Exhibit 10.14
PURCHASE AGREEMENT
dated as of September 1, 2002
by and among
PILOT THERAPEUTICS HOLDINGS, INC.
and
PILOT THERAPEUTICS, INC.
and
KINGS, INC.
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement"), dated as of
September 1, 2002, by and among PILOT THERAPEUTICS HOLDINGS, INC., a company
incorporated in Delaware ("Pilot"), PILOT THERAPEUTICS, INC., a company
incorporated in North Carolina and a wholly-owned subsidiary of Pilot
("Subsidiary"), and KINGS, INC., a company incorporated in Delaware ("Kings").
W I T N E S S E T H:
WHEREAS, Subsidiary and Kings have entered into (i) a Purchase
Order, dated November 27, 2001 (the "Concentrate Purchase Order"), relating to
Pilot's purchase of borage concentrate ("BC"), (ii) a Purchase Order, dated
November 27, 2001 (the "Seed Purchase Order"), relating to Pilot's purchase of
borage seed and crop commitments for future Crossential GLA and (iii) an
Agreement for Supply of Borage and Echium Oil, dated April 14, 2002 (the "BEO
Agreement");
WHEREAS, Pilot, Subsidiary and Kings desire to (ii) amend the
rights and obligations of Subsidiary and Kings set forth in the Concentrate
Purchase Order and the BEO Agreement as set forth herein and (ii) replace in its
entirety the Seed Purchase Order with the Option Agreement between Kings and
Subsidiary attached hereto as Appendix A (the "Option Agreement");
NOW THEREFORE, for the consideration herein stated and in
further consideration of the premises and the mutual agreements, covenants and
provisions herein contained, the parties hereto agree as follows:
1. PURCHASE AND SALE OF BC.
(a) SALE OF BC. Subject to the terms and conditions herein
contained, Subsidiary agrees to purchase from Kings, and Kings agrees
to sell to Subsidiary, on the Closing Date, the BC, free and clear of
any lien, encumbrance, equity or adverse claim.
(b) PURCHASE PRICE. As against the sale of the BC by Kings,
Pilot agrees to pay a purchase price (the "Purchase Price") therefor to
Kings as follows:
(i) Pilot shall wire transfer $200,000 (the "Cash
Purchase Price") to an account designated, in writing, by
Kings at least two business days prior to the Closing Date;
and
(ii) Pilot shall issue and deliver 523,288 restricted
shares of Pilot Common Stock (the "Restricted Shares") to
Kings.
2. THE CLOSING.
(a) TIME AND PLACE OF CLOSING. The consummation of the sale of
the BC shall occur at a closing (the "Closing") to be held at the
offices of Hunton & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, at 10:00 A.M. on September 20, 2002, or such other place, time
and date as may be mutually agreed upon by Kings, Pilot and Subsidiary.
Such date is herein sometimes referred to as the "Closing Date".
(b) ACTION TO BE TAKEN. At the Closing, upon satisfaction of
the conditions of Closing set forth in this Agreement, (x) Pilot shall
(i) wire transfer the Cash Purchase Price to Kings and (ii) cause to be
delivered to Kings a certificate representing the Restricted Shares and
(y) Kings shall deliver to Pilot a certificate of representations and
warranties relating to the Restricted Shares.
3. REPRESENTATIONS AND WARRANTIES OF PILOT. Pilot represents and
warrants to Kings as follows:
(a) ORGANIZATION. Pilot is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry
on its business as now being conducted.
(b) NECESSARY AUTHORIZATION AND APPROVAL. Pilot has full
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All acts and other
proceedings required to be taken by or on the part of Pilot to
authorize it to carry out this Agreement and the transactions
contemplated hereby have been duly and properly taken. This Agreement
has been duly executed and delivered by Pilot and constitutes the
legal, valid and binding obligation of Pilot in accordance with its
terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights or
remedies generally. Neither the execution, delivery or performance of
this Agreement nor the consummation of the transactions contemplated
hereby is prohibited by, or requires Pilot to obtain any consent,
authorization, approval or registration under, any law, rule or
regulation, other than as contemplated hereby, or any judgment, order,
writ, injunction or decree, which is binding on Pilot or the terms of
any contract to which Pilot is a party.
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4. REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY. Subsidiary
represents and warrants to Kings as follows:
(a) ORGANIZATION. Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State of
North Carolina and has all requisite corporate power and authority to
carry on its business as now being conducted.
(b) NECESSARY AUTHORIZATION AND APPROVAL. Subsidiary has full
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All acts and other
proceedings required to be taken by or on the part of Subsidiary to
authorize it to carry out this Agreement and the transactions
contemplated hereby have been duly and properly taken. This Agreement
has been duly executed and delivered by Subsidiary and constitutes the
legal, valid and binding obligation of Subsidiary in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights or
remedies generally. Neither the execution, delivery or performance of
this Agreement nor the consummation of the transactions contemplated
hereby is prohibited by, or requires Subsidiary to obtain any consent,
authorization, approval or registration under, any law, rule or
regulation, other than as contemplated hereby, or any judgment, order,
writ, injunction or decree, which is binding on Subsidiary or the terms
of any contract to which Subsidiary is a party.
5. REPRESENTATIONS AND WARRANTIES OF KINGS. Kings represents and
warrants to Pilot and Subsidiary as follows:
(a) ORGANIZATION. Kings is a company duly organized, validly
existing and in good standing under the laws of Delaware and has all
requisite corporate power and authority to carry on its business as now
being conducted.
