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Purchase Agreement
by and between
Astralis Ltd.
and
SkyePharma PLC
Dated as of December 10, 2001
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TABLE OF CONTENTS
1. Certain Filings.................................................................................1
2. Purchase and Sale of Securities; Closings.......................................................2
2.1 Authorization of Preferred Shares......................................................2
2.2 Purchase and Sale......................................................................2
2.3 The Closings...........................................................................3
2.4 Delivery of Convertible Preferred Stock................................................3
2.5 Delivery of the Registration Rights Agreement and Stockholders Agreement...............4
3. Representations and Warranties of the Corporation...............................................4
3.1 Organization...........................................................................4
3.2 Authorization..........................................................................5
3.3 Authorization of Preferred Shares......................................................6
3.4 Authorization of Reserved Common Shares................................................6
3.5 No Consent or Approval Required........................................................6
3.6 Subsidiaries...........................................................................6
3.7 Assets and Liabilities; Financial Statements...........................................7
3.8 Absence of Certain Changes.............................................................7
3.9 Compliance with Laws...................................................................8
3.10 Litigation............................................................................10
3.11 Brokers' and Finders' Fees............................................................10
3.12 Employees and Employee Benefits.......................................................11
3.13 Environmental Matters.................................................................12
3.14 Contracts.............................................................................13
3.15 Intellectual Property and Other Proprietary Rights....................................14
3.16 Disclosure............................................................................17
3.17 Capitalization........................................................................17
3.18 Acknowledgement Regarding Securities..................................................18
3.19 Taxes.................................................................................19
3.20 Agreements Regarding Confidential Information, Proprietary Information
and Intellectual Property............................................................19
3.21 Registration Rights...................................................................20
3.22 Rights of First Refusal; Voting and Registration Rights...............................20
3.23 Previous Issuances Exempt.............................................................20
3.24 No Integrated Offering................................................................20
3.25 Securities Offerings..................................................................21
3.26 Investment Company Act................................................................21
3.27 Use of Proceeds.......................................................................21
3.28 Related Party Transactions............................................................21
3.29 Takeover Statutes.....................................................................22
3.30 Hercules; Exception...................................................................22
4. Representations and Warranties of the Purchaser................................................22
4.1 Due Organization......................................................................22
4.2 Authorization; Execution and Delivery of Agreement....................................22
4.3 No Consent or Approval Required.......................................................23
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4.4 No Brokers............................................................................23
4.5 Access to Information.................................................................23
4.6 Acquisition For Own Account...........................................................23
4.7 Accredited Investor...................................................................24
5. Conditions to Obligations of the Purchaser at the Closings under this Agreement................24
5.1 Corporate Proceedings; Consents; Etc..................................................24
5.2 Blue Sky Matters......................................................................24
5.3 Registration Rights Agreement and Stockholders Agreement..............................24
5.4 Filings and Documents.................................................................24
5.5 Financial Statements..................................................................25
5.6 Regulatory Approvals..................................................................25
5.7 Representations, Warranties and Covenants.............................................25
5.8 No Litigation.........................................................................25
5.9 No Prohibition........................................................................26
5.10 No Material Adverse Change............................................................26
5.11 Opinion of Counsel....................................................................26
5.12 D&O Insurance.........................................................................26
5.13 Executive Employment Agreements.......................................................26
5.14 Composition of Board of Directors.....................................................26
6. Additional Conditions to the Second Closing....................................................26
6.1 Occurrence of First Closing...........................................................26
6.2 Filing of FDA Application.............................................................26
6.3 No Material Adverse Change............................................................27
6.4 Financial Statements..................................................................27
6.5 No Defaults, Insolvency, Bankruptcy, Litigation, etc..................................27
6.6 Compensation Matters..................................................................29
7. Conditions to Obligations of Corporation at the Closings under this Agreement..................29
7.1 Representations and Warranties and Covenants..........................................29
7.2 Registration Rights Agreement and Stockholders Agreement..............................29
7.3 No Litigation.........................................................................29
7.4 No Prohibition........................................................................29
7.5 Payment of the Purchase Price.........................................................30
7.6 Occurrence of First Closing...........................................................30
8. Covenants......................................................................................30
8.1 Insurance.............................................................................30
8.2 Public Disclosure of Transactions.....................................................30
8.3 Independent Public Accountant.........................................................30
8.4 Information Rights....................................................................30
9. Indemnification; Survival......................................................................33
9.1 Indemnification by the Corporation....................................................33
9.2 Indemnification by the Purchaser......................................................33
9.3 Procedures Relating to Third Party Claims.............................................33
9.4 Survival of Representations, Warranties and Agreements................................34
10. Expenses.......................................................................................34
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11. Notices........................................................................................34
12. Successors and Assigns.........................................................................36
13. Amendments.....................................................................................36
14. Entire Agreement...............................................................................36
15. Termination....................................................................................36
16. Counterparts...................................................................................36
17. Headings.......................................................................................36
18. Governing Law; Submission to Jurisdiction; Selection of Forum..................................37
iii
Astralis LTD.
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement") dated as of December 10,
2001 by and between Astralis Ltd., a Delaware corporation (the "Corporation"),
and SkyePharma PLC, a company incorporated under the laws of England and Wales
(the "Purchaser"). The term Corporation shall include the Corporation's
predecessor in interest, Astralis Pharmaceuticals Ltd., a Colorado corporation
("Astralis Pharmaceuticals"), except where the context otherwise requires.
WHEREAS, Astralis LLC, a New Jersey limited liability company
("Astralis LLC"), and Hercules Development Group Inc., a Colorado corporation
("Hercules"), entered into a business combination whereby the members of
Astralis LLC exchanged all of their membership interests in Astralis LLC for
shares of common stock of Hercules and warrants to purchase shares of common
stock of Hercules (the "Exchange"), and Astralis LLC was dissolved;
WHEREAS, Hercules was renamed Astralis Pharmaceuticals and,
solely for the purpose of changing Astralis Pharmaceuticals' domicile from
Colorado to Delaware, the shares of common stock of Astralis Pharmaceuticals and
warrants to purchase shares of common stock of Astralis Pharmaceuticals were
exchanged for shares of Common Stock of the Corporation (as defined in Section
3.17) and warrants to purchase shares of Common Stock of the Corporation (the
"Migratory Merger");
WHEREAS, the Purchaser wishes to purchase from the
Corporation, and the Corporation wishes to sell to the Purchaser, two million
(2,000,000) shares of the Corporation's Convertible Preferred Stock, at a price
of ten U.S. dollars ($10.00) per share of Convertible Preferred Stock, subject
to the terms and conditions set forth herein; and
WHEREAS, the Purchaser and the Corporation are entering into
this Agreement to provide for such purchase and sale and to establish various
rights and obligations in connection therewith.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Certain Filings
The Corporation has filed with the Secretary of State of the State of
Delaware (a) the Certificate of Incorporation of the Corporation, as amended, in
the form of Exhibit A attached hereto (the "Certificate of Incorporation"),
authorizing 2,000,000 shares, par value $0.001 per share, to be designated as
Series A Convertible Preferred Stock of the Corporation (the "Convertible
Preferred Stock") and (b) a Certificate of Designations, Preferences and Rights,
in the form of Exhibit B attached hereto (the "Certificate of Designations"),
designating the voting powers, designations, preferences and other special
rights, and qualifications, limitations and restrictions of the Convertible
Preferred Stock.
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2. Purchase and Sale of Securities; Closings
2.1 Authorization of Preferred Shares
On the terms and subject to the conditions hereof the
Corporation has authorized (a) the issuance of an aggregate of 2,000,000 shares
of Convertible Preferred Stock (the "Preferred Shares") and (b) the reservation
of an aggregate 8,000,000 shares of Common Stock for issuance upon conversion or
exercise of the Preferred Shares (the "Reserved Common Shares").
2.2 Purchase and Sale
(a) First Purchase. At the First Closing (as defined herein),
upon the terms and subject to the conditions hereinafter set forth, the
Corporation will sell to the Purchaser and the Purchaser shall purchase
from the Corporation, one million newly-issued shares of Convertible
Preferred Stock at a purchase price of $10.00 per share and $10,000,000
in the aggregate.
(b) Second Purchase. At the Second Closing (as defined
herein), upon the terms and subject to the conditions hereinafter set
forth, the Corporation will sell to the Purchaser and the Purchaser
shall purchase from the Corporation an additional one million
newly-issued shares of Convertible Preferred Stock (the "Additional
Shares") at a purchase price of $10.00 per share and $10,000,000 in the
aggregate. The Conversion Price set forth in the Certificate of
Designations for the shares of Convertible Preferred Stock to be issued
at the Second Closing will be adjusted and/or reset to the same extent
as though such additional Preferred Shares had been issued at the First
Closing.
(c) Instalment Purchase of Additional Shares. In the event the
condition to the Second Closing set forth in Section 6.2 is not
satisfied or waived on or before January 30, 2002, at each Instalment
Closing (as defined herein) the Purchaser shall purchase the Additional
Shares in four equal instalments of 250,000 shares each at a purchase
price of $10.00 per share. The purchase by the Purchaser of Additional
Shares shall be upon the terms and subject to the conditions set forth
herein including the additional conditions to the Second Closing set
forth in Section 6 (other than the condition set forth in Section 6.2).
The Conversion Price set forth in the Certificate of Designations for
the shares of Convertible Preferred Stock to be issued at the
Instalment Closing will be adjusted and/or reset to the same extent as
though such shares of Convertible Preferred Stock had been issued at
the First Closing.
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2.3 The Closings
The first closing (the "First Closing") hereunder with respect
to the Preferred Shares will take place at the offices of ▇▇▇▇▇, Danzig,
Scherer, ▇▇▇▇▇▇ & Perreti LLC, One Speedwell Avenue, Morristown, New Jersey, on
the date of the execution of this Agreement, subject to the prior satisfaction
or waiver of all conditions to the First Closing set forth in Sections 5 and 7
hereof (other than any such conditions which, by their terms, cannot be
satisfied until the First Closing), or at such other time and place as the
Corporation and the Purchaser may agree. The date on which the First Closing
occurs is referred as to the "First Closing Date."
