercise price of $0.375
per share;
(ii) to the Subscriber for 500,000 shares at an exercise price of $0.45
per share;
(iii) to the Subscriber for 1,000,000 shares at an exercise price of
$1.00 per share;
(iv) to the Subscriber for 500,000 shares at an exercise price of $1.25
per share; and
(v) to Hardy Chan for 150,000 shares at an exercise price of $0.375 per
share.
"Subscription Price" means the consideration for the Subscription Shares and the
Share Options payable by the Subscriber to the Company, in the total sum of
United States Dollars One Million and Five Hundred Thousand (US$1,500,000)
payable in the manner as particularly described in Clause 3.01;
"Subscription Shares" means all those 3,750,000 shares of common stock of
US$0.001 par value of the Company, to be allotted by the Company to the
Subscriber as fully paid pursuant to Clause 2.01 hereof.
1.02 Headings in this Agreement are inserted for convenience only and shall be
ignored in construing this Agreement. Unless the context otherwise requires,
words denoting the singular number only shall include the plural and vice versa
and word denoting any gender shall include all the other genders.
2. AGREEMENT TO SUBSCRIBE AND ALLOT SHARES
2.01 In consideration of the payment of the Subscription Price by the Subscriber
to the Company in accordance with Clause 3.01 hereof, the Company shall allot
the Shares to the Subscriber on or before the Allotment Date and grant the Share
Options to the Subscriber subject to and upon the terms and conditions herein
contained but otherwise free from all encumbrance.
2.02 The Subscription Shares shall be issued and allotted to the Subscriber as
fully paid subject to the terms and provisions of the Certificate of
Incorporation and other constitutive documents of the Company as from time to
time in force.
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2.03 The Company agrees that the Subscription Shares will, when issued, rank
pari passu in all respect with all the existing shares of the Company, other
than the Company's Series A Preferred Stock, in issue prior to the Allotment
Date including the right to dividends and other distributions declared, made or
paid at any time after the Allotment Date.
3. SUBSCRIPTION PRICE
The Subscriber shall pay the Subscription Price at the Closing directly into an
escrow account maintained by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, and the Company agrees
that ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, shall thereafter, on behalf of the Company, wire
$500,000 to the account of Kingsway PharmaPrint Asia Limited pursuant to the
Joint Venture Shareholders' Agreement between the parties hereto of even date
herewith and wire $1,000,000 to the accounts specified in writing by the
Company.
4. ALLOTMENT OF SUBSCRIPTION SHARES
4.01 The Company shall allot the Subscription Shares to the Subscriber or its
nominee as the Subscriber shall direct and cause the name of the Subscriber or
its nominee to be entered into the Register of Members as the registered holder
of the Subscription Shares and deliver the share certificate(s) in respect
thereof to the Subscriber or its nominee on or before the Allotment Date.
4.02 The Company, at its own expense, shall prepare and file as soon as
practicable (the "Filing Date") with the Securities and Exchange Commission (the
"SEC") a registration statement (the "Registration Statement") on Form S-1
covering the resale of the Subscription Shares provided that each Subscriber
shall have provided timely to the Company all information needed for the
Registration Statement regarding it and its plan of distribution. The Company
shall use commercially reasonable efforts to have the Registration Statement
declared effective by the SEC as soon as practicable thereafter. Notwithstanding
the foregoing, the Subscriber agrees that it shall not sell, transfer or
otherwise convey any interest in the Subscription Shares prior to the dates such
Subscription Shares are permitted to be sold pursuant to the schedule set forth
below:
(a) 30% of the Subscription Shares (1,125,000 shares) may be sold on and after
that date on which the Registration Statement is declared effective;
(b) another 30% of the Subscription Shares (1,125,000 shares) may be sold on and
after that date which is six (6) months from the date of this Agreement;
(c) another 20% of the Subscription Shares (750,000 shares) may be sold on and
after that date which is nine (9) months from the date of this Agreement; and
(d) the remaining 20% of the Subscription Shares (750,000 shares) may be sold on
and after that date which is twelve (12) months from the date of this Agreement.
4.03 Upon exercise of the Share Options, the Company shall, at its own expense,
prepare and file on the Filing Date with the SEC a registration statement (the
"Share Options Registration
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Statement") on Form S-1 (or such other form as is available) covering the resale
of the Share Options provided that each Subscriber shall have provided timely to
the Company all information needed for the Share Options Registration Statement
regarding it and its plan of distribution. The Company shall use commercially
reasonable efforts to have the Share Options Registration Statement declared
effective by the SEC as soon as practicable thereafter.
