Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 15,
2001, among InKine Pharmaceutical Company, Inc., a corporation organized under
the laws of the State of New York (the "Company"), and the investors set forth
on the signature pages hereto (the "Purchasers").
WHEREAS:
A. The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act") or Section 4(2) of the Securities
Act.
B. The Company desires to sell, and the Purchasers desire to purchase,
upon the terms and conditions stated in this Agreement, (i) convertible notes of
the Company in the aggregate principal amount of Ten Million Dollars
($10,000,000), in the form attached hereto as Exhibit A (the "Notes"),
convertible into shares of the Company's common stock, par value $.0001 per
share (the "Common Stock"), and (ii) warrants (the "Warrants"), in the form
attached hereto as Exhibit B, to acquire an aggregate of 265,487 shares of
Common Stock. The shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Notes are referred to herein as the "Conversion
Shares" and the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants are referred to herein as the "Warrant Shares." The
Notes, the Warrants, the Conversion Shares and the Warrant Shares are
collectively referred to herein as the "Securities" and each of them may
individually be referred to herein as a "Security."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
D. All references herein to monetary denominations shall refer to
lawful money of the United States of America.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Section 6 and Section 7 below, the Company shall issue and sell to the
Purchasers, and the Purchasers severally agree to purchase from the Company, the
Notes and the Warrants for an aggregate purchase price of Ten Million Dollars
($10,000,000) (the "Purchase Price").
(b) Form of Payment. On the Closing Date, the Purchasers shall pay
the Purchase Price by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of the duly executed
Notes and Warrants and the Company shall deliver the Notes and Warrants against
delivery of the Purchase Price.
(c) Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes and Warrants pursuant to this Agreement
(the "Closing") shall be 12:00 noon, New York City time, on June 15, 2001,
subject to a two business day grace period at either party's option, but in any
event not later than June 17, 2001, or such other time as may be mutually agreed
upon by the Company and the Purchasers (the "Closing Date"). The Closing shall
occur at the offices of Klehr, Harrison, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
The Purchasers represent and warrant, severally and not jointly, to
the Company as follows:
(a) Purchase for Own Account, Etc.. The Purchasers are purchasing
the Securities for the Purchasers' own account for investment purposes only and
not with a present view towards the public sale or distribution thereof, except
pursuant to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act. The Purchasers
understand that the Purchasers must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available, and that the Company has no present intention of
registering the resale of any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2(a) to
the contrary, by making the representations herein, the Purchasers do not agree
to hold the Securities for any minimum or other specific term and reserve the
right to dispose of the Securities at any time in accordance with or pursuant to
a registration statement or an exemption from the registration requirements
under the Securities Act.
(b) Accredited Investor Status. Each Purchaser is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. The Purchasers understand that the
Securities are being offered and sold to the Purchasers in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Purchasers' compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchasers set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchasers to acquire the Securities.
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(d) Information. The Purchasers and their counsel, if any, have
been furnished all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been specifically requested by the Purchasers or their counsel. The
Purchasers and their counsel have been afforded the opportunity to ask questions
of the Company and have received what the Purchasers believe to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other
investigation conducted by the Purchasers or their counsel or any of their
representatives shall modify, amend or affect the Purchasers' right to rely on
the Company's representations and warranties contained in Section 3 below. The
Purchasers understand that the Purchasers' investment in the Securities involves
a high degree of risk.
(e) Governmental Review. The Purchasers understand that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Transfer or Resale. The Purchasers understand that (i) except
as provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the resale of the Securities has been registered thereunder; or (b) the
Purchasers shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions and reasonably acceptable to the Company's counsel)
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; or (c) sold under
and in compliance with Rule 144 promulgated under the Securities Act (or a
successor rule) ("Rule 144"); or (d) sold or transferred to an affiliate of a
Purchaser who agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 2(f) and who is an Accredited
Investor; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws (other than pursuant to the terms of the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement, provided such pledge is
consistent with applicable laws, rules and regulations.
(g) Legends. The Purchasers understand that the Notes and Warrants
and, until such time as the Conversion Shares and Warrant Shares have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Purchasers under Rule 144, the certificates for the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state of the United States or in any other
jurisdiction. The securities represented hereby may not be offered,
sold or transferred in the absence of an effective registration
statement for the securities under applicable securities laws
unless offered, sold or transferred pursuant to an available
exemption from the registration requirements of those laws.