The second closing (the "Second Closing") hereunder with
respect to the Additional Shares will take place at the offices of ▇▇▇▇▇,
Danzig, Scherer, ▇▇▇▇▇▇ & Perreti LLC, One Speedwell Avenue, Morristown, New
Jersey, on the date that is the first business day (which shall not be later
than January 31, 2002) following satisfaction or waiver of all conditions to the
Second Closing set forth in Sections 5, 6 and 7 hereof (other than any such
conditions which, by their terms, cannot be satisfied until the Second Closing),
or at such other time and place as the Corporation and the Purchaser may agree.
The date on which the Second Closing occurs is referred to as the "Second
Closing Date".
In the event that the Purchaser purchases the Additional
Shares by instalment as permitted in Section 2.2(c) the closing hereunder with
respect to the Additional Shares (the "Instalment Closings"), will take place on
January 31, 2002 with respect to the first instalment, on April 30, 2002 with
respect to the second instalment, on July 31, 2002 with respect to the third
instalment and on January 31, 2003 with respect to the fourth instalment, or the
business date immediately following if any such date is not a business date upon
satisfaction or waiver of all of the conditions set forth in Section 5, 6 and 7
hereof (other than the condition set forth in Section 6.2 and other than any
such conditions which, by their terms, cannot be satisfied until the Instalment
Closing). Any date on which an Instalment Closing occurs is referred to as an
"Instalment Closing Date".
2.4 Delivery of Convertible Preferred Stock
At the First Closing, the Corporation shall deliver to the
Purchaser a stock certificate representing 1,000,000 shares of Convertible
Preferred Stock, registered in the name of the Purchaser, or at the direction of
the Purchaser, in the name of one of its affiliates, and dated the First Closing
Date, against receipt by the Corporation of a certified or official bank check
payable to the Corporation, or a wire transfer of immediately available funds,
to an account designated by the Corporation at least one business day prior to
the First Closing Date, in either case in an aggregate amount equal to
$10,000,000 (the "First Purchase Price").
At the Second Closing, the Corporation shall deliver to the
Purchaser a stock certificate representing 1,000,000 shares of Convertible
Preferred Stock, registered in the name of the Purchaser, or at the direction of
the Purchaser, in the name of one of its affiliates, and dated the Second
Closing Date, against receipt by the Corporation of a certified or official bank
check payable to the Corporation, or a wire transfer of immediately available
funds, to an account designated by the Corporation at least one business day
prior to the Second Closing Date, in either case in an aggregate amount equal to
$10,000,000 (the "Second Purchase Price")
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On any Instalment Closing Date the Corporation shall deliver
to the Purchaser a stock certificate representing 250,000 shares of Convertible
Preferred Stock, registered in the name of the Purchaser, or at the direction of
the Purchaser, in the name of one of its affiliates, and dated the applicable
Instalment Closing Date, against receipt by the Corporation of a certified or
official bank check payable to the Corporation, or a wire transfer of
immediately available funds, to an account designated by the Corporation at
least one business day prior to the applicable Instalment Closing Date, in
either case in an aggregate amount equal to $2,500,000 (each an "Instalment
Purchase Price").
2.5 Delivery of the Registration Rights Agreement and
Stockholders Agreement
At the First Closing, the Corporation and the Purchaser shall
deliver to the other duly executed copies of the Registration Rights Agreement,
of even date herewith, by and between the Corporation and the Purchaser, in the
form attached hereto as Exhibit C (the "Registration Rights Agreement"), and the
parties hereto shall deliver to each other duly executed copies of the
Stockholders Agreement, of even date herewith, by and among the Corporation and
the Purchaser and the other parties thereto, in the form attached hereto as
Exhibit D (the "Stockholders Agreement").
3. Representations and Warranties of the Corporation
The Corporation hereby represents and warrants to the
Purchaser that:
3.1 Organization
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
The Corporation has all requisite corporate power and authority to own
and lease its properties, to carry on its business as presently
conducted and to carry out the transactions contemplated hereby. The
Corporation is duly qualified to do business and is in good standing in
each jurisdiction in which such qualification is necessary because of
the property owned, leased or operated by it or because of the nature
of its businesses as now being conducted, except for those
jurisdictions where the failure to be so qualified would not reasonably
be expected to have, individually or in the aggregate, a material
adverse effect on the condition (financial or otherwise), operations,
prospects, business, assets, liabilities or earnings of the
Corporation.
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(b) The Corporation has, prior to the execution of this
Agreement, delivered to the Purchaser true and complete copies of its
certificate of incorporation and its by-laws, each as amended to date
(collectively, the "Corporation's Organizational Documents") and the
certificate of incorporation and by-laws of Astralis Pharmaceuticals.
Each of the Corporation's Organizational Documents as so delivered is
in full force and effect. The stock certificate books and stock
transfer ledgers of the Corporation and of Astralis Pharmaceuticals
(which have been made available for inspection by the Purchaser prior
to the date hereof) are true and complete. The corporate records and
minute books of the Corporation and of Astralis Pharmaceuticals (which
have been made available for inspection by the Purchaser prior to the
date hereof) contain all resolutions of the Corporation's Board of
Directors and stockholders and any committee thereof, and all
resolutions of Astralis Pharmaceuticals' Board of Directors and
stockholders and any committee thereof, as the case may be, and reflect
all material action taken and authorizations made at meetings of the
Corporation's Board of Directors or any committees thereof and at any
stockholders' meetings thereof, or by written consent without a
meeting, and at meetings of Astralis Pharmaceuticals' Board of
Directors or any committees thereof and at any stockholders' meetings
thereof, or by written consent without a meeting, as the case may be.
3.2 Authorization
The execution, delivery and performance by the Corporation of
this Agreement, the Registration Rights Agreement and the Stockholders Agreement
(such documents, collectively, the "Transaction Documents") and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of the Corporation and each of the
Transaction Documents shall have been, duly executed and delivered by the
Corporation and are in full force and effect. The Transaction Documents
constitute the valid and binding obligations of the Corporation, enforceable in
accordance with their respective terms, subject as to enforcement of (A)
applicable bankruptcy, insolvency, moratorium or similar laws relating to or
affecting the rights and remedies of creditors and debtors and (B) equitable
principles generally, regardless of whether such principles are considered in a
proceeding at equity or at law. The execution, delivery and performance of each
of the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, and compliance with the provisions hereof and
thereof by the Corporation will not (a) violate any law or statute or order,
judgment or decree of any court, administrative agency or other governmental
body applicable to the Corporation, or its properties or assets, (b) conflict in
any respect with or result in any breach of any of the terms or provisions or
constitute (with due notice or lapse of time, or both) a default under the
Certificate of Incorporation or By-laws of the Corporation, (c) result in a
breach or violation of, or a default under, or acceleration of any obligations
pursuant to any note, indenture, mortgage, lease, agreement, contract,
understanding, arrangement or instrument ("Contracts") to which the Corporation
is a party or by which it or any of its properties or assets may be bound or
affected, (d) result in any change in the rights or obligations of any party
under the Contracts, or (e) result in the creation or imposition of any lien,
claim, judgment, charge, mortgage, security interest, pledge, restriction or
other encumbrance (collectively, "Liens") of any nature whatsoever upon any of
the properties or assets of the Corporation.
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3.3 Authorization of Preferred Shares
The issuance, sale and delivery of the Preferred Shares have
been duly authorized by all requisite corporate action of the Corporation; and
the Preferred Shares have been duly authorized and duly reserved for issuance
pursuant to this Agreement, and when issued, sold and delivered in accordance
with the terms of this Agreement and the Certificate of Designations, the
Preferred Shares will be validly issued and outstanding, fully paid and
nonassessable and will not create or vest any preemptive or other similar
rights, or cause any adjustment in the number of securities issuable pursuant
to, or the conversion or exercise price of, any outstanding rights to purchase,
acquire or subscribe to shares in the Corporation or securities convertible into
shares of the Corporation by any of the beneficial holders of shares of the
Corporation or any securities convertible into, or exercisable for, shares of
the Corporation, and will be free and clear of all Liens.
3.4 Authorization of Reserved Common Shares
The Reserved Common Shares have been duly authorized and duly
reserved for issuance upon conversion or exercise of Preferred Shares. When and
if issued, sold and delivered in accordance with the terms of the Certificate of
Designations, the Reserved Common Shares will be duly authorized, validly issued
and outstanding, fully paid and nonassessable and will not create or vest any
preemptive or other similar rights, or cause any adjustment in the number of
securities issuable pursuant to, or the conversion or exercise price of, any
outstanding rights, to purchase, acquire or subscribe to shares in the
Corporation or securities convertible into shares of the Corporation by any of
the beneficial holders of shares of the Corporation or any securities
convertible into, or exercisable for, shares of the Corporation, and will be
free and clear of all Liens.
3.5 No Consent or Approval Required
No notices, reports or other filings ("Filings") are required
to be made with, nor are any consents, registrations, approvals, permits or
authorizations ("Consents") required to be obtained from, any governmental or
regulatory authority, agency, commission, body or other governmental entity, in
connection with the execution and delivery of this Agreement and the performance
by the Corporation of its obligations hereunder, except such Consents or Filings
as have already been duly and validly obtained or filed, or with respect to any
Filings that must be made after any Closing, as will be filed in a timely
manner. Attached hereto as Schedule 3.5 is a complete and accurate list of all
Consents or Filings as have been obtained or filed and Filings to be made after
the Closing.
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3.6 Subsidiaries
The Corporation has no Subsidiaries. For the purposes of this
Agreement, a "Subsidiary" means any entity, whether incorporated or
unincorporated, of which at least a majority of the securities or ownership
interests having by their terms ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions is directly or
indirectly owned or controlled by such party or by one or more of its respective
Subsidiaries. "Person" shall be construed broadly and shall include an
individual, a partnership, a corporation, an association, a joint stock company,
a limited liability company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof or any group comprised of such individuals or entities.