5. CONDITIONS PRECEDENT
The obligations of the Subscriber under this Agreement to consummate the
purchase of the Subscription Shares hereinafter shall be subject to the
satisfaction of each of the following conditions:
(a) The Company must have entered into the Joint Venture Shareholders' Agreement
and Licensing and Distribution Agreement, substantially in the form of the
document in Annexure A, with Capital Alert Investments Ltd. and Kingsway
PharmaPrint Asia Limited, respectively, on or before the date of this Agreement;
(b) The Company shall have agreed to set aside United States Dollar Five Hundred
Thousand (US$500,000.00) out of the Subscription Price in a segregated account
with the name of the joint venture (as stipulated in the Joint Venture
Shareholders' Agreement) as beneficiary on the terms and conditions to be agreed
between the Company and the Subscriber;
(c) The Company shall have agreed to contribute the money set aside under
paragraph (b) of this clause to the joint venture to be set up under the Joint
Venture Shareholders' Agreement;
(d) The Board of Directors of the Company shall have appointed Hardy Chan as a
director to the Board and ▇▇. ▇▇▇▇ (or any replacement nominated by the
Subscriber) may not be removed without the approval of the Subscriber except by
a vote of the Company's shareholders for as long as the Subscriber is the owner
of 937,500 shares or more of the Company's Common Stock;
(e) The Company and Montecito Leasing Group, LLC, shall have executed amendments
to the Collateral Assignment of Patents and Trademarks, dated May, 2000, and the
Security Agreement, dated May, 2000, between the parties, in substantially the
form as reviewed and approved by the Subscriber; and
(f) ▇▇▇▇▇▇▇▇ ▇▇▇ shall have executed and delivered to the Subscriber a voting
trust agreement with respect to the Company's shares in a form acceptable to the
Subscriber.
6. WARRANTIES AND UNDERTAKINGS BY THE COMPANY
6.01 The Company represents and warrants to the Subscriber that:
(a) As of the date hereof, the authorized capital stock of the Company consists
of (i) Fifty Million (50,000,000) shares of Common Stock of which 17,155,767
shares are issued and outstanding and (ii) Five Million (5,000,000) shares of
preferred stock, 7005 which are issued and outstanding and designated as Series
A Convertible Preferred Stock. All issued and
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outstanding Shares of Common Stock and Preferred Stock have been duly authorized
and validly issued and are fully paid and nonassessable.
(b) Upon their issuance and delivery pursuant to this Agreement, the Shares will
be duly authorized and validly issued, fully paid and nonassessable and will be
free of any liens or encumbrances other than those created hereunder or by the
actions of the Subscriber. The issuance and sale of the Shares hereunder will
not give rise to any preemptive right or right of first refusal or right of
participation on behalf of any person. The offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of any applicable federal or state securities laws, and neither the
Company nor any authorized agent acting on its behalf will purposefully take any
action hereafter that would cause the loss of such exemption.
(c) The Management Accounts give a true and fair view of the financial position
of the Company as at the Management Accounts Date and the profit or loss of the
Company for the corresponding year end.
(d) Except as disclosed in the Company's filings with the SEC or drafts of the
Company's Annual Report or Form 10-K for the period ended March 31, 2000 which
have been provided to Subscriber as of August 14, 2000, (i) the business of the
Company has not been materially and adversely affected by the loss of any
important customer or source of supply or by any abnormal factor not affecting
similar businesses to a like extent and there are no facts which are likely to
give rise to any such effect; (ii) the Company does not have any material
capital commitments; (iii) the Company is not a party to any unusually onerous
contract or to any contract entered into otherwise than in the ordinary and
usual course of business or otherwise than on arm's length terms; and (iv) apart
from normal debt collection, neither the Company nor any person for whose acts
or defaults the Company may be vicariously liable is involved in any civil,
criminal or arbitration proceedings and no such proceedings and no claims of any
nature are pending or threatened by or against the Company or such person or in
respect whereof the Company is liable to indemnify any party concerned and there
are no facts likely to give rise to any such proceedings.
6.02 The Company represents and warrants to the Subscriber that:
(a) The Company is a corporation duly organized and validly existing under the
laws of the State of Delaware and is in good standing under such laws. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and assets, and to carry on its business as presently
conducted.
(b) The Company has the power and authority to execute, deliver and perform this
Agreement and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement.