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The Company agrees that it shall, immediately upon the Registration
Statement (as defined in the Registration Rights Agreement) being declared
effective, deliver to its transfer agent an opinion letter of counsel,
confirming that the Registration Statement is effective, and opining that, so
long as the Registration Statement is effective, the transfer agent shall issue,
in connection with the issuance of the Conversion Shares and Warrant Shares,
certificates representing such Conversion Shares and Warrant Shares without the
restrictive legend above, provided such Conversion Shares and Warrant Shares are
to be sold pursuant to the prospectus contained in the Registration Statement.
Upon receipt of such opinion, the Company shall use its best efforts to cause
the transfer agent to confirm, for the benefit of the holders, that no further
opinion of counsel is required at the time of transfer in order to issue such
shares without such restrictive legend.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by state securities laws, (a) the
sale of such Security is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement; (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions and reasonably acceptable to the Company's
counsel, to the effect that a public sale or transfer of such Security may be
made without registration under the Securities Act; or (c) such holder provides
the Company with reasonable assurances that such Security can be sold under Rule
144. In the event the above legend is removed from any Security and thereafter
the effectiveness of a registration statement covering such Security is
suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance written
notice to the Purchasers the Company may require that the above legend be placed
on any such Security that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and the Purchasers shall cooperate in
the replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration statement
or under Rule 144.
(h) Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Purchasers and are valid and binding agreements of the
Purchasers enforceable against the Purchasers in accordance with their terms.
(i) Residency. Each Purchaser is a resident of the jurisdiction set
forth under such Purchaser's name on the execution page hereto.
The Purchasers' representations and warranties made in this Article
2 are made solely for the purpose of permitting the Company to make a
determination that the offer and sale of the Notes and Warrants pursuant to this
Agreement complies with applicable U.S. federal and state securities laws and
not for any other purpose. Accordingly, the Company should not rely on such
representations and warranties for any other purpose.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows:
(a) Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
or under the Notes, the Warrants or the Registration Rights Agreement or (iii)
the business, operations, properties, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Warrants and the Registration Rights Agreement,
to issue and sell the Notes and the Warrants in accordance with the terms
hereof, to issue the Conversion Shares upon conversion of the Notes in
accordance with the terms thereof and to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms thereof; (ii) the execution,
delivery and performance of this Agreement, the Notes, the Warrants and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes and the Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares) have been duly authorized
by the Company's Board of Directors and no further consent or authorization of
the Company, its Board of Directors, any or committee of the Board of Directors
is required, and (iii) this Agreement constitutes, and, upon execution and
delivery by the Company of the Registration Rights Agreement, the Notes and the
Warrants, such agreements will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms.
(c) Stockholder Authorization. Except as provided in Section 4(p)
hereof, neither the execution, delivery or performance by the Company of its
obligations under this Agreement, the Notes, the Warrants or the Registration
Rights Agreement, nor the consummation by it of the transactions contemplated
hereby or thereby (including, without limitation, the issuance of the Notes or
the Warrants or the issuance or reservation for issuance of the Conversion
Shares or Warrant Shares) requires any consent or authorization of the Company's
stockholders, including but not limited to consent under Rule 4460(i)
promulgated by the National Association of Securities Dealers, Inc. (the "NASD")
or any similar rule.
(d) Capitalization. The capitalization of the Company as of the
date hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable and
reserved for issuance pursuant to securities (other than the Notes and the
Warrants) exercisable or exchangeable for, or convertible into, any shares of
capital stock and the number of shares to be reserved for issuance upon
conversion of the Notes and exercise of the Warrants is set forth on Schedule
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3(d). All of such outstanding shares of capital stock have been, or upon
issuance, will be, validly issued, fully paid and non-assessable. No shares of
capital stock of the Company (including the Conversion Shares and the Warrant
Shares) are subject to preemptive rights or any other similar rights of the
stockholders of the Company or any liens or encumbrances. Except for the
Securities and as set forth on Schedule 3(d), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
nor are any such issuances or arrangements contemplated, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement). Schedule 3(d) sets
forth all of the Company issued securities or instruments containing
antidilution or similar provisions that will be triggered by, and all of the
resulting adjustments that will be made to such securities and instruments as a
result of, the issuance of the Securities in accordance with the terms of this
Agreement, the Notes or the Warrants. The Company has furnished to the
Purchasers true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof ("Certificate of Incorporation"), the Company's
By-laws as in effect on the date hereof (the "By-laws"), and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for capital stock of the Company.