3.7 Assets and Liabilities; Financial Statements
(a) Attached hereto as Schedule 3.7 is a complete and accurate
list of (a) all the Corporation's material assets (including all assets
having a value in excess of $100,000 and any and all leases, licenses
and other contract rights of the Corporation, regardless of value), and
(b) all of its indebtedness and liabilities of any nature (whether
absolute, accrued, contingent, or otherwise, and whether due or to
become due) in excess of $100,000. Except as set forth on Schedule 3.7,
the Corporation has good title to, or a valid leasehold interest in, as
applicable, all of its assets, free and clear of all Liens. Except as
set forth on Schedule 3.7, the Corporation does not have any
indebtedness or liability of any nature (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due) which,
individually and in the aggregate, is in excess of $100,000.
(b) The Corporation has delivered to the Purchaser a copy of
the Corporation's financial statements (which include the financial
statements of Astralis Pharmaceuticals) as of and for the fiscal year
ended December 31, 2000 and the unaudited financial statements for the
nine-month period ended September 30, 2001, (the "Corporation's
Financial Statements"). The Corporation's Financial Statements were
prepared in accordance with the books and records of the Corporation in
all material respects and were prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved, except as may be
otherwise noted therein. Each of the Corporation's Financial Statements
fairly presents the financial position of the Corporation as of the
respective dates set forth therein or the results of operations and
changes in financial position of the Corporation for the respective
fiscal periods or as of the respective dates set forth therein.
3.8 Absence of Certain Changes
Other than the Exchange, the Migratory Merger, and the private
placement of 2,000,000 shares of Common Stock of Astralis Pharmaceuticals and
400,000 warrants to purchase shares of Common Stock of Astralis Pharmaceuticals
on November 13, 2001, since the date of the Corporation's Financial Statements
neither the Corporation nor Astralis Pharmaceuticals has suffered any change or
development which has had a material adverse effect or has conducted their
business other than in the ordinary and usual course consistent with past
practices and has not:
(a) sold, leased, transferred or otherwise disposed of any of
the assets (other than dispositions in the ordinary course of business
consistent with past practices),
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(b) terminated or amended in any material respect any material
contract or lease to which the Corporation or Astralis Pharmaceuticals
is a party or to which it is bound or to which its properties are
subject,
(c) suffered any loss, damage or destruction, whether or not
covered by insurance, which has had a material adverse effect,
(d) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes,
(e) incurred any liabilities (other than in the ordinary
course of business or contractual liabilities) which, individually or
in the aggregate, have had a material adverse effect,
(f) incurred, created or suffered to exist any Liens (other
than non-material Liens) on the Corporation's or Astralis
Pharmaceuticals' assets,
(g) increased the compensation payable or to become payable to
any of the Corporation's or Astralis Pharmaceuticals' officers or
employees or increased any bonus, severance, accrued vacation,
insurance, pension or other employee benefit plan, payment or
arrangement made by the Corporation or Astralis Pharmaceuticals for or
with any such officers or employees out of the ordinary course of
business,
(h) suffered any labor dispute, strike, or other work
stoppage,
(i) made or obligated itself to make any capital expenditures
in excess of $100,000 individually (other than planned capital
expenditures as set forth in Schedule 3.8(i)),
(j) entered into any contract or other agreement requiring the
Corporation or Astralis Pharmaceuticals to make payments in excess of
$100,000 individually (other than contracts or agreements that the
Corporation plans to enter into as set forth in Schedule 3.8(j)),
(k) paid any dividends, whether in cash or property, on
account of, or repurchased any of, the Common Stock, or
(l) entered into any agreement to do any of the foregoing.
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3.9 Compliance with Laws
(a) Each of the Corporation and Astralis Pharmaceuticals, (i)
has at all times since its respective time of organization conducted
its business and, in the case of the Corporation, is conducting its
business, in compliance with all Applicable Laws (as defined below),
(ii) has, and each of its employees has, all licenses, permits,
qualifications, registrations, memberships and authorizations of, and
made all filings with, Governmental Authorities (as defined below)
necessary for the conduct of its business as currently conducted
(collectively, the "Permits"), in the case of the Corporation, or in
the case of Astralis Pharmaceuticals had, and each of its employees
had, all Permits necessary for the conduct of its business as conducted
during its existence, and (iii) has at all times made and maintained
records relating to its business which comply with Applicable Law and
which accurately reflect all transactions in reasonable detail,
including without limitation all books, ledgers, files, reports, plans
and operating records whether maintained on electronic or magnetic
media or otherwise (collectively, the "Records"), except where the
failure to comply with such Applicable Laws, obtain such Permits or
maintain such Records would not, individually or in the aggregate, have
a material adverse effect upon the financial condition, business,
operations or prospects of the Corporation. The Permits are in full
force and effect, and no violations have been recorded in respect of
any of the Permits, and no proceeding is pending or, to the knowledge
of the Corporation, threatened to revoke or limit any of the Permits.
There are no material Permits.
(b) Except as set forth on Schedule 3.9(b), no Governmental
Authority has initiated any investigation, inquiry or proceeding into
the business or operations of the Corporation or of Astralis
Pharmaceuticals or any employees or agents of any of the foregoing and,
to the best knowledge of the Corporation, there is no basis for any
such investigation, inquiry or proceeding. There is no unresolved
violation or exception by any Governmental Authority, in each case as
to which the Corporation or Astralis Pharmaceuticals has received
written notice or which has been specifically identified to it by such
Governmental Authority, with respect to any report or statement by any
Governmental Authority relating to any examination of any of the
Corporation or of Astralis Pharmaceuticals or any employees of the
foregoing and, to the best knowledge of the Corporation, there is no
basis for any such investigation, inquiry or proceeding.
(c) The Corporation has in place accounting controls, policies
and procedures sufficient to ensure that their transactions are
recorded in a manner which permits the preparation of financial
statements in accordance with generally accepted accounting principles
and applicable regulatory accounting requirements. Since the time of
its respective organization, each of the Corporation and Astralis
Pharmaceuticals has made all filings required to be made by it with any
Governmental Authority except where the failure to do so would not,
individually or in the aggregate, have a material adverse effect upon
the financial condition, business, operations or prospects of the
Corporation.
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(d) Except as set forth on Schedule 3.9(d), each of the
Corporation and Astralis Pharmaceuticals has timely filed all reports,
schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (all
of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred
to herein as the "SEC Documents"). The Corporation has delivered to the
Purchaser true and complete copies of the SEC Documents, except the
exhibits and schedules thereto and the documents incorporated therein.
As of their respective dates, the SEC Documents complied with the
requirements of the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act"), as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their
respective dates, each of the financial statements of the Corporation
and of Astralis Pharmaceuticals included in the SEC Documents complied
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such
financial statements or the notes thereto, or (b) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of each of
the Corporation and Astralis Pharmaceuticals as of the dates thereof
and the consolidated results of each of their operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to immaterial year-end audit adjustments).
(e) For the purposes of this Agreement, (i) "Applicable Law"
means any and all federal and state statutes, laws, rules, regulations,
codes and ordinances of any Governmental Authority (including, without
limitation, federal and state securities laws and regulations), in each
case as amended and in effect from time to time and (ii) "Governmental
Authority" means any federal, national or state government, political
subdivision thereof or governmental or regulatory authority, agency,
board, bureau, commission, court or self-regulatory organization.
3.10 Litigation
There is no action, suit, investigation, audit or proceeding
pending against, or to the best knowledge of the Corporation threatened against
or affecting, the Corporation or Astralis Pharmaceuticals or any of its assets
or properties before any court or arbitrator or any governmental body, agency or
official. There is no lawsuit or claim by the Corporation or Astralis
Pharmaceuticals pending, or which the Corporation intends or reasonably expect
to initiate, against any other Person.
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3.11 Brokers' and Finders' Fees
Neither the Corporation nor Astralis Pharmaceuticals has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fee or agents' commission or investment bankers' fees or an similar
charges in connection with this Agreement or the transaction contemplated
hereby.
3.12 Employees and Employee Benefits
(a) Schedule 3.12 identifies each employee of the Corporation
who has entered into an employment agreement with the Corporation, and
the Corporation has, prior to the date hereof, delivered a copy of each
such agreement to the Purchaser. To the best knowledge of the
Corporation, no employee of the Corporation is in violation of any term
of any employment contract, patent disclosure agreement or any other
contract or agreement relating to the relationship of any such employee
with the Corporation or any other party as a result of the nature of
the business presently conducted or proposed to be conducted by the
Corporation. The Corporation has never been a party to any collective
bargaining agreement or other labor agreement with any labor union or
organization. There is no unfair labor practice charge or other
grievance procedure against the Corporation pending, or, to the best
knowledge of the Corporation, threatened. There is no complaint,
lawsuit or proceeding in any forum by or on behalf of any former
employee, any applicant for employment or any classes of the foregoing
alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship against the Corporation or Astralis
Pharmaceuticals pending or, to the best knowledge of the Corporation,
threatened. The Corporation is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health.
There is no proceeding, claim, suit, action or governmental
investigation pending or, to the best knowledge of the Corporation,
threatened, in respect to which any current or former member, officer,
employee or agent of the Corporation or of Astralis Pharmaceuticals,
may be entitled to claim indemnification from the Corporation.
(b) All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of the Corporation or
Astralis Pharmaceuticals (the "Employees"), including, but not limited
to, "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and deferred compensation, stock option, stock purchase, stock
appreciation rights, stock based, incentive and bonus plans (the
"Benefit Plans") are listed on Schedule 3.12. True and complete copies
of all Benefit Plans listed on Schedule 3.12, including, but not
limited to, any trust instruments and insurance contracts forming a
part of any Benefit Plans, and all amendments thereto have been
provided or made available to Purchaser.
11
(c) All employee benefit plans covering Employees (the
"Plans"), to the extent subject to ERISA, are in substantial compliance
with ERISA. Each Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which
is intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), has received a favorable
determination letter from the Internal Revenue Service with respect to
such qualification and the Corporation is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge
of the Corporation threatened, litigation relating to the Plans.
Neither the Corporation nor Astralis Pharmaceuticals has engaged in a
transaction with respect to any Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject the
Corporation to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA in an amount which would be material.