(b) NECESSARY AUTHORIZATION AND APPROVAL. Kings has full
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All acts and other
proceedings required to be taken by or on the part of Kings to
authorize it to carry out this Agreement and the transactions
contemplated hereby have been duly and properly taken. This Agreement
has been duly executed and delivered by Kings and constitutes the
legal, valid and binding obligation of Kings in accordance with its
terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights or
remedies generally. Neither the execution, delivery or performance of
this Agreement nor the consummation of the transactions contemplated
hereby is prohibited by, or requires Kings to obtain any consent,
authorization, approval or registration under, any law, rule or
regulation, other than as contemplated hereby, or any judgment, order,
writ, injunction or decree, which is binding on Kings or the terms of
any contract to which Kings is a party.
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6. AGREEMENTS OF PILOT, SUBSIDIARY AND KINGS.
(a) INITIAL CASH PURCHASE PRICE BORAGE CONCENTRATE. Kings
agrees that (i) upon its receipt of the Cash Purchase Price, title to
$200,000 of BC shall pass to Subsidiary (the "Initial CPP Borage
Concentrate"), (ii) Kings shall retain possession of the Initial CPP
Borage Concentrate as bailee of Subsidiary and treat the Initial CPP
Borage Concentrate with the same degree of care Kings provides to
borage concentrate owned by Kings, and (iii) Kings shall deliver the
Initial CPP Borage Concentrate to a location designated by Pilot, in
writing, as soon as reasonably practical; provided, however, that until
delivered to such location by Kings, Kings shall retain the risk of
loss of the Initial CPP Borage Concentrate. Pilot may request, in
writing and from time to time, Kings to deliver Initial CPP Borage
Concentrate, having a value equal to $200,000, to Pilot at ▇▇▇ ▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Delivery
Address"). Upon receipt of any such request, Kings shall (i) promptly
ship the amount of Initial CPP Borage Concentrate requested to Pilot at
the Delivery Address and (ii) notify Pilot of the date of shipment. The
purchase price for the Initial CPP Borage Concentrate shipped to Pilot
pursuant to this Section 6(a) shall be $96.00 per kilogram, ex works.
(b) RESTRICTED SHARES BORAGE CONCENTRATE. Kings agrees that
(i) upon its receipt of notice from Pilot that Pilot wants to receive
delivery of BC based upon Pilot's delivery of the Restricted Shares
(the "RS Borage Concentrate"), title to BC, having a value equal to the
value of the requested RS Borage Concentrate to be delivered to Pilot,
shall pass to Pilot, (ii) Kings shall treat the RS Borage Concentrate
with the same degree of care King provides to borage concentrate owned
by Kings, and (iii) Kings shall deliver the RS Borage Concentrate to
the Delivery Address, as soon as reasonably practical; provided,
however, that until delivered to such location by Kings, Kings shall
retain the risk of loss of the RS Borage Concentrate. Upon receipt of
any such request, Kings shall (i) promptly ship the amount of RS Borage
Concentrate requested to Pilot at the Delivery Address and (ii) notify
Pilot of the date of shipment. The purchase price for the RS Borage
Concentrate shipped to Pilot pursuant to this Section 6(b) shall be
$96.00 per kilogram, ex works. Kings agrees that Pilot shall be
entitled to receive delivery of RS Borage Concentrate having a value of
$1,644,863 (i.e., 16,448 kilograms) pursuant to this Section 6(b).
(c) ADDITIONAL CASH PURCHASE PRICE BORAGE CONCENTRATE. Kings
agrees that (i) upon its receipt of additional cash from Pilot pursuant
to Section 6(f) or (h) of this Agreement, title to BC equal to such
additional cash shall pass to Subsidiary (the "Additional CPP Borage
Concentrate"), (ii) Kings shall retain possession of the Additional CPP
Borage Concentrate as bailee of Subsidiary and treat the Additional CPP
Borage Concentrate with the same degree of care Kings provides to
borage concentrate owned by Kings, and (iii) Kings shall deliver the
Additional CPP Borage Concentrate to the Delivery Address, as soon as
reasonably practical; provided, however, that until delivered to such
location by Kings, Kings shall retain the risk of loss of the
Additional CPP Borage Concentrate. Upon receipt of any such request,
Kings shall (i) promptly ship the amount of Additional CPP Borage
Concentrate requested to Pilot at the Delivery
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Address and (ii) notify Pilot of the date of shipment. The purchase
price for the Additional CPP Borage Concentrate shipped to Pilot
pursuant to this Section 6(c) shall be $96.00 per kilogram, ex works.
(d) UNDELIVERED BORAGE CONCENTRATE. Kings agrees that, on and
after the Closing Date, Kings shall (i) retain in its possession and/or
under its control sufficient amounts of BC (the "Undelivered Borage
Concentrate") so that it can deliver Undelivered Borage Concentrate
promptly to Pilot in accordance with Sections 6(a), (b) and (c) of this
Agreement and (ii) not grant a security interest in, or lien upon, the
Undelivered Borage Concentrate retained or controlled by Kings in
accordance with clause (i) of this sentence.
(e) PILOT'S DELIVERY RIGHTS. Pilot shall have the right to
advise Kings, in writing, at any time between the Closing Date and
September 10, 2003, that Pilot wants to receive delivery of Undelivered
Borage Concentrate and, until delivered by Kings, Kings shall retain
title to, and the risk of loss of, the Undelivered Borage Concentrate.