(e) Issuance of Shares. The Conversion Shares and Warrant Shares
are duly authorized and reserved for issuance, and, upon conversion of the Notes
and exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances and will not be subject to preemptive rights, rights of
first refusal or other similar rights of stockholders of the Company and will
not impose personal liability upon the holder thereof.
(f) No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Notes and the Warrants by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance, as applicable, of the Notes, the Warrants, the Conversion Shares
and Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment (including, without
limitation, the triggering of any anti-dilution provisions), acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and rules or regulations of any self-regulatory
organizations to which either the Company or its securities are subject)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected (except,
with respect to clause (ii), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its subsidiaries is in violation of its Certificate of
6
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as the
Purchasers owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency or other third party in order for it to execute, deliver or perform any
of its obligations under this Agreement, the Registration Rights Agreement, the
Notes or the Warrants, in each case in accordance with the terms hereof or
thereof. The Company is not in violation of the listing requirements of the
NASDAQ National Market ("NNM") and does not reasonably anticipate that the
Common Stock will be delisted by NNM for the foreseeable future. The Company has
not received any notice regarding the possible delisting of the Common Stock
from NNM.
(g) SEC Documents, Financial Statements. Since January 1, 1998, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of Sections 13, 14 and 15(d) 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 Company has made available to the Purchasers true and complete copies of the
SEC Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or 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. None of the statements
made in any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have been amended or
updated in subsequent filings made prior to the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
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consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end audit adjustments). Except
as set forth in the financial statements of the Company included in the SEC
Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements and (iii) liabilities incurred as a result of the transaction
contemplated hereby, which liabilities and obligations referred to in clauses
(i) and (ii), individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
(h) Absence of Certain Changes. Since December 31, 2000, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
the SEC Documents filed prior to the date hereof.
(i) Absence of Litigation. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body, including, without limitation, the SEC or
NNM, pending or, to the best knowledge of the Company or any of its
subsidiaries, threatened against the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such. To the best
knowledge of the Company, after reasonable investigation, there are no facts
which, if known by a potential claimant or governmental authority, could give
rise to a claim or proceeding which, if asserted or concluded with results
unfavorable to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(j) Intellectual Property. Except as set forth on Schedule 3(j),
each of the Company and its subsidiaries owns or is licensed to use all patents,
patent applications, trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, permits, inventions,
discoveries, processes, scientific, technical, engineering and marketing data,
object and source codes, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge necessary for the
conduct of its business as now being conducted (collectively, "Intangibles").
Except as set forth on Schedule 3(j), to the best knowledge of the Company,
neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any Intangibles
which, if the subject of an unfavorable decision, ruling or finding, would have
a Material Adverse Effect. Except as set forth on Schedule 3(j), neither the
Company nor any of its subsidiaries has received written notice of any pending
conflict with or infringement upon such third party Intangibles. Neither the
Company nor any of its subsidiaries has entered into any consent agreement,
indemnification agreement, forbearance to ▇▇▇ or settlement agreement with
respect to the validity of the Company's or its subsidiaries' ownership or right
to use its Intangibles and, to the best knowledge of the Company, there is no
reasonable basis for any such claim to be successful. Except as set forth on
Schedule 3(j), the Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
8
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the best knowledge of the Company, no person is infringing on or
violating the Intangibles owned or used by the Company or its subsidiaries.
(k) Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(l) Disclosure. All information relating to or concerning the
Company set forth in this Agreement or provided to the Purchasers pursuant to
Section 2(d) hereof or otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading.
(m) Acknowledgment Regarding Purchasers' Purchase of the
Securities. The Company acknowledges and agrees that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and each Purchaser is "arms-length" and any
statement made by any Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser's purchase of the Securities and has not
been relied upon by the Company, its officers or directors in any way. The
Company further acknowledges that the Company's decision to enter into this
Agreement has been based solely on an independent evaluation by the Company and
its representatives.