(d) Neither the Corporation nor Astralis Pharmaceuticals has
ever maintained or contributed to any employee benefit plan subject to
Title IV of ERISA. All contributions required to be made under the
terms of any Plan have been timely made or have been reflected on the
Corporation's financial statements.
(e) The Corporation has no obligations for retiree health and
life benefits under any Plan.
(f) Except as set forth on Schedule 3.12, the consummation of
the transactions contemplated by this Agreement will not (x) entitle
any Employees to severance pay or (y) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of
the Benefit Plans.
3.13 Environmental Matters
(a) Except as would not, individually or in the aggregate,
have a material adverse effect on the Corporation:
(i) no notice, notification, demand, request for
information, citation, summons or order has been
received, no complaint has been filed, no penalty has
been assessed, and no investigation, action, claim,
suit, proceeding or review is pending or, to the best
knowledge of the Corporation, is threatened by any
governmental entity or other Person relating to or
arising out of any Environmental Law (as defined
below);
(ii) the Corporation is and each of the Corporation and
Astralis Pharmaceuticals has been in compliance with
all Environmental Laws and all Environmental Permits
(as defined below); and
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(iii) there are no liabilities of or relating to the
Corporation of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or
otherwise arising under or relating to any
Environmental Law and there are no facts, conditions,
situations or set of circumstances which could
reasonably be expected to result in or be the basis
for any such liability.
(b) "Environmental Laws" means any federal, state, local or
foreign law (including, without limitation, common law), treaty,
judicial decision, regulation, rule, judgment, order, decree,
injunction, permit or governmental restriction or requirement or any
agreement with any governmental authority or other third party,
relating to human health and safety or the environment and arising from
the use, presence, disposal, discharge or release of pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or
materials. "Environmental Permits" means, with respect to any Person,
all permits, licenses, franchises, certificates, approvals and other
similar authorizations of governmental authorities relating to or
required by Environmental Laws and affecting, or relating in any way
to, the business of such Person as currently conducted.
3.14 Contracts
Schedule 3.14 hereto sets forth a complete and accurate list
and description of all of the contracts and agreements, whether written or oral,
of the Corporation including:
(a) agreements, contracts or instruments to which the
Corporation is a party that relate to the borrowing of money, the
capital lease or purchase on an instalment basis of any property or
asset or the guarantee of any of the foregoing (including without
limitation pledged receivables);
(b) licenses, leases, contracts and other arrangements with
respect to any property of the Corporation, and all contracts,
agreements, commitments, purchase orders or other understandings or
arrangements with respect to which the Corporation has any liability or
obligation (contingent or otherwise) or which may otherwise have any
continuing effect after the date of this Agreement;
(c) contracts, agreements or other understandings or
arrangements (including without limitation those with respect to
compensation) between the Corporation and any current or former member,
officer, consultant, agent and/or Affiliate (or any spouse or relative
of any of the foregoing);
(d) management, operating, service, joint venture, partnership
or limited liability company agreements;
13
(e) any contract or agreement pursuant to which the
Corporation has agreed to indemnify or hold harmless any other Person
or to pay liquidated damages of any kind;
(f) any contract or agreement creating any Lien on any
property or assets of the Corporation;
(g) any contract or agreement relating to the member interests
of the Corporation;
(h) any other material agreement, lease, commitment,
instrument, plan, arrangement or contract entered into by the
Corporation, or to which any of its assets may be subject; or
(i) licenses, contracts, agreements or other understandings or
arrangements between the Corporation and any other Person relating to
Intellectual Property as defined in Section 3.15 below.
All the foregoing are herein called "Contracts." Such list
includes with respect to each Contract the names of the parties, the date
thereof, and its title or other general description. The Contracts listed on
Schedule 3.14 set forth the entire arrangement and understanding between the
Corporation and the respective third parties with respect to the subject matter
thereof, and, except as indicated in such Schedule, there have been no
amendments or waivers or side or supplemental arrangements to or in respect of
any Contract. The Corporation will furnish any further information that the
Purchaser may reasonably request in connection therewith. Each Contract is
valid, binding and enforceable against the Corporation, and to the best
knowledge of the Corporation, each other party thereto, in accordance with its
terms and in full force and effect. There is no event that has occurred or
existing condition that constitutes or that, with notice, the happening of an
event and/or the passage of time, would constitute a default or breach under any
Contract by the Corporation, or would cause the acceleration of any obligation
of any party thereto, give rise to any right of termination or cancellation or
cause the creation of any Lien by reason of the failure of the Corporation to
fulfill the obligations thereunder.
3.15 Intellectual Property and Other Proprietary Rights
(a) In this Agreement, "Intellectual Property" shall mean (i)
all inventions (whether patentable or unpatentable and whether or not
reduced to practice) and all improvements to such inventions; (ii) all
patents, patent rights, patent applications and patent disclosures
together with all reissues, renewals, registrations, confirmations,
substitutions, revisions, extensions, divisions, continuations,
continuations in part, reexaminations, provisional applications, and
supplementary protection certificates thereof and all international
equivalents of such patents and applications; (iii) all registered or
unregistered trademarks, trade names, service marks including all
goodwill associated therewith; (iv) all copyrights and all applications
and registrations therefore; and (v) all trade secrets or other
proprietary rights and processes. In this Agreement, "Corporate
Technology" shall mean all Intellectual Property in the world, which
during the term of this Agreement are owned by, licensed to or
controlled by the Corporation, and shall include, without limitation,
any patents and patent applications which are licensed to the
Corporation by third parties under which the Corporation has the right
to grant sublicenses.
14
(b) Schedule 3.15(b) contains a true and correct list of
Corporate Technology owned by, licensed to or controlled by the
Corporation; provided that failure to list in Schedule 3.15(b) any
patent or patent application which otherwise falls within the
definition of Corporate Technology as set forth above shall not in any
way limit or exclude such patent application or patent as a Corporate
Technology.
(c) Except as set forth on Schedule 3.15(c) hereto,
(i) the Corporation and the conduct of the business of
the Corporation as presently and hereafter to be
conducted has not, does not and will not violate,
conflict with or infringe upon the Intellectual
Property of any other Person,
(ii) neither the Corporation nor Astralis Pharmaceuticals
has received any communication alleging that it
violates or infringes the Intellectual Property of
any other Person,
(iii) neither the Corporation nor Astralis Pharmaceuticals
has been sued for infringing any Intellectual
Property of another Person,
(iv) neither the Corporation nor Astralis Pharmaceuticals
has granted any options, licenses or agreements of
any kind relating to Intellectual Property or the
marketing or distribution thereof, and
(v) the Corporation is not bound by or a party to any
options, licenses or agreements of any kind relating
to the Intellectual Property of any other Person,
other than the license attached hereto as Exhibit E.
(d) The license by and between ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇'▇▇▇▇ ("▇▇.
▇'▇▇▇▇") and Astralis LLC, dated April 26, 2001, attached hereto as
Exhibit E (the "License"), and all of the Corporation's business
related thereto, do not infringe upon or violate any Intellectual
Property rights of any Person.
(e) The Corporation and ▇▇. ▇'▇▇▇▇ are in compliance with all
requirements of the License, and the Corporation and ▇▇. ▇'▇▇▇▇ will
not commit or permit any actions or omissions which would cause the
breach of the License and will provide Purchaser promptly with notice
of any such alleged breach.
15
(f) All assignments for the Corporate Technology have been
properly executed and recorded with the United States Patent and
Trademark Office and patent offices in countries other than the United
States.
(g) ▇▇. ▇'▇▇▇▇ is the sole inventor and sole owner of United
States Patent Application Serial Number 09/809,003, entitled
"Compositions and Methods for the Treatment and Clinical Remission of
Psoriasis," filed on March 15, 2001 (the "Patent Application"), and ▇▇.
▇'▇▇▇▇ has no contract, agreement, or obligation to assign to any
Person his right, title, and interest in the Patent Application.
(h) The Corporate Technology is subsisting and is not invalid
or unenforceable, in whole or in part. There are no (i) unpaid
maintenance fees or renewal fees currently overdue, or applications or
registrations for the Corporate Technology that have lapsed or been
abandoned, cancelled or expired; (ii) claims, actions, oppositions, or
proceedings, pending or threatened, challenging the validity or
enforceability of any of the Corporate Technology; (iii) existing facts
which would form a basis for a finding that any patent claim in the
Corporate Technology is unpatentable, unenforceable, or invalid; and
(iv) no patent claims which have been adjudged unpatentable,
unenforceable or invalid.
(i) The Corporation, Astralis Pharmaceuticals, ▇▇. ▇'▇▇▇▇ and
any inventors of the Patent Application, the attorneys and agents who
prepared or prosecuted the Patent Application, and others involved in
the preparation or prosecution of the Patent Application have not
committed and will not commit any acts or omissions that would result
in the loss of patent property rights in the United States or in
countries foreign to the United States relating to or claiming priority
from the Patent Application.
(j) Neither the Corporation, Astralis Pharmaceuticals, nor ▇▇.
▇'▇▇▇▇ have assigned, transferred, conveyed, sub-licensed, or otherwise
encumbered its right, title and interest in the Corporate Technology.
The Corporate Technology is free and clear of any Liens, and no other
Person has or shall have any claim of ownership with respect to the
Corporate Technology, whatsoever.
(k) The Corporation is the sole and exclusive owner of or has
a valid and assignable license to the Corporate Technology.
(l) The Corporate Technology and the use of the Corporate
Technology in the development, manufacture, use, distribution,
marketing, promotion and sale of products do not and will not conflict
with, interfere with, violate, or infringe any Intellectual Property
owned or possessed by any Person. There are no pending patent
applications in the United States or in countries other than the United
States which, if issued, may cover or prevent the development,
manufacture, use, distribution, marketing, promotion or sale of the
Corporate Technology.
16
(m) There are no claims, judgments or settlements against or
owed by the Corporation or ▇▇. ▇'▇▇▇▇ or pending or threatened claims,
actions, oppositions, proceedings, or litigation against the
Corporation, Astralis Pharmaceuticals, or ▇▇. ▇'▇▇▇▇ relating to the
Corporate Technology. There are no claims, judgments or settlements
against or owed by the ▇▇. ▇'▇▇▇▇, or pending or threatened claims,
actions, oppositions, proceedings, or litigation against ▇▇. ▇'▇▇▇▇
relating to the License or Patent Application.