(f) ADDITIONAL PAYMENTS. Pilot agrees that it shall promptly
pay to Kings 50% of any monies (other than (i) grants or (ii) loans
made to Pilot by Academy Venture Fund LLC or its affiliates in an
amount not to exceed $240,000) raised by Pilot after the execution and
delivery of this Agreement by the parties hereto; provided, however,
that Pilot's aggregate payment of monies pursuant to this sentence
shall not exceed $1,075,000.
(g) PILOT WEEKLY REPORT. By Tuesday of each week, commencing
on the first Tuesday after the execution and delivery of this Agreement
by the parties hereto, Pilot shall deliver a written report to Kings
(i) summarizing Pilot's Private Placement fundraising results from the
immediately prior week and (ii) summarizing the status of Pilot's
discussions with potential strategic partners as of the end of the
immediately prior week (the "Report"). Kings understands that the
Report shall contain material, non public information and Kings agrees
to keep the Report confidential. Kings further agrees that neither it
nor any of its affiliates can buy or sell Pilot Common Stock until the
information contained in the Report becomes publicly available or Pilot
advises Kings, in writing, that the information contained in the Report
shall no longer be considered material, non public information. Subject
to any applicable confidentiality requirements, Pilot will forward copy
correspondence relating to the subject matter discussed in the Report
to Kings upon reasonable request.
(h) STRATEGIC TRANSACTION. If Pilot (i) closes a strategic
transaction with a third party resulting in Pilot having a market
capitalization of $100 million or greater and (ii) completes a
financing resulting in Pilot receiving net proceeds of at least
$15,000,000, Pilot shall promptly pay off outstanding sums owing to
Kings.
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(i) OPTION AGREEMENT; CONFIDENTIALITY AND COOPERATION
AGREEMENT. Upon execution and delivery of this Agreement by the parties
hereto, (x) Subsidiary and Kings agree to execute and deliver the
Option Agreement, (y) Pilot and Kings agree to execute and deliver the
Confidentiality and Cooperation Agreement (the "Confidentiality
Agreement") attached hereto as Appendix B and (z) Pilot, Subsidiary and
Kings agree that this Agreement shall not become effective until
Subsidiary and Kings have executed and delivered the Option Agreement
and Pilot and Kings have executed and delivered the Confidentiality
Agreement.
(j) CONCENTRATE PURCHASE ORDER AMENDMENT AND SATISFACTION;
SEED PURCHASE ORDER REPLACEMENT. Notwithstanding anything to the
contrary in the Concentrate Purchase Order, the Seed Purchase Order or
the BEO Agreement, Kings agrees that, effective upon the Closing, (i)
the Concentrate Purchaser Order shall be the sole purchase order which
evidences monetary obligations Pilot owes to Kings, (ii) the monetary
obligations Pilot owes to Kings under the Concentrate Purchase Order,
including accrued interest, as of the Closing, shall be $2,844,863,
(iii) $1,644,863 of Pilot's $2,844,863 monetary obligation under the
Concentrate Purchase Order shall be met by Pilot's delivery of the
523,288 Restricted Shares to Kings on the Closing Date, and (iv) upon
Kings receipt of $1,275,000 in cash and 523,288 Restricted Shares from
Pilot, neither Pilot nor Subsidiary shall have any further monetary
obligations owed to Kings or any of Kings' affiliates under the
Concentrate Purchase Order. Pilot, Subsidiary and Kings agree that,
effective upon the Closing, the Seed Purchase Order shall be replaced
in its entirety by the Option Agreement and the Seed Purchase Order
shall be of no further force and effect. Pilot, Subsidiary and Kings
agree that any purchase of Borage Products, as defined in the Option
Agreement, pursuant to the Option Agreement shall be made in accordance
with the terms and conditions of the BEO Agreement.
(k) REPURCHASE OF RESTRICTED SHARES. From the Closing Date
through September 12, 2003, (i) Pilot shall have the right to
repurchase, from time to time, all or a portion of the Restricted
Shares held by Kings at a purchase price of $3.00 per Restricted Share
(the "Principal Amount"), plus accrued interest on the Principal Amount
calculated from the Closing Date through the date of such repurchase at
the Stated Rate (as defined below), payable in cash, and (ii) Kings may
only sell the Restricted Shares to Pilot or Pilot's designee. Between
September 13, 2003 and September 17, 2003, Kings shall have the right
to notify Pilot, in writing, that Pilot must repurchase any Restricted
Shares, at $3.00 per Restricted Share, plus accrued interest on the
Principal Amount calculated from the Closing Date through the date of
such repurchase at the Stated Rate, which Pilot and/or its designee has
not purchased from Kings on or prior to September 12, 2003 (the
"Remaining Restricted Shares"). Upon receipt of such notice from Kings,
(i) Pilot shall have the obligation to purchase from Kings all
Remaining Restricted Shares held by Kings, at $3.00 per Remaining
Restricted Share, plus accrued interest on the Principal Amount
calculated from the Closing Date through the date of such repurchase at
the Stated Rate, payable in cash, by no later than September 24, 2003
and (ii) Kings shall have the obligation to sell to Pilot all Remaining
Restricted Shares held by Kings, at $3.00 per Remaining Restricted
Share, plus accrued interest on the Principal Amount
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calculated from the Closing Date through the date of such repurchase at
the Stated Rate, payable in cash, by no later than September 24, 2003.