(n) Listing. Promptly after the Closing Date, the Company will
secure the listing of the Conversion Shares and Warrant Shares upon each
national securities exchange or automated quotation system upon which shares of
Common Stock are currently listed (subject, if applicable, to official notice of
issuance).
(o) Form S-3 Eligibility. The Company is eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances known to the Company that
would prohibit or delay the preparation and filing of a registration statement
on Form S-3 with respect to the Registrable Securities (as defined in the
Registration Rights Agreement). The Company has no basis to believe that its
past or present independent public auditors will withhold their consent to the
inclusion, or incorporation by reference, of their audit opinion concerning the
Company's financial statements which are included in the Registration Statement
required to be filed pursuant to the Registration Rights Agreement.
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(p) No General Solicitation. Neither the Company nor any
distributor participating on the Company's behalf in the transactions
contemplated hereby (if any) nor any person acting for the Company, or any such
distributor, has conducted any "general solicitation," as such term is defined
in Regulation D, with respect to any of the Securities being offered hereby.
(q) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act, the result of such integration which
would require registration under the Securities Act, or any applicable
stockholder approval provisions, including, without limitation, Rule 4460(i) of
the NASD or any similar rule.
(r) No Brokers. Except as set forth on Schedule 3(r), the Company
has taken no action that would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by any Purchaser
relating to this Agreement or the transactions contemplated hereby.
(s) Acknowledgment Regarding Securities. The Company's Chief
Executive Officer and Chief Financial Officer have studied and fully understand
the nature of the Securities being sold hereunder. The Company acknowledges that
its obligation to issue Conversion Shares upon conversion of the Notes in
accordance with the terms of the Notes is absolute and unconditional, regardless
of the dilution that such issuance may have on the ownership interests of other
stockholders. Taking the foregoing into account, the Company's Board of
Directors has determined in its good faith business judgment that the issuance
of the Notes and Warrants hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders.
(t) Title. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them that is material to the business of
the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and its subsidiaries. Any real property
and facilities held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially interfere with the use made and proposed to
be made of such property and buildings by the Company and its subsidiaries.
(u) Tax Status. Except as set forth in the SEC Documents, the
Company and each of its subsidiaries has made or filed all foreign, U.S.
federal, state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its subsidiaries has set aside
10
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, of which the Company has
received written notice, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect to any
statute of limitations relating to the assessment or collection of any federal,
state or local tax. To the Company's knowledge, none of the Company's tax
returns is presently being audited by any taxing authority.
(v) Key Employees. Each of the Company's directors, officers and
any Key Employee (as defined below) is currently serving the Company in the
capacity disclosed in the SEC Documents. No Key Employee, to the best of the
knowledge of the Company and its subsidiaries, is in violation of any material
term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant with the Company, and, to the Company's
knowledge, the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any material liability with respect to any
of the foregoing matters. No Key Employee has, to the best of the knowledge of
the Company and its subsidiaries, any intention to terminate or limit his
employment with, or services to, the Company or any of its subsidiaries, nor, to
the Company's knowledge, is any such Key Employee subject to any constraints
which would cause such employee to be unable to devote his full time and
attention to such employment or services. "Key Employee" means the persons
listed on Schedule 3(v) and any individual who assumes or performs any of the
duties of a Key Employee.
(w) Insurance. The Company has in force fire, casualty, product
liability and other insurance policies, with extended coverage, sufficient in
amount to allow it to replace any of its material properties or assets which
might be damaged or destroyed or sufficient to cover liabilities to which the
Company may reasonably become subject, and such types and amounts of other
insurance with respect to its business and properties, on both a per occurrence
and an aggregate basis, as are customarily carried by persons engaged in the
same or similar business as the Company. No default or event has occurred that
could give rise to a default under any such policy.
(x) Environmental Matters. There is no environmental litigation or
other environmental proceeding pending or, to the Company's knowledge,
threatened by any governmental regulatory authority or others with respect to
the current or any former business of the Company or any partnership or joint
venture currently or at any time affiliated with the Company. No state of facts
exists as to environmental matters or Hazardous Substances (as defined below)
that involves the reasonable likelihood of a material capital expenditure by the
Company or that may otherwise have a Material Adverse Effect. No Hazardous
Substances have been treated, stored or disposed of, or otherwise deposited, in
or on the properties owned or leased by the Company (solely with respect to the
portion of such leased properties occupied by the Company) or by any partnership
or joint venture currently or at any time affiliated with the Company in
violation of any applicable environmental laws. The environmental compliance
11
programs of the Company comply in all material respects with all environmental
laws, whether federal, state or local, currently in effect. As used herein,
"Hazardous Substances" means any substance, waste, contaminant, pollutant or
material that has been determined by any governmental authority to be capable of
posing a risk of injury to health, safety, property or the environment.