(n) The Corporation, Astralis Pharmaceuticals, Astralis LLC,
▇▇. ▇'▇▇▇▇ and any other inventors of the Corporate Technology, the
attorneys and agents who prepared or prosecuted the Corporate
Technology, and others involved in the preparation or prosecution of
the Corporate Technology all have complied and shall comply with all
applicable duties of candor and good faith dealing with the United
States Patent and Trademark Office and patent offices in countries
other than the United States, including the duty to disclose all
information known to be material to the patentability of the Corporate
Technology.
3.16 Disclosure
Neither this Agreement nor any exhibit or schedule hereto nor
any statement, list or certificate delivered or shown to Purchaser pursuant
hereto or pursuant to any request therefor, contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances in which
they were made, not misleading. Nothing contained in this Section 3.16 shall
diminish or derogate from any of the other representations and warranties of the
Corporation contained in this Section 3.
3.17 Capitalization
(a) The authorized capital stock of the Corporation consists
solely of 75,000,000 shares of Common Stock, par value $0.0001 per
share (the "Common Stock"), of which 37,576,179 shares are issued and
outstanding, and 3,000,000 shares of Preferred Stock including
2,000,000 shares of Series A Convertible Preferred Stock, of which no
shares are issued and outstanding. Five million shares of Common Stock
are reserved for issuance to employees, officers, directors and
consultants pursuant to the Corporation's employee benefit plans.
(b) Except pursuant to this Agreement, and except as set forth
in Schedule 3.17 hereto there are no (i) outstanding warrants, options,
agreements, convertible securities or other commitments or instruments
pursuant to which the Corporation is or may become obligated to issue
or sell any shares of capital stock or other securities of the
Corporation, (ii) preemptive or similar rights to purchase or otherwise
acquire shares of capital stock of the Corporation pursuant to any
provision of law, the Certificate of Incorporation or Bylaws of the
Corporation or any agreement to which the Corporation is party or
otherwise, (iii) obligation (contingent or otherwise) of the
Corporation to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof or (iv) voting trusts, voting
agreements, proxies or other agreements or instruments with respect to
the voting of the Corporation's Common Stock or other securities to
which the Corporation is a party, or to the best knowledge of the
Corporation, among or between any Persons other than the Corporation.
Schedule 3.17, as certified by the Chief Executive Officer of the
Corporation, sets forth:
17
(i) a true and accurate list of the beneficial and record
holders of (a) five percent (5%) or greater of the
issued and outstanding shares of Common Stock of the
Corporation, and (b) all outstanding options,
warrants or other rights to purchase Common Stock of
the Corporation and the number of such securities
held by them, immediately prior to the First Closing
(except for the Preferred Shares to be acquired by
Purchaser pursuant to this Agreement);
(ii) a true and accurate list of all proposed or
contemplated issuances or grants by the Corporation
of shares of Common Stock of the Corporation or
options, warrants or other rights to purchase Common
Stock of the Corporation and the number of such
securities and the proposed or contemplated
recipients thereof (except for the Preferred Shares
to be acquired by Purchaser pursuant to this
Agreement); and
(iii) a pro forma list of the beneficial and record holders
of (a) five percent (5%) or greater of the issued and
outstanding shares of Common Stock of the
Corporation, and (b) all outstanding options,
warrants or other rights to purchase Common Stock of
the Corporation and the number of such securities
held by them as of the Second Closing (including the
Preferred Shares to be acquired by Purchaser pursuant
to this Agreement).
(c) Upon the purchase and sale of the Preferred Shares
described herein, the Purchaser will hold at least 15.27% of the fully
diluted Common Stock, assuming for purposes of this Section 3.17(c) the
conversion of all securities convertible at any time into shares of
Common Stock and the exercise of all options or warrants or other
rights to purchase or receive shares of the Common Stock.
18
3.18 Acknowledgement Regarding Securities
The Corporation acknowledges that its obligation to issue
Common Stock upon conversion of the Preferred Shares, in accordance with the
terms of this Agreement and the Certificate of Designations, is absolute and
unconditional, regardless of the dilution that such issuance may have on the
ownership interests of other stockholders of the Corporation. Taking the
foregoing into account, the Corporation's Board of Directors has determined in
its good faith business judgment that the issuance of the Preferred Shares
hereunder and the consummation of the other transactions contemplated hereby are
(a) in the best interests of the Corporation and its stockholders and (b) do not
breach (with or without the passage of time or the giving of notice) any
obligations of the Corporation the result of which would have, individually or
in the aggregate, a material adverse effect on the condition (financial or
otherwise), operations, prospects, business, assets, liabilities or earnings of
the Corporation. The Corporation's Board of Directors has approved the terms of
this Agreement and the Certificate of Designations and the transactions
contemplated hereby and thereby. There are no adjustments, Liens or rights that
would be triggered by the issuance of the Preferred Shares pursuant to
agreements between the Corporation and any lender or holder of an equity
interest or other securities of the Corporation.
3.19 Taxes
The Corporation, Astralis Pharmaceuticals and Astralis LLC
have filed all Tax Returns and paid all Taxes shown thereon to be due, if any,
that are required to have been filed on or before each Closing with appropriate
Federal, state, foreign, county and local governmental agencies or
instrumentalities, except where the failure to do so would not have a material
adverse effect upon the business of the Corporation. As of the date hereof,
there are not pending or, to the best knowledge of the Corporation threatened,
any audits, examinations, investigations or other proceedings in respect of
Taxes or Tax matters. There are not, to the best knowledge of the Corporation,
any unresolved questions or claims concerning the Corporation's Tax liability
(including any Tax liability of Astralis Pharmaceuticals or Astralis LLC) that
are reasonably likely to have a material adverse effect on the business of the
Corporation. The Corporation has no liability with respect to any income,
payroll, withholding, franchise or similar Taxes.
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") includes all federal,
state and local income, profits, franchise, gross receipts, environmental,
customs duty, capital stock, severances, stamp, payroll, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term "Tax Return" includes all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
3.20 Agreements Regarding Confidential Information,
Proprietary Information and Intellectual Property
Schedule 3.20 identifies all of the employees of the
Corporation who have executed and delivered an agreement with the Corporation,
Astralis Pharmaceuticals or Astralis LLC with respect to non-disclosure,
non-competition and assignment of Corporate Technology.
19
3.21 Registration Rights
Except as provided in the Registration Rights Agreement, and
as set forth on Schedule 3.21, the Corporation is not under any contractual
obligation to register any of its outstanding securities.
3.22 Rights of First Refusal; Voting and Registration Rights
To the best of the Corporation's knowledge no party has any
right of first refusal, right of first offer, right of co-sale, preemptive right
or other similar right regarding the Corporation's securities. There are no
provisions of the Articles of Incorporation or the By-laws of the Corporation,
no agreements to which the Corporation is a party and no agreements by which the
Corporation, or the Preferred Shares are bound, which (a) may affect or restrict
the voting rights of the Purchaser with respect to the Preferred Shares in its
capacity as a stockholder of the Corporation, (b) restrict the ability of the
Purchaser, or any successor thereto or assignee or transferee thereof, to
transfer the Preferred Shares, (c) would adversely affect the Corporation's or
the Purchaser's right or ability to consummate the transaction contemplated by
this Agreement or comply with the terms of the Transaction Documents and the
transactions contemplated hereby or thereby, (d) require the vote of more than a
majority of the Corporation's issued and outstanding Common Stock, voting
together as a single class, to take or prevent any corporate action, other than
those matters requiring a class vote under Delaware law, or (e) entitle any
party to nominate or elect any director of the Corporation or require any of the
Corporation's stockholders to vote for any such nominee or other person as a
director of the Corporation in each case.
3.23 Previous Issuances Exempt
All shares of Common Stock and other securities issued by the
Corporation, including those issued in connection with the Migratory Merger, or
by Astralis Pharmaceuticals prior to the Closing Date have been issued in
transactions either registered under the Securities Act or exempt from the
registration requirements under the Securities Act and all applicable state
securities or "blue sky" laws, and in compliance with all applicable corporate
laws. Neither the Corporation nor Astralis Pharmaceuticals has offered any of
its Common Stock, or any other securities, for sale to, or solicited any offers
to buy any of the foregoing from the Corporation or Astralis Pharmaceuticals, as
the case may be, or otherwise approached or negotiated with any other Person in
respect thereof, in such a manner as to require registration under the
Securities Act. No holder of any of the Corporation's capital stock has any
rescission or pre-emptive rights.
3.24 No Integrated Offering
None of the Corporation, Astralis Pharmaceuticals or any other
Person acting on the Corporation's or Astralis Pharmaceuticals' behalf, has
directly or indirectly engaged in any form of general solicitation or general
advertising with respect to the Preference Shares nor have any of such Persons
made any offers or sales of any security or solicited any offers to buy any
security under circumstances that would require registration of the Preferred
Shares under the Securities Act or cause this offering of Preferred Shares to be
integrated with any prior offering of securities of the Corporation or Astralis
Pharmaceuticals for purposes of the Securities Act.
20
3.25 Securities Offerings
Subject to the accuracy of the Purchaser's representations and
warranties made in Section 4 hereof to the Corporation, (i) the offer, sale and
issuance of the Preferred Shares to the Purchaser in conformity with the terms
of this Agreement, and (ii) the issuance to the Purchaser of the Reserved Common
Shares, each constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act and the registration or qualification
requirements of any applicable state securities or "blue sky" laws.
3.26 Investment Company Act
The Corporation is not now, and after giving effect to the
sale of the Preferred Shares and the application of the proceeds thereof will
not be, required to register as an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
3.27 Use of Proceeds
The Corporation will utilize the net proceeds from the sale of
the Preferred Shares for general corporate purposes including but not limited to
the testing and development of Psoraxine.