If Pilot and/or its designee shall not purchase all of the Remaining
Restricted Shares held by Kings by September 24, 2003, Kings shall
thereafter have the right to sell all Remaining Restricted Shares to
one or more third parties, in private transactions or on the open
market, subject only to compliance with applicable securities laws. If
Remaining Restricted Shares are sold by Kings to a third party on or
prior to March 31, 2004 at a price per share less than $3.00 per
Remaining Restricted Share (the "Price Per Share"), plus accrued
interest on the Principal Amount calculated from the Closing Date
through the date of such sale at the Stated Rate, Pilot shall be
obligated to pay to Kings the difference between what Kings would have
received had it sold such Remaining Restricted Shares at a Price Per
Share of $3.00, plus accrued interest on the Principal Amount
calculated from the Closing Date through the date of such sale at the
Stated Rate, and the Price Per Share that Kings actually received for
such Remaining Restricted Shares (the "Shortfall Amount"); provided,
however, if Kings is unable to sell all Remaining Restricted Shares by
March 31, 2004 because of the lack of a liquid market for Pilot common
stock or Pilot's failure to obtain the effectiveness of the
Registration Statement contemplated in Section 6(l) of, and Schedule A
to, this Agreement or to maintain such effectiveness at all times
during the period from September 24, 2003 through March 31, 2004 or to
provide Kings with a current and usable prospectus under such
Registration Statement at any time during such period, then so long as
Kings is continuing to use commercially reasonable efforts to sell any
Remaining Restricted Shares then held by it and so notifies Pilot,
Pilot's obligation to pay the Shortfall Amount to Kings with respect to
such Remaining Restricted Shares shall continue in effect. If Remaining
Restricted Shares are sold by Kings to a third party on or prior to
March 31, 2004 at a Price Per Share of greater than $3.00, plus accrued
interest on the Principal Amount calculated from the Closing Date
through the date of such sale at the Stated Rate, Kings shall be
obligated to pay to Pilot the difference between what Kings would have
received had it sold such Remaining Restricted Shares at a Price Per
Share of $3.00, plus accrued interest on the Principal Amount
calculated from the Closing Date through the date of such sale at the
Stated Rate, and the Price Per Share that Kings actually received for
such Remaining Restricted Shares (the "Excess Amount"). If Pilot's
obligation to pay any Shortfall Amount shall continue after March 31,
2004 as contemplated above, King's obligation to pay any Excess Amount
shall likewise continue for the same period. With respect to any
Remaining Restricted Shares sold by Kings prior to the last day of any
calendar month ending during the period between September 24, 2003
through March 31, 2004 (or such longer period for which the obligation
to pay a Shortfall Amount and Excess Amount is extended as provided
above), Kings shall notify Pilot of the aggregate Shortfall Amount or
Excess Amount with respect to such sold Remaining Restricted Shares not
later than the fifth business day of the next following month and such
Shortfall Amount or Excess Amount shall be payable in cash by the party
required to pay same not later than five business days after the date
of such notice. For purposes of this Section 6(k), "Stated Rate" means
(i) if on the date(s) that Pilot repurchases the Restricted Shares, or
such other date(s) as Kings sells the Remaining Restricted Shares to a
party other than Pilot (or the next previous business day if the date
the Restricted Shares are repurchased by Pilot or the Remaining
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Restricted Shares are sold to a third party falls on a non-business
day), the purchase price is $3.00 or greater per Restricted Share or
Remaining Restricted Share, as the case may be, a rate of 1% above the
Bank of England Minimum Lending Rate in effect on the date(s) that
Pilot repurchases the Restricted Shares, or such other date(s) as Kings
sells the Remaining Restricted Shares to a party other than Pilot (or
the next previous business day if the date the Restricted Shares are
repurchased by Pilot or the Remaining Restricted Shares are sold to a
third party falls on a non-business day) and (ii) if on the date(s)
that Pilot repurchases the Restricted Shares, or such other date(s) as
Kings sells the Remaining Restricted Shares to a party other than Pilot
(or the next previous business day if the date the Restricted Shares
are repurchased by Pilot or the Remaining Restricted Shares are sold to
a third party falls on a non-business day), the purchase price is less
than $3.00 per Restricted Share or Remaining Restricted Share, as the
case may be, 50% of the rate calculated in accordance with clause (i)
of this sentence.
(l) REGISTRATION OF REMAINING RESTRICTED SHARES. If by July 1,
2003, Pilot has not purchased from Kings a number of Restricted Shares
which would enable Kings to sell under Securities Act Rule 144 ("Rule
144") the Remaining Restricted Shares on September 24, 2003, Pilot
shall commence the preparation of a Registration Statement with respect
to the Remaining Restricted Shares (excluding the number of Remaining
Restricted Shares which could be sold by Kings on September 24, 2003
pursuant to Rule 144) owned by Kings. The parties' rights and
obligations with respect to such Registration Statement and certain
related matters are set forth in Schedule A to this Agreement, which is
incorporated by reference herein.
(m) BORAGE CONCENTRATE SHELF LIFE. Borage concentrate has a
minimum shelf life of twelve months from the date of manufacture. The
Initial CPP Borage Concentrate, RS Borage Concentrate and Additional
CPP Borage Concentrate (collectively, the "Subsidiary Borage
Concentrate") was manufactured on January 2, 2002. Any deterioration in
the Subsidiary Borage Concentrate that occurs after January 2, 2003
will be for the account of Subsidiary unless Kings took action with
respect to other borage concentrate under its possession or control
during the period from January 2, 2002 to January 2, 2003 and if
similar action had been taken by Kings with respect to the Subsidiary
Borage Concentrate, the deterioration would not have occurred.