(y) Regulatory Permits. The Company possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities which are material to the conduct to its business, and
the Company has not received any written notice of proceeding relating to the
revocation or modification of any such certificate, authorization or permit.
4. COVENANTS.
(a) Best Efforts. The parties shall use their best efforts timely
to satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
(b) Form D: Blue Sky Laws. The Company shall file with the SEC a
Form D with respect to the Securities as required under Regulation D and provide
a copy thereof to the Purchasers promptly after such filing if the Company
elects to rely on the exemption from registration pursuant to Regulation D. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for sale to
the Purchasers pursuant to this Agreement under applicable securities or "blue
sky" laws of the states of the United States or obtain exemption therefrom, and
shall provide evidence of any such action so taken to the Purchasers on or prior
to the Closing Date. Within ten (10) days after the Closing Date, the Company
shall file a Form 8-K concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 8-K.
(c) Reporting Status. So long as any Purchaser beneficially owns
any of the Notes and unexercised Warrants, the Company shall timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination. In addition, the Company shall take
all actions necessary to meet the "registrant eligibility" requirements set
forth in the general instructions to Form S-3 or any successor form thereto, to
continue to be eligible to register the resale of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
(d) Use of Proceeds. The Company shall use the proceeds from the
sale of the Notes and Warrants as set forth in Schedule 4(d).
(e) Participation Right. Subject to the terms and conditions
specified in this Section 4(e), for a period of one year after the date that the
registration statement (as defined in the Registration Rights Agreement) the
Company is required to file pursuant to Section 2(a) of the Registration Rights
Agreement is declared effective, the Purchasers shall have a right to
participate with respect to (i) future equity or equity-linked securities, or
(ii) debt which is convertible into equity or in which there is an equity
component ("Additional Securities") on the same terms and conditions as offered
12
by the Company to the other purchasers of such Additional Securities. Each time
the Company proposes to offer any Additional Securities, the Company shall make
an offering of such Additional Securities to each Purchaser in accordance with
the following provisions:
(i) the Company shall deliver a notice (the "Notice") to the
Purchasers stating (i) its bona fide intention to offer such Additional
Securities, (ii) the number of such Additional Securities to be offered, (iii)
the price and terms, if any, upon which it proposes to offer such Additional
Securities, and (iv) the anticipated closing date of the sale of such Additional
Securities.
(ii) by written notification received by the Company, within
seven (7) days after giving of the Notice, any Purchaser may elect to purchase
or obtain, at the price and on the terms specified in the Notice, up to that
portion of such Additional Securities which equals the proportion that the
number of shares of Common Stock purchased by such Purchaser pursuant to the
terms hereof bears to the total number of shares of Common Stock then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities then outstanding). The Company shall promptly, in
writing, inform each Purchaser which elects to purchase all of the Additional
Shares available to it ("Fully-Exercising Purchaser") of any other Purchaser's
failure to do likewise. During the five-day period commencing after such
information is given, each Fully-Exercising Purchaser shall be entitled to
obtain that portion of the Additional Securities for which the Purchasers were
entitled to subscribe but which were not subscribed for by the Purchasers which
is equal to the proportion that the number of shares of Common Stock held by
such Fully-Exercising Purchaser bears to the total number of shares of Common
Stock held by all Fully-Exercising Purchasers who wish to purchase some of the
unsubscribed shares;
(iii) if all Additional Securities which the Purchasers are
entitled to obtain pursuant to subsection 4(e)(ii) are not elected to be
obtained as provided in subsection 4(e)(ii) hereof, the Company may, during the
60-day period following the expiration of the period provided in subsection
4(e)(ii) hereof, offer the remaining unsubscribed portion of such Additional
Securities to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If the Company
does not consummate the sale of such Additional Securities within such period,
the right provided hereunder shall be deemed to be revived and such Additional
Securities shall not be offered or sold unless first reoffered to the Purchasers
in accordance herewith;
(iv) the participation right in this Section 4(e) shall not be
applicable to (i) the issuance or sale of shares of Common Stock (or options
therefor) to employees, officers, directors, or consultants of the Company for
the primary purpose of soliciting or retaining their employment or service
pursuant to a stock option plan (or similar equity incentive plan) approved by
the Board of Directors, (ii) the issuance of securities in connection with a
bona fide underwritten public offering that results in total proceeds to the
Company of at least $25,000,000, (iii) the issuance or sale of the Notes, or
(iv) the issuance of securities in connection with mergers, acquisitions,
strategic business partnerships or joint ventures (the primary purpose of which,
in the reasonable judgment of the Board of Directors, is not to raise additional
capital).