(c) This Agreement constitutes legal, valid and binding obligations of the
Company subject only to applicable bankruptcy, insolvency, reorganization and
similar laws affecting creditors' rights generally and there are no
circumstances subsisting and the Company is not aware of any
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circumstances which may in the foreseeable future arise which might cause this
Agreement to cease to be its legal, valid and binding obligations.
(d) The execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby will not, conflict with or result in any
violation of any provision of the Company's Certificate of Incorporation, bylaws
or any amendments thereto. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, conflict
with or result in any violation of, or default, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to a
loss of any material benefit, under any material mortgage, indenture, lease or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree statute, law, ordinance, rule or regulation applicable to the
Company, its properties or assets and which would have a material adverse effect
on the Company's business and financial condition.
(e) There is no action, proceeding or investigation pending, or to the Company's
knowledge threatened, against the Company that questions the validity of this
Agreement, or the right of the Company to enter into this Agreement, or to
consummate the transactions contemplated hereby, nor is the Company aware that
there is any basis for the foregoing.
(f) No consent, approval or authorization of or registration, qualification,
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Shares hereunder, or
the consummation of any other transaction contemplated hereby.
(g) Except as described in the Company's SEC filings and other than the Shares
and Share Options, there are no other outstanding securities, debt or equity
presently convertible into Common Stock.
(h) Except as set forth in the schedules to the Licensing and Distribution
Agreement, it is the sole and rightful owner of all right, title and interest in
and to the Patented Technology and the Licensed Marks (both as defined in the
Licensing and Distribution Agreement) and all related intellectual property
rights therein or holds adequate licenses or otherwise holds all rights
necessary to use the Patented Technology and the Licensed Marks and all related
intellectual property rights therein free and clear of all liens, claims and
encumbrances, and it has the unrestricted right to market, license and exploit
the Patented Technology and the Licensed Marks and all related intellectual
property rights therein and such marketing, licensing and exploitation of the
Patented Technology and the Licensed Marks and all related intellectual property
rights therein will in no way constitute an infringement or other violation of
any patent, copyright, trade secret, or trademark or other third party rights;
(i) Except as set forth in the schedules to the Licensing and Distribution
Agreement, no claims have been made in respect of the Patented Technology or
Licensed Marks and any related intellectual property rights therein and no
demands of any third party have been made pertaining to them, and no proceedings
have been instituted or are pending or, to the best of its knowledge, threatened
that challenge the rights of the Company in respect thereof.
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6.03 For as long as the Subscriber is the owner of 937,500 shares or more of the
Company's Common Stock, upon the request of Subscriber, the Board of Directors
of the Company shall appoint two (2) persons nominated by the Subscriber (the
"Subscriber Directors") as directors to the Board and those two directors may
not be removed without the approval of the Subscriber except by a vote of the
Company's shareholders (as provided in Clause 5(d), ▇▇. ▇▇▇▇ shall initially be
one of the Subscriber Directors);
6.04 The Company covenants and agrees that, subject to the exercise of the
fiduciary duties of the directors of the Company in good faith, it shall
nominate the Subscriber Directors for election by the Company's stockholders at
the next scheduled stockholders meeting where directors are elected if so
requested by Subscriber.
7. SUBSCRIBER'S ACKNOWLEDGMENT
7.01 The Subscriber acknowledges that it has been advised by the Company of the
nature and particulars of the Disclosed Matters and copies of all the documents
referred to in Schedule 2 have been provided by the Company to the Subscriber,
to the extent requested, prior to the signing hereof and the Subscriber shall be
deemed to have agreed to subscribe for the Subscription Shares with full
knowledge of the Disclosed Matters.
7.02 The Subscriber acknowledges that no warranty or representation other than
those as set out in this Agreement has been given to the Subscriber (whether by
the Company or other persons or companies) and the Subscriber is entering into
this Agreement solely in reliance of the warranties and representations herein
contained and its own investigation.
8. FURTHER AGREEMENTS
8.01 The Subscriber acknowledges that the Company may invite third parties to
acquire shares in the Company from time to time.
8.02 For the avoidance of doubt, the Subscriber acknowledges that upon Further
Issue, the shareholding of the Subscriber shall be diluted accordingly.
9. ASSIGNMENT
This Agreement shall be binding on and enure for the benefit of the successors
of each of the parties but shall not be assignable by any party hereto save and
except with the prior written consent of the other party hereto, which consent
shall not be unreasonable withheld.