7. CONDITIONS OF CLOSING.
(a) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF KINGS
HEREUNDER. All obligations of Kings under this Agreement are subject to
the representations and warranties of Pilot and Subsidiary contained in
this Agreement being true on and as of the Closing Date with the same
effect as if said representations and warranties had been made on and
as of the Closing Date; Pilot and Subsidiary shall have performed and
complied with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing; and
Kings shall have been furnished with a certificate of Pilot and
Subsidiary, dated the Closing Date, certifying in such detail as Kings
may reasonably request, to the fulfillment of the foregoing conditions.
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(b) CONDITION PRECEDENT TO THE OBLIGATIONS OF PILOT AND
SUBSIDIARY HEREUNDER. All obligations of Pilot and Subsidiary under
this Agreement are subject to the representations and warranties of
Kings contained in this Agreement being true on and as of the Closing
Date with the same effect as if said representations and warranties had
been made on and as of the Closing Date; Kings having performed and
complied with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing; and
Pilot and Subsidiary shall having been furnished with a certificate of
an officer of Kings, dated the Closing Date, certifying in such detail
as Pilot or Subsidiary may reasonably request, to the fulfillment of
the foregoing conditions.
8. WAIVER OR MODIFICATION OF AGREEMENT. No provision of this
Agreement may be amended, waived or otherwise modified except by an instrument
in writing signed by the parties hereto; provided, however, that any party
hereto which is entitled to the benefits of this Agreement may, and has the
right to, waive or modify in writing any term or condition hereof for his or its
benefit at any time on or prior to the Closing Date.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
10. NOTICES, ETC. All notices, requests, demands and other
communications hereunder shall be given in writing (which includes telex,
telecopier, facsimile and other wire transmission):
(a) if to or Pilot or Subsidiary, to
--------------------------------
Pilot Therapeutics Holdings, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Street, ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. "Ski" ▇▇▇▇▇▇▇, III PhD.
President, Chief Executive Officer
and Chief Scientific Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
---------------
Hunton & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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(b) if to Kings, to
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Kings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
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Kings, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
Fax: ▇▇▇-▇▇▇▇-▇▇▇▇
(or to such other address as such person shall specify by notice hereunder), and
shall be deemed to be effective when given in such manner, provided, that any
notice given other than in writing by registered or certified mail shall be
confirmed in writing by registered or certified mail.
11. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13. SUCCESSORS AND ASSIGNS. The respective rights and obligations
of the parties hereto shall not be assignable without the prior written consent
of the other parties. This Agreement shall be binding upon and inure to the
benefit of the heirs, distributees, successors and assigns of the parties
hereto. Except as expressly stated in this Agreement, nothing herein contained
is intended to confer upon any person, other than the parties hereto and their
respective permitted successors, assigns and nominees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
14. EFFECT OF AGREEMENT. Kings, Pilot and Subsidiary agree that if
there shall be any inconsistency between the terms of this Agreement and the
terms of the Concentrate Purchase Order and/or the BEO Agreement, the terms of
this Agreement shall control.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PILOT THERAPEUTICS HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III Ph.D.
--------------------------------------
Name: ▇▇▇▇▇ ▇. "Ski" ▇▇▇▇▇▇▇ III, PhD.
Title: President, Chief Executive Officer
and Chief Scientific Officer
PILOT THERAPEUTICS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III Ph.D.
--------------------------------------
Name: ▇▇▇▇▇ ▇. "Ski" ▇▇▇▇▇▇▇ III, PhD.
Title: President, Chief Executive Officer
and Chief Scientific Officer
KINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
11
APPENDIX A
OPTION AGREEMENT
KINGS, INC.
WESTON CENTRE
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
September , 2002
Pilot Therapeutics, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Street, ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. "Ski" ▇▇▇▇▇▇▇ III, PhD.
President, Chief Executive Officer
and Chief Scientific Officer
Re: Option Agreement
Dear Ski:
Kings, Inc. ("Kings") and Pilot Therapeutics, Inc. ("Pilot")
acknowledge and agree that Kings has in its possession and/or under its control
approximately 900 metric tons of borage seed ("Seed") and/or Seed converted into
borage oil ("Oil"). Seed and Oil are collectively referred to herein as "Borage
Products". Kings agrees that Pilot shall have the option (the "Option") to
purchase all or a portion of the Borage Products from Kings during the period
from January 1, 2003 to December 31, 2005 (the "Option Period") by providing
written notice (the "Exercise Notice") of Pilot's exercise of the Option to
Kings at least ninety days prior to the Borage Products estimated delivery date.
The Exercise Notice shall specify the estimated Borage Products delivery date
and delivery location. The purchase price for any (i) Seed purchased by Pilot
pursuant to an Exercise Notice shall be $2,948 per metric ton and (ii) Oil
purchased by Pilot pursuant to an Exercise Notice shall be as calculated in the
Agreement for the Supply of Borage and Echium Oil, dated April 14, 2002, between
Kings and Pilot (the "Supply Agreement"). All Borage Products delivered by Kings
to Pilot pursuant to this Option shall meet the Quality Requirements, as
specified in the Supply Agreement.