3.28 Related Party Transactions
No current or former director, officer, employee or
stockholder or member of the Corporation, Astralis Pharmaceuticals or Astralis
LLC, or any associate or affiliate thereof, or any parent, spouse, child,
brother, sister or any other relative with a relationship (by blood, marriage or
adoption) of not more remote than first cousin of any of the foregoing
(collectively, "Family Members"), is presently, or during the 12-month period
ending on the date of this Agreement has been, directly or indirectly (i) a
party to any transaction with the Corporation, Astralis Pharmaceuticals or
Astralis LLC (including any contract, agreement or other arrangement providing
for the furnishing of services by, or rental of real or personal property from,
or otherwise requiring payments to, any such director, officer, employee or
stockholder or such associate, affiliate or Family Member) or (ii) to the best
knowledge of the Corporation, the direct or indirect owner of an interest in any
company, firm, association or business organization (other than the ownership of
less than two percent of the outstanding capital stock of any publicly traded
entity) which is a present (or potential) competitor, lender, broker or customer
of the Corporation, nor does any member of management or any of the respective
Family Members receive income from any source other than the Corporation which
relates to the Corporation's business or should properly accrue to the
Corporation. Schedule 3.28(a) sets forth a list of all Family Members who are
currently employed or who were employed by the Corporation or Astralis
Pharmaceuticals at any time together with a description of jobs, title and
annual salary and bonus for each such person. The Corporation does not have any
loans outstanding to any employee, officer, director, stockholder, associate or
Affiliate of the Corporation, Astralis Pharmaceuticals or Astralis LLC or to any
Family Member.
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3.29 Takeover Statutes
No "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation (including Section 203 of the
Delaware General Corporation Law, as amended) (each a "Takeover Statute") or any
anti-takeover provision in the Corporation's Certificate of Incorporation and
By-laws is, or on any Closing Date will be, applicable to the Corporation, the
Purchaser, the issuance of the Preferred Shares or the other transactions
contemplated by this Agreement.
3.30 Hercules; Exception
In the case of the representations and warranties set forth in
Sections 3.9(a), 3.9(b), 3.9(c), 3.10, 3.12, 3.13, 3.15, 3.20 and 3.28, solely
to the extent that such representations and warranties relate to Hercules before
it was renamed Astralis Pharmaceuticals Ltd. on November 13, 2001, such
representations and warranties are made to the best knowledge of the Corporation
after reasonable investigation.
4. Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the
Corporation as follows:
4.1 Due Organization
The Purchaser is a company duly organized and validly existing
under the laws of England and Wales.
4.2 Authorization; Execution and Delivery of Agreement
The Purchaser has all requisite power and authority to execute
this Agreement and the Transaction Documents, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser and this Agreement constitutes the
legal, valid, binding and enforceable obligation of the Purchaser, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
22
4.3 No Consent or Approval Required
Other than as a result of the reporting requirements of the
Exchange Act, no consent, approval, order or authorization of, or registration,
declaration, filing with or notice to, any Authority is required to be made or
obtained by the Purchaser in order to execute or deliver this Agreement or to
consummate the transactions contemplated hereby.
4.4 No Brokers
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Purchaser, for which the Corporation will become liable.
4.5 Access to Information
The Purchaser has had adequate opportunity to ask questions
of, and receive answers from, the Corporation's officers, employees, agents,
accountants, and representatives concerning the Corporation's and Astralis
Pharmaceuticals' business, operations, financial condition, assets, liabilities,
and all other matters relevant to its investment in the Preferred Shares. The
foregoing, however, does not limit or modify the representations and warranties
of the Corporation in Section 3 of this Agreement or the right of the Purchaser
to rely thereon.
4.6 Acquisition For Own Account
(a) The Purchaser, by reason of its business and financial
experience, has such knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the
merits and risks of its investment in the Preferred Shares, and is
purchasing the Preferred Shares hereunder for its own account, for
investment and not with a view to, or any present intention of,
effecting a distribution of such securities or any part thereof. The
Purchaser acknowledges that the Preferred Shares to be purchased
hereunder have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or the securities laws of any state or
other jurisdiction and cannot be disposed of unless they are
subsequently registered under the Securities Act and any applicable
state laws or exemption from such registration is available.
Furthermore, the Purchaser acknowledges that the Corporation shall
place upon each certificate representing the Preferred Shares, a legend
substantially in the following form:
"The securities represented by this certificate have been
issued without registration or qualification under the
Securities Act of 1933, as amended (the "Securities Act"), or
any applicable state securities laws (the "State Acts"). Such
securities may not be sold, assigned, transferred or otherwise
disposed of, beneficially or on the records of the company,
unless the securities represented by this certificate have
been registered or qualified under the Securities Act and the
applicable State Acts or there has been delivered to the
company an opinion of counsel, reasonably satisfactory to the
company, to the effect that such registration and
qualification are not required."
23
4.7 Accredited Investor
The Purchaser is an "accredited investor" (as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act).
5. Conditions to Obligations of the Purchaser at the Closings under this
Agreement
The obligation of the Purchaser to consummate each of the
First Closing, Second Closing, and any Instalment Closing is subject to the
satisfaction of the following conditions on or prior to each such Closing:
5.1 Corporate Proceedings; Consents; Etc
All corporate and/or other proceedings to be taken by the
Corporation, its officers, directors and stockholders and all waivers, Filings
and Consents to be obtained by the Corporation in connection with the
transactions contemplated by this Agreement and the Transaction Documents shall
have been taken or obtained, other than those Filings which must be made after
any Closing.
5.2 Blue Sky Matters
All consents, approvals, qualifications and/or registrations
required to be obtained or effected under any applicable state securities or
"blue-sky" laws in connection with the execution and delivery of the Preferred
Shares shall have been obtained or effected.
5.3 Registration Rights Agreement and Stockholders Agreement
The Registration Rights Agreement, in the form attached
hereto, and the Stockholders Agreement, in the form attached hereto, shall have
been executed and delivered by all of the parties thereto (including the
Corporation), other than the Purchaser.
5.4 Filings and Documents
(a) The Certificate of Incorporation in the form of Exhibit A
attached hereto shall have been duly authorized by the Board of
Directors and the stockholders of the Corporation and filed with the
Secretary of State of the State of Delaware.
24
(b) The Certificate of Designations in the form of Exhibit C
hereto shall have been duly authorized by the Board of Directors of the
Corporation, duly executed on behalf of the Corporation and filed with
the Secretary of State of the State of Delaware.
(c) The Corporation shall have delivered to the Purchaser a
certificate of the Secretary of the Corporation at the Closing
certifying that attached thereto is: (i) a true and complete copy of
the Corporation's Certificate of Incorporation, as in effect at the
Closing; (ii) a true and complete copy of its By-laws as in effect at
the Closing; (iii) a true and complete copy of the Certificate of
Designations; and (iv) a true and complete copy of all resolutions duly
adopted by its Board of Directors (x) authorizing the execution,
delivery and performance of this Agreement, and (y) authorizing the
consummation of the transactions contemplated hereby.
5.5 Financial Statements
The Purchaser shall have received a copy of the Corporation's
audited financial statements as of and for the fiscal year ended December 31,
2000 and the unaudited financial statements for the nine-month period ended
September 30, 2001, which in each case includes the financial statements of
Astralis Pharmaceuticals.
5.6 Regulatory Approvals
All approvals and authorizations of, filings and registrations
with, and notifications to, all Governmental Authorities required for the
consummation of the transactions contemplated by this Agreement shall have been
obtained or made and shall be in full force and effect.
5.7 Representations, Warranties and Covenants
Each representation and warranty of the Corporation shall be
(i) true and correct in all respects as of the First Closing Date and (ii) true
and correct in all material respects as of each other Closing Date, as if made
on and as of each such date (other than representations and warranties that
expressly speak only as of a prior date); the Corporation shall have complied in
all material respects with its covenants and agreements to be performed at or
prior to each Closing; and the Corporation shall have delivered to the Purchaser
a certificate of the Chief Executive Officer of the Corporation in a form
previously agreed between the parties, certifying as to the foregoing matters.
5.8 No Litigation
No litigation or other formal proceeding shall have been
instituted or threatened seeking to enjoin any of the transactions contemplated
hereby or seeking damages in respect thereof, and no injunction or temporary
restraining order shall have been issued with respect to any of the transactions
contemplated hereby.
25
5.9 No Prohibition
There shall be no Applicable Law in effect that prohibits the
purchase of the Preferred Shares by the Purchaser or that would otherwise impose
a material penalty upon the Purchaser in respect of the purchase of the
Preferred Shares.
5.10 No Material Adverse Change
There shall have been no material adverse change in the
business, properties, assets, prospects or condition (financial or otherwise) of
the Corporation from and after the date of this Agreement.
5.11 Opinion of Counsel
The Purchaser shall have received an opinion, dated as of each
Closing Date, of ▇▇▇▇▇, Danzig, Scherer, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, in substantially
the form of Exhibit F, and of Bond, ▇▇▇▇▇▇▇▇▇ & King LLP, in substantially the
form of Exhibit G.
5.12 D&O Insurance
The Corporation shall have purchased directors and officers
insurance provided by a reputable insurance carrier in character and amount
equivalent to that carried by Persons engaged in similar businesses and subject
to the same or similar risks and such insurance coverage shall be in effect as
of the First Closing Date.
5.13 Executive Employment Agreements
An executive employment agreement, between the Corporation and
▇▇. ▇'▇▇▇▇, in the form attached hereto as Exhibit H, shall have been duly
executed by the signatories thereto and delivered to the Corporation.
5.14 Composition of Board of Directors
The Corporation shall have taken all steps necessary pursuant
to its Certificates of Incorporation and By-laws to provide for the election of
one director to the Board of Directors by holders of the majority of the
outstanding shares of Convertible Preferred Stock.
6. Additional Conditions to the Second Closing
6.1 Occurrence of First Closing
The First Closing shall have occurred.
6.2 Filing of FDA Application
The Corporation shall have filed with the U.S. Federal Drug
Administration ("FDA") an Investigational New Drug ("IND") application relating
to the Corporation's vaccine for the treatment of psoriasis ("PSORAXINE") on or
prior to January 30, 2002.
26
6.3 No Material Adverse Change
There shall have been no material adverse change in the
business, properties, assets, prospects or condition (financial or otherwise) of
the Corporation from and after the date of this Agreement.