10. REMEDIES FOR BREACH
Any remedy conferred on each of the parties hereto for breach of this Agreement
shall be in addition and without prejudice to all other rights and remedies
available to it and the exercise of or failure to exercise any remedy shall not
constitute a waiver by the related party of any of its rights or remedies.
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11. LEGAL COSTS AND FEES
11.01 Each party hereto shall bear its own legal costs and expenses of and
incidental to the preparation, negotiation, approval and completion of this
Agreement.
11.02 All fees (including share premium fees) payable in connection with the
allotment of the Subscription Shares to the Subscriber (if any) shall be borne
and paid by the Company absolutely.
12. ENTIRE AGREEMENT
This Agreement constitutes the whole agreement between the parties relating to
the subject matter herein (no party having relied on any representation made by
any other party which is not a term of this Agreement) and no future variation
of any term of this Agreement shall be effective unless made in writing and
signed by each of the parties.
13. PREVIOUS AGREEMENT
This Agreement shall supersede all and any previous agreements or arrangements
between the parties hereto relating to the Company, the Property or to any other
matter referred to in this Agreement and all or any such previous agreements or
arrangements (if any) shall cease and determine with effect from the date
hereof.
14. TIME OF THE ESSENCE
Time shall be of the essence in every respect of this Agreement.
15. COUNTERPARTS
This Agreement may be executed in any number of copies or counterparts and by
the different parties hereto on separate copies or counterparts and which
together shall constitute one agreement.
16. GOVERNING LAW; ARBITRATION
16.01 This Agreement (excluding the matters referred in Clause 16.02) shall be
governed by and construed in accordance with the laws of Hong Kong.
16.02 Notwithstanding any provision herein contained, the management and
operation of the Company and its Certificate of Incorporation and other
constitutive documents shall be governed by and construed in accordance with the
laws of Delaware, U.S.A. and all laws relating to companies in force in the
U.S.A. shall apply to the Company.
16.03 The Parties agree to submit all disputes arising out of this Agreement to
arbitration in Hong Kong in accordance with the Model Law on International
Commercial Arbitration adopted by the United Nations Commission on International
Trade Law.
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17. ANNOUNCEMENT
Neither party shall make any public announcement in relation to the transactions
the terms of which are set out in this Agreement or the transactions or
arrangements hereby contemplated or herein referred to or any matter ancillary
hereto or thereto without the prior written consent of the other party (which
consent shall not be unreasonably withheld or delayed).
18. NOTICES
Any notice required or permitted to be given hereunder shall be in writing and
shall be (a) personally delivered, (b) transmitted by internationally recognized
air courier service, or (c) transmitted by facsimile, in each case to the
parties as follows, as elected by the party giving such notice, to the other
parties at the addresses set forth on the first page of this Agreement or as
amended by notice pursuant to this subsection. Except as otherwise specified
herein, all notices and other communications shall be deemed to have been duly
given on (i) the date of receipt if delivered personally, (ii) three (3)
Business Days after delivery to the courier, or (iii) the next Business Day in
the jurisdiction of the recipient following the date of transmission with
electronic confirmation if transmitted by facsimile, whichever shall first
occur. Any party may change its address for purposes hereof by notice to the
other parties. All notices and other communications shall be in the English
language.
AS WITNESS the hands of the parties hereto the day and year first above
written.
PHARMAPRINT INC.
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Executive Officer
CAPITAL ALERT INVESTMENTS LTD
By:
Name:
Its:
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SCHEDULE 1
(Particulars of the Company)
1. Place of incorporation : Delaware, U.S.A.
2. Date of incorporation : September 1995
3. Registered office : Corporation Trust Center
1209 Orange Street, Wilmington,
Delaware
4. Company Registration No. : ▇▇-▇▇▇▇▇▇▇
5. Authorised share capital : US$50,000.00 made up of 50,000,000
shares of US$0.001 each shares of Common Stock
6. Issued share capital : US$17,155.78 of 17,155,767 shares of
US$0.001 each, US$7.00 of 7,005
shares of Series A Preferred Stock
of US$0.001 each.
7. Existing directors: ▇▇▇▇▇▇▇ ▇. Trad ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
8. Existing Secretary: ▇▇▇▇▇▇▇ ▇. Trad
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SCHEDULE 2
(Disclosed Matters)
All those matters, transactions, dealings, acts and things referred to or
mentioned in the following documents copies of which have been provided to the
Subscriber prior to the signing hereof, to the extent requested:
1. Bylaws of the Company.
2. Certificate of Incorporation of the Company.
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SCHEDULE 3
(Management Accounts)