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(v) the participation right set forth in this Section 4(e) may
not be assigned or transferred, except that such right is assignable by each
Purchaser to any wholly-owned subsidiary or parent of, or to any corporation or
entity that is, within the meaning of the Securities Act, controlling,
controlled by or under common control with, any such Purchaser.
(f) Expenses. The Company shall pay to the Purchasers at the
Closing, reimbursement for the out-of-pocket expenses reasonably incurred by the
Purchasers directly in connection with the negotiation, preparation, execution
and delivery of this Agreement and the other agreements to be executed in
connection herewith, including, without limitation, the Purchasers' reasonable
due diligence and attorneys' fees and expenses, including, but not limited to, a
$12,000 documentation preparation fee (the "Expenses").
(g) Financial Information. The Company shall send (via electronic
transmission or otherwise) the following reports to the Purchasers until the
Purchasers transfer, assign or sell all of their Notes and Warrants: (i) within
ten (10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q, its proxy statements and any Current
Reports on Form 8-K; and (ii) within one (1) day after release, copies of all
press releases issued by the Company or any of its subsidiaries.
(h) Reservation of Shares. The Company currently has authorized and
reserved for the purpose of issuance 2,700,000 shares of Common Stock to provide
for the full conversion of the Notes and issuance of the Conversion Shares in
connection therewith, the payment of interest on the Notes and the issuance of
Common Stock in connection therewith, the full exercise of the Warrants and the
issuance of the Warrant Shares in connection therewith and as otherwise required
by the Notes and the Warrants (collectively, the "Issuance Obligations"). In the
event such number of shares becomes insufficient to satisfy the Issuance
Obligations, the Company shall take all necessary action to authorize and
reserve such additional shares of Common Stock necessary to satisfy the Issuance
Obligations.
(i) Listing. The Company shall maintain, so long as the Purchasers
(or any of its affiliates) owns any Securities, the listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of the
Notes and exercise of the Warrants on each national securities exchange or
automated quotation system on which shares of Common Stock are currently listed.
The Company will use its best efforts to continue the listing and trading of its
Common Stock on NNM, the New York Stock Exchange ("NYSE") or the American Stock
Exchange ("AMEX") and will comply in all respects with the reporting, filing and
other obligations under the bylaws or rules of the NASD and such exchanges, as
applicable. So long as the Purchasers own any Securities, the Company shall
promptly provide to the Purchasers copies of any notices it receives regarding
the continued eligibility of the Common Stock for trading on the NNM or, if
applicable, any securities exchange or automated quotation system on which
securities of the same class or series issued by the Company are then listed or
quoted, if any.
(j) Corporate Existence. So long as any Purchaser beneficially owns
any Notes, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
14
transaction (i) assumes the Company's obligations hereunder and under the
Registration Rights Agreement, the Notes and the Warrants and the agreements and
instruments entered into in connection herewith and therewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all the Notes and exercise in full of all Warrants outstanding as
of the date of such transaction and (ii) except in the event of a merger,
consolidation of the Company into any other corporation, or the sale or
conveyance of all or substantially all of the assets of the Company where the
consideration consists solely of cash, the surviving or successor entity is a
publicly traded corporation whose common stock is listed for trading on the NNM,
NYSE or AMEX.
(k) No Integrated Offerings. The Company shall not make any offers
or sales of any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold hereunder
under the Securities Act or cause this offering of the Securities to be
integrated with any other offering of securities by the Company for purposes of
any stockholder approval provision applicable to the Company or its securities.