Kings agrees that during the Option Period it shall provide
Pilot with written notice of any proposed sale of Borage Products (a "Proposed
BP Sale") to a third party (the "Proposed BP Sale Notice"). The Proposed BP Sale
Notice shall specify all of the material terms and conditions of the Proposed BP
Sale, including, price, quantity and target delivery dates. Pilot shall have the
right to advise Kings, in writing, within three business days of Pilot's receipt
of the Proposed BP
12
Sale Notice, that it wants to purchase all or a portion of the Borage Products
specified in the Proposed BP Sale Notice on the terms set forth in the Proposed
BP Sale Notice (the "Pilot Purchase Notice"). Upon Kings receipt of a Pilot
Purchase Notice, Kings (i) shall sell and deliver to Pilot the Borage Products
specified by Pilot in the Pilot Purchase Notice and (ii) may sell the Borage
Products specified in the Proposed BP Sale Notice not purchased by Pilot to the
third party on the same terms and conditions set forth in the Proposed BP Sale
Notice within thirty days of the date of the Proposed BP Sale Notice. If Kings
does not receive a Pilot Purchase Notice within three business days of Pilot's
receipt of a Proposed BP Sale Notice, Kings may sell the Borage Products
specified in the Proposed BP Sale Notice to a third party on the same terms and
conditions set forth in the Proposed BP Sale Notice within thirty days of the
date of the Proposed BP Sale Notice. If Kings does not sell the Borage Products
specified in the Proposed BP Sale Notice to a third party within thirty days of
the date of the Proposed BP Sale Notice, Kings shall be required to comply with
the notice and sale provisions, and Pilot shall have the purchase rights,
specified in this paragraph before Kings may sell the Borage Products originally
specified in the Proposed BP Sale Notice to a third party.
Subject to the immediately preceding paragraph, Pilot agrees
that if Pilot has not delivered an Exercise Notice with respect to all Borage
Products on or before the last day of the Option Period, (x) this Option shall
terminate, on the last day of the Option Period (the "Third Party Permitted Sale
Date"), with respect to all Borage Products not subject to a previously
delivered Exercise Notice ("Unpurchased Borage Products") and (y) Kings shall
have the right, after the Third Party Permitted Sale Date, to sell Unpurchased
Borage Products to a third party and have no further obligations to Pilot with
respect to Unpurchased Borage Products hereunder.
Pilot agrees that it shall not purchase any borage seed and/or
borage oil from a third party during the Option Period unless it has delivered
to Kings an Exercise Notice with respect to all of the Borage Products remaining
in Kings' possession and/or under its control prior to any Pilot purchase of
borage seed and/or borage oil from such third party.
Pilot and Kings agree that this Option shall replace in its
entirety the Purchase Order, dated November 27, 2001, relating to borage seed
commitment for future Crossential GLA and borage crop commitment for future
Crossential GLA (the "Purchase Order") and the Purchase Order shall be of no
further force and effect as of the date hereof.
Pilot and Kings agree that any purchase of Borage Products
pursuant to this Option shall be made in accordance with the terms and
conditions of the Supply Agreement.
13
Please sign in the space indicated below to confirm Pilot's
acceptance of the terms of the Option set forth herein.
Very truly yours,
KINGS, INC.
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
ACCEPTED AND AGREED as
of the day of September 2002.
PILOT THERAPEUTICS, INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇ ▇. "Ski" ▇▇▇▇▇▇▇ III, PhD.
Title: President, Chief Executive Officer
and Chief Scientific Officer
APPENDIX B
CONFIDENTIALITY AND COOPERATION AGREEMENT
In order to facilitate the delivery of the Report, as defined in
Section 6(g) of the Purchase Agreement, dated as of September 1, 2002, among
Pilot Therapeutics Holdings, Inc. ("Pilot"), Pilot Therapeutics, Inc. and Kings,
Inc. (the "Company"), Pilot and the Company agree:
1. CONFIDENTIALITY. As a condition to Pilot's delivery of the Report to
the Company, the parties agree that for a period of three (3) years from the
date hereof, all information relating to either of them and their subsidiaries
furnished by or on behalf of a party to another party or its Representatives (as
defined below), whether prior to or after the execution of this Agreement and
irrespective of the form of communication, or learned by any party in connection
with its visits to another party's facilities, in connection with the Company's
consideration of the Report (such information, together with notes, memoranda,
summaries, analyses, compilations and other writings relating thereto or based
thereon prepared by the party or its Representatives being referred to herein as
the "Material" will be kept strictly confidential; provided, however, that the
Material may be disclosed to any of the parties' Representatives who need to
know such information (it being understood that such Representatives will be
informed of the contents of this Agreement and that, by receiving such
information, such Representatives are agreeing to be bound by this Agreement).
The term "Material" does not include information which (i) is or becomes
generally available to the public other than as a result of disclosure by a
party or its Representatives or (ii) becomes available to a party or its
Representatives on a non-confidential basis from a source other than the other
party or its affiliates or Representatives, provided that neither the party nor
any of its Representatives is aware that such source is under an obligation
(whether contractual, legal or fiduciary) to that party to keep such information
confidential. For purposes hereof, the "Representatives" of any entity means
such entity's directors, officers, employees, legal and financial advisors,
accountants and other agents and representatives, and also includes any bank of
other financial institution or institutional investor who is considering
providing financing to Pilot or the Company. Each party will be responsible for
any breach of this Agreement by any of its Representatives and agrees to take
all reasonable measures to restrain its Representatives from prohibited or
unauthorized disclosure or use of Material.