6.4 Financial Statements
With respect to the Second Closing and any Instalment Closing
occurring on or before January 31, 2002 the Purchaser shall have received
management accounts for the year ended December 31, 2001. With respect to any
Instalment Closing occurring after January 31, 2002, the Purchaser shall have
received (i) a copy of the Corporation's financial statements as of and for the
fiscal year ended December 31, 2001, and an unqualified audit opinion of the
Accountants (as defined in Section 8.3) with respect to such financial
statements and (ii) the latest available interim financial statements and
management accounts.
6.5 No Defaults, Insolvency, Bankruptcy, Litigation, etc
None of the following shall have occurred or shall exist:
(a) the Corporation shall have defaulted in paying any
dividend when due on the Preferred Shares;
(b) the Corporation shall have failed to perform or observe
any of its obligations under this Agreement, the Registration Rights
Agreement, the Stockholders Agreement, the terms of the Convertible
Preferred Stock or any other agreement entered in connection with the
Purchaser's investment hereunder;
(c) any representation or warranty made in writing by or on
behalf of the Corporation in this Agreement or in any writing furnished
in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which
made;
(d) the Corporation (a) shall have defaulted (as principal or
as guarantor or other surety) in the payment of any principal of or
premium or interest on any indebtedness beyond any period of grace
provided with respect thereto, or (b) shall have defaulted in the
performance of or compliance with any term of any evidence of
indebtedness and as a consequence of such default or condition such
indebtedness shall have become, or shall have been declared due and
payable before its stated maturity or before its regularly scheduled
dates of payment;
27
(e) the Corporation (i) is generally not paying, or shall have
admitted in writing its inability to pay, its debts as they become due,
(ii) shall have filed, or consented by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
readjustment of debt, dissolution, liquidation, administration,
moratorium or other similar law of any jurisdiction, (iii) shall have
made an assignment for the benefit of its creditors, (iv) shall have
consented to the appointment of a custodian, receiver, administrative
receiver, administrator, supervisor, liquidator, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) shall have been adjudicated as
bankrupt or insolvent or to be liquidated, (vi) shall have ceased or
threatened in writing to cease, or shall have suspended or threatened
in writing to suspend, making payments in respect of its debts and
other obligations, (vii) shall have ceased carrying on all or
substantially all of its business, (viii) shall have proposed or
entered into any composition, scheme of arrangement or other
arrangement for the benefit of its creditors generally or any class of
creditors, (ix) shall have commenced a voluntary winding-up or
dissolution, (x) shall have applied to a court for an administration
order under the Bankruptcy Code or any similar statute, or (xi) shall
have taken corporate action for the purpose of any of the foregoing;
(f) a court or governmental authority of competent
jurisdiction shall have entered an order appointing, without consent by
the Corporation, a custodian, receiver, administrative receiver,
administrator, supervisor, liquidator, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property (or any such Person shall have been appointed by
one or more creditors of the Corporation), or constituting an order for
relief or approving a petition for relief or reorganization, or
approving or imposing any suspension or moratorium of payments, or
approving any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or other
similar law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Corporation, or any such petition
shall have been filed against the Corporation or any of its
subsidiaries and such petition shall not have been dismissed or all or
any substantial part of the property of the Corporation is sequestered
by court order and such order remains in effect; or
(g) a final judgment or judgments for the payment of money
aggregating in excess of $100,000 (or the equivalent thereof in another
currency) (exclusive of judgment amounts which are covered by insurance
and in respect of which such insurer has not denied its liability in
writing) shall have been rendered against the Corporation and which
judgments have not been, after entry thereof, bonded or discharged; or
(h) after the date hereof, the Corporation shall have
consolidated, merged or amalgamated with or into another Person where
the Corporation is not the surviving corporation or that results in the
issuance or exchange of shares representing fifty percent (50%) or more
of the outstanding voting capital stock of the company; or
28
(i) the Corporation shall have conveyed, transferred or leased
all or substantially all of its assets to another Person.
6.6 Compensation Matters
From and after the First Closing Date, except as disclosed to
the Purchaser, the Corporation shall not have (i) issued any capital stock or
securities to current and future directors, employees or consultants, (ii)
entered into any employment or consulting arrangement with any director or
executive officer of the Corporation or (iii) entered into any other
compensation, bonus or benefit arrangement or plans for directors, employees or
consultants with respect to the issuance of capital stock or securities. The
capitalization table set forth on Schedule 3.17 shall be revised to reflect any
such issuance, arrangements or plans following the First Closing Date and shall
be true and correct in all respects as of any other Closing Date. The
Corporation shall deliver to the Purchaser a certificate of the Chief Executive
Officer of the Corporation certifying as to the foregoing matters.
7. Conditions to Obligations of Corporation at the Closings under this
Agreement
The obligations of the Corporation to consummate each Closing,
is subject to the satisfaction of the following conditions on or prior to each
such Closing:
7.1 Representations and Warranties and Covenants
Each representation and warranty of the Purchaser shall be (i)
true and correct in all respects as of the First Closing Date and (ii) true and
correct in all material respects as of each other Closing Date, as if made on
and as of each such date (other than representations and warranties that
expressly speak only as of a prior date).
7.2 Registration Rights Agreement and Stockholders Agreement
The Registration Rights Agreement, in the form attached
hereto, and the Stockholders Agreement, in the form attached hereto, shall have
been executed and delivered by the Purchaser.
7.3 No Litigation
No litigation or other formal proceeding shall have been
instituted or threatened seeking to enjoin any of the transactions contemplated
hereby or seeking damages in respect thereof, and no injunction or temporary
restraining order shall have been issued with respect to any of the transactions
contemplated hereby.
7.4 No Prohibition
There is no Applicable Law in effect that prohibits the sale
of the Preferred Shares by the Corporation or that would otherwise impose a
material penalty upon the Corporation in respect of the sale of the Preferred
Shares.
29
7.5 Payment of the Purchase Price
The Purchaser shall have delivered, as applicable, the First
Purchase Price, Second Purchase Price or the Instalment Purchase Price.
7.6 Occurrence of First Closing
In the case of any Closing other than the First Closing, the
First Closing shall have occurred.
8. Covenants
8.1 Insurance
The Corporation shall as promptly as practicable after the
date hereof, but no later than the Second Closing Date, purchase professional
liability, errors and omissions, general liability, property and casualty and
business interruption insurance as the Board of Directors deems adequate. The
Corporation shall also use its best efforts to purchase any other type of
insurance reasonably requested by the Purchaser. Such insurance policies shall
provide full and adequate coverage for all normal risks incident to the business
of the Corporation and its directors, officers and other personnel, properties
and assets, and shall be in character and amount at least equivalent to that
carried by Persons engaged in similar businesses and subject to the same or
similar perils or hazards.
8.2 Public Disclosure of Transactions
Neither the Corporation nor the Purchaser shall, without the
prior consent of the other party, directly or indirectly issue any public
disclosure with respect to this Agreement or the investment by the Purchaser
pursuant to this Agreement, except as may be required by Applicable Law (or
under the rules and regulations of any securities exchange on which the Common
Stock or the Purchaser's capital stock is listed), in which case the Corporation
and the Purchaser, as the case may be, shall issue any required statement only
after consulting with the other party and furnishing such disclosure to the
other party prior to such consultation.
8.3 Independent Public Accountant
As promptly as practicable after the date hereof, the
Corporation shall retain an independent public accounting firm as required by
the Securities Act and the rules promulgated thereunder to serve as its
independent auditor (the "Accountants").
30
8.4 Information Rights
(a) Access to Records. From the date hereof and thereafter for
so long as the Purchaser owns any Preferred Shares issued hereunder the
Corporation shall, and shall cause each Subsidiary to, afford to the
Purchaser, the Affiliates of the Purchaser and each of their respective
officers, employees, advisors, counsel and other authorized
representatives (collectively with the affiliates of the Purchaser, the
"Representatives"), during normal business hours, reasonable access,
upon reasonable advance notice, to all of the books, records and
properties of the Corporation and its Subsidiaries and all officers and
employees of the Corporation and such Subsidiaries. The Purchaser shall
keep confidential information obtained by it in connection with any
such inspection, except that the Purchaser shall be permitted to
disclose the information relating to the Corporation's business (i) to
such of its representatives as need to know such information relating
to the Corporation's business for the sole purpose of evaluating the
business of the Corporation, provided such Persons are informed of the
confidential nature of the information relating to the Corporation's
business and the restrictions imposed hereby; (ii) to the extent
required by law, rule or regulation or legal process; (iii) to the
extent such information relating to the Corporation's or any of its
Subsidiaries' breach is or becomes publicly available other than as a
result of a breach of this Section 8.4(a); or (iv) to the extent the
Corporation shall have consented to such disclosure.
(b) Financial Reports. From the First Closing Date and
thereafter for so long as the Purchaser owns at least ten percent (10%)
of the Preferred Shares issued pursuant to this Agreement the
Corporation shall furnish to the Purchaser the following:
(i) Monthly Management Accounts. As soon as available,
but not later than 30 days after the end of each
month beginning with the management accounts for the
month of November, 2001, a consolidated balance sheet
of the Corporation as of the end of such period and
consolidated statements of income of the Corporation
for such period and for the period commencing at the
end of the previous fiscal year and ending with the
end of such period, setting forth in each case in
comparative form the corresponding figures for the
corresponding period of the preceding fiscal year,
and including comparisons to the budget or plan, all
prepared in accordance with generally accepted
accounting principles consistently applied (except
for the absence of footnotes, and quarter-end and
year-end adjustments).
(ii) Quarterly Reports. As soon as available, but not
later than 45 days after the end of the quarter
beginning with the report for the quarter ended
December 31, 2001, (A) a consolidated balance sheet
for the Corporation as of the end of such period and
consolidated statements of income, cash flows and
changes in stockholders' equity for such quarterly
accounting period and for the period commencing at
the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in
comparative form the corresponding figures for the
corresponding period of the preceding fiscal year,
and including comparisons to the budget or business
plan, all prepared in accordance with generally
accepted accounting principles consistently applied,
subject to normal year-end adjustments and the
absence of footnote disclosure, and (B) a report or
presentation by management of the Corporation of the
operating and financial highlights of the Corporation
and its Subsidiaries for such period, which shall
include (x) a comparison between operating and
financial results and budget and (y) an analysis of
the operations of the Corporation and its
Subsidiaries for such period.