(l) Legal Compliance. The Company shall conduct its business and
the business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(m) Redemptions and Dividends. So long as any Purchaser
beneficially owns any Notes, the Company shall not, without first obtaining the
written approval of the Purchasers, repurchase, redeem, or declare or pay any
cash dividend or distribution on, any shares of capital stock of the Company,
except for repurchases of stock held by employees or former employees of the
Company.
(n) Trading Restrictions. No Purchaser shall be permitted to sell,
transfer or otherwise dispose of, during any 45 trading day period, more than
4.99% of the least number of shares of Common Stock issued and outstanding
during such 45 trading day period (other than dispositions to the Company). The
restriction contained in this Section 4(n) may not be altered, amended, deleted
or changed in any manner whatsoever unless the holders of a majority of the
outstanding shares of Common Stock and the holders of the Notes and Warrants
shall approve, in writing, such alteration, amendment, deletion or change.
(o) NASD Rule 4350(i). Notwithstanding any term contained in this
Agreement, the Notes or the Warrants, in no event shall the Company issue to the
Purchasers (under any circumstance, including but not limited to upon conversion
of any Note, as payment on interest under any Note, upon an event of default
under any Note, or upon exercise of any Warrant) an amount of Common Stock which
would exceed 19.9% of the Company's issued and outstanding shares of Common
Stock on the date hereof. The Company shall, in lieu of affecting any issuance
which would violate the foregoing restriction, make a cash payment to the
holders of the Notes in accordance with Article V.A. of the Notes.
15
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue
certificates, registered in the name of each Purchaser or its nominee, for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by the Purchasers to the Company upon conversion of the Notes or
exercise of the Warrants, as applicable. To the extent and during the periods
provided in Sections 2(f) and 2(g) of this Agreement, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Conversion
Shares or Warrant Shares prior to registration of the Conversion Shares and
Warrant Shares under the Securities Act or without an exemption therefrom, will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Purchasers' obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
(c) If the Purchasers provide the Company and the transfer agent
with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope customary for opinions of counsel in comparable transactions and
reasonably acceptable to the Company's counsel, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from registration, or the Purchasers provide the Company with
reasonable assurances that such Securities may be sold under Rule 144, the
Company shall permit the transfer and, in the case of the Conversion Shares and
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the
Purchasers.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes
and Warrants to the Purchasers hereunder is subject to the satisfaction, at or
before the Closing, of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Each Purchaser shall have delivered the Purchase Price in
accordance with Section 1(b) above.
(b) The representations and warranties of each Purchaser shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and each Purchaser shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by each Purchaser
at or prior to the Closing Date.
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(c) No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE.
The obligation of the Purchasers hereunder to purchase the Notes
and Warrants from the Company hereunder is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that such
conditions are for each Purchaser's sole benefit and may be waived by each
Purchaser at any time in such Purchaser's sole discretion:
(a) The Company shall have executed this Agreement, the Notes, the
Warrants and the Registration Rights Agreement, and delivered executed original
copies of the same to each Purchaser.
(b) The Company shall have delivered to each Purchaser duly
executed Notes and Warrants (each in such denominations as such Purchaser shall
request but in no event less than $250,000 increments) in accordance with
Section 1(b) above.
(c) The Common Stock shall be listed on NNM and trading in the
Common Stock (or NNM generally) shall not have been suspended by the SEC or NNM.
(d) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. The Purchasers shall have received a certificate,
executed by the Chief Executive Officer of the Company after reasonable
investigation, dated as of the Closing Date to the foregoing effect.
(e) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(f) The Purchasers shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchasers and in substantially the form of Exhibit D
attached hereto.
(g) There shall have been no material adverse changes and no
material adverse developments in the business, properties, operations, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, since the date hereof.
17
(h) The Purchasers shall have received a copy of resolutions, duly
adopted by the Board of Directors of the Company or a committee thereof, which
shall be in full force and effect at the time of the Closing, authorizing the
execution, delivery and performance by the Company of this Agreement, the
Registration Rights Agreement, the Notes and the Warrants and the consummation
by the Company of the transactions contemplated hereby and thereby, certified as
such by the Secretary or Assistant Secretary of the Company.
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed in the State of New York. The Company and
the Purchasers irrevocably consent to the jurisdiction of the United States
federal courts and the state courts located in the County of New York, State of
New York in any suit or proceeding based on or arising under this Agreement and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
the Purchasers to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
Execution Page shall not affect the validity or enforceability of this
Agreement.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the
Purchasers, the Company, their affiliates and persons acting on their behalf
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchasers
18
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and no
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchasers.