In addition, each party agrees that, except with the prior consent of
the other party or as required or permitted by this Agreement, it will not, and
it will direct its Representatives not to, make any release to the press or
other public disclosure concerning either (i) the existence of the Escrow
Agreement, this Agreement or that the Material has been made available to such
other party or (ii) in the event that a party or any of its Representatives
engages in discussions or negotiations with such other party or its
Representatives, the fact that discussions are taking place concerning the
Report, including the status of the Private Placement, as defined in the Escrow
Agreement, except for such public disclosure as may be necessary, in the written
opinion of a party's outside counsel, for the party not to be in violation of or
default under any applicable law, regulation or governmental order. If a party
proposes to make any disclosure based upon such an opinion, the party will
deliver a copy of such opinion to the other party together with the text of the
proposed disclosure as far in advance of its disclosure as is reasonably
practicable,
and will in good faith consult with and consider the suggestions of such other
party and its Representatives concerning the nature and scope of the information
proposed to be disclosed.
If a party or any of its Representatives is requested in any judicial
or administrative proceeding or by any governmental or regulatory authority to
disclose any Material, it will: (i) give the other party prompt notice of such
request so that such other party may seek an appropriate protective order; and
(ii) consult with such party as to the advisability of taking legally available
steps to resist or narrow such a request. The disclosing party will cooperate
fully with the other party in obtaining such an order. If in the absence of a
protective order the disclosing party is nonetheless compelled to disclose
Material, the other party agrees that it may make such disclosure without
liability hereunder, provided that it gives the other party written notice of
the information to be disclosed as far in advance of its disclosure as is
practicable and, upon the other party's request and at its expense, then the
disclosing party will use its best efforts to obtain reasonable assurances that
confidential treatment will be accorded to such information.
Notwithstanding the return or destruction of the Material, a party and
its Representatives will continue to be bound by the obligations hereunder.
2. MISCELLANEOUS. This Agreement: (i) contains the sole and entire
agreement between among the parties with respect to the subject matter hereof;
(ii) may be amended, modified or waived only by a separate written instrument
duly executed by or on behalf of the party against whom such amendment,
modification or waiver is to be enforceable; and (iii) shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the conflicts of laws principles thereof.
2
The parties acknowledge and agree that money damages would not be a
sufficient remedy for any breach of any provision of this Agreement by the other
party, and that in addition to all other remedies which any party hereto may
have, each party will be entitled to specific performance and injunctive or
other equitable relief as a remedy for any such breach. No failure or delay by
any party hereto in exercising any right, power or privilege hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
PILOT THERAPEUTICS HOLDINGS, INC.
-----------------------------------
▇▇▇▇▇ ▇. "Ski" ▇▇▇▇▇▇▇, III, PhD.
President, Chief Executive Officer
and Chief Scientific Officer
KINGS, INC.
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
3
SCHEDULE A
REGISTRATION PROCEDURES
1. Effective Registration. If by July 1, 2003, Pilot has not
purchased from Kings a number of Restricted Shares which would enable Kings to
sell under Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act") the Remaining Restricted Shares on September 22, 2003, then as promptly as
practical after July 1, 2003, but no later than August 1, 2003, Pilot will file
with the Securities and Exchange Commission ("SEC") a registration statement on
any form for which Pilot then qualifies and which form shall permit the resale
of the Remaining Restricted Shares under the Securities Act in an offering to be
made on a continuous basis pursuant to Rule 415 of the Securities Act (the
"Registration Statement"). Pilot shall use its reasonable best efforts to cause
the Registration Statement to become and remain continuously effective for a
period ending on the earliest of (i) one (1) year; (ii) the date occurring after
March 31, 2004 that Kings notifies Pilot that it no longer intends to use
commercially reasonable efforts to dispose of the Remaining Restricted Shares as
contemplated by Section 6(k) of the Purchase Agreement; or (iii) the date when
all of the Remaining Restricted Shares have been disposed of by Kings in
accordance with the plan of distribution set forth in the Registration
Statement, as amended, or prospectus or supplement thereto (but in any event not
before the expiration of any longer period required under the Securities Act).
2. Registration Procedures. In connection with the registration
contemplated by Section 1 of this Schedule A:
(a) Not less than five (5) days before filing the Registration
Statement or amendment thereto or prospectus or any supplements thereto, Pilot
will furnish to Kings' counsel copies of all such documents proposed to be
filed, which documents will be subject to review and comments of such counsel,
and Pilot will not file any Registration Statement or amendment thereto or any
prospectus or any supplement thereto to which Kings or any underwriters shall
reasonably object.
(b) Pilot will ensure that: (i) the Registration Statement and
any amendment thereto and any prospectus forming part thereof and any amendment
or supplement thereto (and each report or other document incorporated therein by
reference) complies in all material respects with the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
respective rules and regulations thereunder; (ii) the Registration Statement and
any amendment thereto does not, when it becomes effective, and will not, for so
long as it remains effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and (iii) any prospectus forming part of
the Registration Statement, and any amendment or supplement to such prospectus,
does not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(c) Pilot will notify Kings of the effectiveness of the
Registration Statement filed hereunder and, for as long as it remains effective,
prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to comply with the Securities Act
and, as may be necessary to keep the Registration Statement effective in
accordance with the terms of Section 1 of this Schedule A, and will comply with
the provisions of the Securities Act with respect to the disposition of the
Remaining Restricted Shares covered by the Registration Statement in accordance
with the intended method or methods of distribution by Kings set forth in the
Registration Statement, as amended, or prospectus or supplement thereto.