31
(iii) Annual Audit. Beginning with the fiscal year ended
December 31, 2001, as soon as available, but not
later than 90 days after the end of each fiscal year
of the Corporation, audited consolidated financial
statements of the Corporation, which shall include
statements of income, cash flows and changes in
stockholders' equity for such fiscal year and a
balance sheet as of the last day thereof, each
prepared in accordance with GAAP, and accompanied by
the report of the Accountants. The Corporation and
its Subsidiaries shall maintain a system of
accounting sufficient to enable its Accountants to
render the report referred to in this Section
8.4(b)(iii).
(iv) Miscellaneous. Promptly upon becoming available, each
of the following:
(A) copies of all financial statements, reports,
press releases, notices, proxy statements and other
documents sent by the Corporation or its Subsidiaries
to its stockholders generally or released to the
public and copies of all regular and periodic
reports, if any, filed by the Corporation or its
Subsidiaries with the SEC, any securities exchange or
the NASD;
(B) notification in writing of the existence of any
default under any material agreement or instrument to
which the Corporation or any of its Subsidiaries is a
party or by which any of their assets are bound;
(C) upon specific request, copies of all reports
prepared for or delivered to the management of the
Corporation or its Subsidiaries by its accountants;
and
(D) upon specific request, any other routinely
collected financial or other information available to
management of the Corporation or its Subsidiaries
(including without limitation, routinely collected
statistical data).
32
9. Indemnification; Survival
9.1 Indemnification by the Corporation
The Corporation hereby agrees to indemnify and hold harmless
the Purchaser and its respective affiliates, directors, officers and employees
(collectively, the "Purchaser Indemnified Parties") from and against any and all
liabilities, judgments, claims, settlements, losses, damages (including any
diminution in value of its investment in the Corporation), reasonable fees
(including attorneys' and other experts' fees and disbursements), Liens, taxes,
penalties, obligations and expenses (collectively, "Losses") incurred or
suffered by any such Person arising from, by reason of or in connection with any
misrepresentation or breach of any representation, warranty or covenant of the
Corporation pursuant to this Agreement (for the period such representation,
warranty or covenant survives) or any certificate or other document delivered by
the Corporation under this Agreement. This indemnification provision shall be in
addition to the rights of the Purchaser to bring an action against the
Corporation for breach of any term of this Agreement and the Transaction
Documents.
9.2 Indemnification by the Purchaser
The Purchaser hereby agrees to indemnify and hold harmless the
Corporation and its affiliates, directors, officers and employees (the
"Corporation Indemnified Parties"), from and against any and all Losses incurred
or suffered by any such Person arising from, by reason of or in connection with
any misrepresentation or breach of any representation, warranty or covenant of
the Purchaser contained in this Agreement (for the period such representation,
warranty or covenant survives) or any certificate or other document delivered by
the Purchaser under this Agreement. Notwithstanding anything else to the
contrary, the Purchaser's maximum liability in the Agreement under this Section
9.2 shall not exceed the amount of the purchase price paid by the Purchaser
hereunder. This indemnification provision shall be in addition to the rights of
the Corporation to bring an action against the Purchaser for breach of any term
of this Agreement and the Transaction Documents.
9.3 Procedures Relating to Third Party Claims
A party seeking indemnification pursuant to Section 9.1 or 9.2
(an "Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim or assessment, or the commencement of any action, suit or proceeding, by a
third party in respect of which indemnity may be sought hereunder (a "Third
Party Claim") and will give the Indemnifying Party such information with respect
thereto as the Indemnifying Party may reasonably request, but no failure to give
such notice shall relieve the Indemnifying Party of any liability hereunder
(except to the extent the Indemnifying Party has suffered actual and material
prejudice thereby). The Indemnifying Party shall have the right, exercisable by
written notice (the "Notice") to the Indemnified Party within 14 days of receipt
of notice from the Indemnified Party of commencement of or assertion of any
Third Party Claim, to assume the defense of such Third Party Claim, using
counsel selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party; provided, that the Indemnifying Party shall not have the
right to assume a Third Party Claim if the Indemnified Party shall have been
advised in writing by counsel that a conflict will arise in the event both the
Indemnified Party and the Indemnifying Party are represented by the same counsel
with respect to the Third Party Claim, in which case such Indemnified Party
shall have the right to control the defense of such Third Party Claim and all
Losses in connection therewith shall be reimbursed by the Indemnifying Party
from time to time upon demand of the Indemnified Party. In addition, if the
Indemnifying Party fails to give the Indemnified Party the Notice complying with
the provisions stated above within the stated time period, the Indemnified Party
shall have the right to assume control of the defense of the Third Party Claim
and all Losses in connection therewith shall be reimbursed by the Indemnifying
Party from time to time upon the demand of the Indemnified Party. In no event
may any Indemnifying Party settle or compromise any Third Party Claim without
the prior written consent of an Indemnified Party.
33
9.4 Survival of Representations, Warranties and Agreements
Notwithstanding any investigation conducted or notice or
knowledge obtained by or on behalf of any party hereto, each representation and
warranty in this Agreement and each agreement or covenant in this Agreement
shall survive the execution and delivery of this Agreement, each Closing and any
termination of this Agreement pursuant to Section 15 without limitation as to
time, except as otherwise specifically referred to herein.
10. Expenses
The Corporation, on the one hand, and Purchaser on the other
hand, shall bear its own expenses in connection with the preparation for and
consummation of the transactions contemplated by this Agreement.
11. Notices
All notices, advices and communications to be given or
otherwise made to any party to this Agreement shall be deemed to be sufficient
if contained in a written instrument delivered in person or by telecopier or
duly sent by first class registered or certified mail, return receipt requested,
postage prepaid, or by overnight courier, or by electronic mail, with a copy
thereof to be sent by mail (as aforesaid) within 24 hours of such electronic
mail, addressed to such party at the address set forth below or at such other
address as may hereafter be designated in writing by the addressee to the
addresser listing all parties:
34
if to the Corporation, to:
Astralis Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
U.S., 07932
Attention: Mr. ▇▇▇▇ Ajnsztajn
Telecopier: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Danzig, Scherer, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ U.S., 07962
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
-and-
if to the Purchaser, to:
SkyePharma PLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
St. Olave's House
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and received
(i) in the case of personal delivery or delivery by telecopier, on the date of
such delivery, (ii) in the case of nationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted. As used in this Section 11, "business day" shall
mean any day other than a day on which banking institutions in the State of New
York are legally closed, or authorized to close, for business.
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12. Successors and Assigns
Except as otherwise expressly provided herein, this Agreement
shall bind and inure to the benefit of the parties hereto and the respective
successors and permitted assigns of the parties hereto. Neither this Agreement,
nor the rights and obligations hereunder, is assignable by any party hereto
(except to a successor-in-interest by operation of law) without the prior
written consent of the other. Any such purported assignment made without such
prior written consent shall be null and void. No Person other than the parties
hereto, the Purchaser Indemnified Parties (in respect of Section 9 only) and the
Corporation Indemnified Parties (in respect of Section 9 only) and their
respective successors and permitted assigns shall have any rights or claims
under this Agreement.
13. Amendments
The terms and provisions of this Agreement may only be amended
or waived either (a) with the written consent of the parties hereto or (b) in a
writing by the party or parties against whom such amendment or waiver is sought
to be enforced.
14. Entire Agreement
This Agreement and the other writings or documents referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
15. Termination
This Agreement may be terminated by either party if the other
party is in material breach of this Agreement and such breach is not cured
within ten days following the delivery of written notice thereof. Such
termination right may be exercised only by the delivery of written notice of
such termination by the terminating party to the other party and such
termination will not relieve any party of liability for its prior breach. This
Agreement may also be terminated by the mutual written consent of the parties
hereto except that each representation and warranty in this Agreement and each
agreement or covenant in this Agreement shall survive such termination.
16. Counterparts
This Agreement may be executed in any number of separate
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
17. Headings
The headings of the various sections of this Agreement and of
the schedules have been inserted for convenience of reference only and shall not
be deemed to be a part of this Agreement.
36
18. Governing Law; Submission to Jurisdiction; Selection of Forum
This Agreement shall be construed in accordance with the laws
of the State of New York, without regard to conflict of law provisions thereof.
Each party hereto agrees that it shall bring up any action or proceeding in
respect of any claim arising out of or related to this agreement or the
transactions contained in and contemplated by this Agreement, whether in tort or
contract or at law or in equity, exclusively in the United States District Court
for the Southern District of New York or, if such court is not available, the
Supreme Court of the State of New York for the county of New York (the "Chosen
Courts") and solely in connection with claims arising under this Agreement or
the transactions contained in or contemplated by this Agreement (i) irrevocably
submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any
objection to laying venue in any such action or proceeding in the Chosen Courts
and agrees not to commence any action in respect of any such claim in any other
court or forum, (iii) waives any objection that the Chosen Courts are an
inconvenient forum or do not have jurisdiction over any party hereto, (iv)
waives any right to a trial by jury and (v) agrees that service of process upon
such party in any such action or proceeding shall be effective if notice is
given in accordance with Section 11 of this Agreement. Without limiting the
foregoing, each of the Corporation and the Purchaser hereby appoints, in the
case of any such action or proceeding brought in the courts of or in the State
of New York, CT Corporation system with offices on the date hereof at ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇ to receive, for it and on its behalf,
service of process in the State of New York with respect thereto, provided the
Corporation and the Purchaser may appoint any other Person, reasonably
acceptable to the other party, with offices in the State of New York to replace
such agent for service of process upon delivery to the other party of a
reasonably acceptable agreement of such new agent agreeing to act.
37
IN WITNESS WHEREOF, the undersigned have caused this Purchase
Agreement to be executed as of the date first written above.
Astralis Ltd.
By:
---------------------------------
Name:
Title:
SkyePharma PLC
By:
---------------------------------
Name:
Title:
38