(f) Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally, by responsible overnight
carrier or by confirmed facsimile, and shall be effective five (5) days after
being placed in the mail, if mailed, or upon receipt or refusal of receipt, if
delivered personally or by responsible overnight carrier or confirmed facsimile,
in each case addressed to a party. The addresses for such communications shall
be:
If to the Company:
InKine Pharmaceutical Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Executive Officer and Chief Financial Officer
with a copy simultaneously transmitted by like means to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to the Purchasers, to the address set forth under the
Purchasers' name on the execution page hereto, with a copy simultaneously
transmitted by like means to:
Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇, LLP
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Each party shall provide notice to the other party of any change in
address.
(g) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. Except
as provided herein or therein, neither the Company nor the Purchasers shall
assign this Agreement or any rights or obligations hereunder. Notwithstanding
19
the foregoing, each Purchaser may assign its rights hereunder to any of its
"affiliates," as that term is defined under the Exchange Act, without the
consent of the Company or to any other person or entity with the consent of the
Company, which consent shall not be unreasonably withheld. This provision shall
not limit any Purchaser's right to transfer the Securities pursuant to the terms
of the Notes, the Warrants and this Agreement or to assign the Purchaser's
rights hereunder or thereunder to any such transferee. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the
Registration Rights Agreement, the Notes or the Warrants, the Securities may be
pledged and all rights of the Purchasers under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with the Purchasers' margin or brokerage account.
(h) Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof shall
survive for two (2) years following the Closing notwithstanding any due
diligence investigation conducted by or on behalf of the Purchasers. Moreover,
none of the representations and warranties made by the Company herein shall act
as a waiver of any rights or remedies the Purchasers may have under applicable
U.S. federal or state securities laws. The Company shall indemnify and hold
harmless the Purchasers and each Purchaser's officers, directors, employees,
partners, members, agents and affiliates for all losses or damages arising as a
result of or related to any breach or alleged breach by the Company of any of
its representations or covenants set forth herein, including advancement of
expenses as they are incurred.
(j) Publicity. The Company and the Purchasers shall have the right
to approve before issuance any press releases, or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Purchasers, to
make any press release with respect to such transactions as is required by
applicable law and regulations (although the Purchasers shall be provided with a
copy thereof by the Company in connection with any such press release prior to
its release.
(k) Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have
occurred on or before June 17, 2001, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
20
(m) Joint Participation in Drafting. Each party to this Agreement
has participated in the negotiation and drafting of this Agreement, the Notes,
the Warrants and the Registration Rights Agreement. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
(n) Equitable Relief. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Purchasers by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that the
Purchasers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
(o) Knowledge. As used in this Agreement, the term "knowledge" of
any person or entity shall mean and include (i) actual knowledge and (ii) that
knowledge which a reasonable prudent business person could have obtained in the
management of his or her business affairs after making due inquiry and
exercising due diligence which a prudent business person should have made or
exercised, as applicable, with respect thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
INKINE PHARMACEUTICAL COMPANY, INC.
By: /S/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
PURCHASERS:
S.A.C. CAPITAL ASSOCIATES, LLC ROYAL BANK OF CANADA
by its agent RBC Dominion
By: /S/ Securities Corporation
-------------------------------------
Name: By: /S/
----------------------------------- -------------------------------------
Title: Name:
---------------------------------- -----------------------------------
Title:
RESIDENCE: Anguila ----------------------------------
By: /S/
-------------------------------------
ADDRESS: c/o S.A.C. Capital Advisors LLC Name:
--------------------------------- -----------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Title:
--------------------------------- ----------------------------------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------- RESIDENCE: Toronto, Canada
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇ -----------------------------
---------------------------------
Telecopy: (▇▇▇) ▇▇▇ ▇▇▇▇
--------------------------------- ADDRESS: One Liberty Plaza
Attention: General Counsel -----------------------------
--------------------------------- ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
-----------------------------
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
CONVERTIBLE NOTES: $8,000,000 -----------------------------
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
WARRANTS: 212,390 shares -----------------------------
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
-----------------------------
CONVERTIBLE NOTES: $2,000,000
WARRANTS: 53,097 shares
22