(d) Pilot will furnish to Kings such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus(es) included in the Registration Statement (including each
preliminary prospectus) as Kings and each underwriter, if any, of the Remaining
Restricted Shares shall reasonably request.
(e) Pilot will use commercially reasonable efforts to (i)
register or qualify the Remaining Restricted Shares under such other securities
or blue sky laws of such jurisdictions in the United States as Kings reasonably
requests and to keep such registration or qualification in effect for so long as
such Registration Statement remains in effect, and to take any other action
which may be reasonably necessary or advisable to enable Kings to consummate the
disposition in such jurisdictions of the Remaining Restricted Shares and (ii)
cause such Remaining Restricted Shares to be registered with or approved by such
other Persons (as defined below) as may be necessary by virtue of the business
and operations of Pilot, to enable Kings to consummate the disposition of the
Remaining Restricted Shares; provided, that Pilot will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 2(e); (ii) subject itself
to taxation in any such jurisdiction other than taxation arising with respect to
the registration of securities; or (iii) consent to general service of process
in any such jurisdiction. As used in this Schedule A, "Person" means an
individual, corporation, partnership, limited liability company, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
(f) Pilot will promptly notify Kings, at any time when a
prospectus relating to the Registration Statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect, contains
an untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and, at the request of
Kings, Pilot will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of the Remaining Restricted Shares,
such prospectus will not contain any untrue statement of a material fact or omit
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made (and Kings shall suspend the use of the prospectus until the requisite
changes thereto have been made).
(g) Pilot will use commercially reasonable efforts to cause
all the Remaining Restricted Shares to be listed on each securities exchange or
market on which Pilot's common stock is then listed.
(h) Pilot will provide a transfer agent and registrar for all
the Remaining Restricted Shares not later than the effective date of the
Registration Statement.
(i) Pilot will otherwise use and shall continue to use
commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC, and make and shall continue to make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first
(1st) day of Pilot's first full calendar quarter after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
(j) Pilot will advise Kings promptly after Pilot receives
notice or obtains knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of the Registration Statement or the initiation
or threatening of any proceeding for such purpose and promptly use commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if any such stop order shall be issued (and, if such stop order shall
be issued, Kings shall suspend the use of the prospectus until it shall be
withdrawn).
3. Registration Expenses.
(a) Pilot's Expenses. All expenses incident to Pilot's
performance of or compliance with the undertakings contained in this Schedule A,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, listing fees, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for Pilot and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by Pilot shall
be borne by Pilot.
(b) Kings' Expenses. Notwithstanding anything to the contrary
contained herein or in the Purchase Agreement, Kings shall bear and pay all
underwriting discounts and commissions, brokerage fees and commissions, and
transfer taxes applicable to the Remaining Restricted Shares sold for its
account.
4. Indemnification.
(a) By Pilot. Pilot agrees to indemnify, to the extent
permitted by law, Kings, its managers, officers, directors, employees and each
Person who controls Kings (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses (including, without
limitation, attorneys' fees) ("Liabilities") caused by any untrue or alleged
untrue statement of material fact contained in the Registration Statement,
prospectus or preliminary prospectus, or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
furnished in writing to Pilot by Kings expressly for use therein or caused by
Kings' failure to deliver, if obligated to do so, a copy of the prospectus or
any amendments or supplements thereto after Pilot has furnished Kings with a
sufficient number of copies of the same. Pilot also agrees, to the extent
permitted by applicable law, to indemnify any underwriters of the Remaining
Restricted Shares, their officers, directors, employees and each Person who
controls such underwriters on substantially the same basis as that of the
indemnification of Kings provided in this Section 4(a).
(b) By Kings. Kings shall furnish to Pilot in writing such
information as Pilot reasonably requests for use in connection with the
Registration Statement or prospectus and, to the extent permitted by law, shall
indemnify Pilot, its directors, officers, employees and each Person who controls
Pilot (within the meaning of the Securities Act) against any Liabilities
resulting from any untrue or alleged untrue statement of material fact contained
in the Registration Statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information furnished in writing by
Kings expressly for use in the Registration Statement or prospectus. In no event
shall the liability of Kings under this Section 4(b) be greater in amount than
the dollar amount of the net proceeds received by Kings upon the sale of the
Remaining Restricted Shares giving rise to such indemnification obligation.
(c) Procedure. Any Person entitled to indemnification under
this Schedule A (the "Indemnified Party") will (i) give prompt written notice to
the indemnifying party (the "Indemnifying Party") of any claim with respect to
which it intends to seek indemnification or contribution hereunder and (ii)
permit such Indemnifying Party to assume the defense of such claim with counsel
reasonably satisfactory to the Indemnified Party; provided, however, that the
failure to provide such written notice shall not relieve the Indemnifying Party
of its obligations hereunder except to the extent that such Indemnifying Party
is materially prejudiced or otherwise forfeits substantive rights or defenses by
reason of such failure or any resulting delays; provided, further, however, that
any Indemnified Party shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (A) the
Indemnifying Party has agreed to pay such fees or expenses, or (B) the
Indemnifying Party fails to assume the defense of such claim and employs counsel
reasonably satisfactory to the Indemnified Party or (C) in the reasonable
judgment of the Indemnified Party, based upon advice of its counsel, a conflict
of interest exists between the Indemnified Party and the Indemnifying Party with
respect to such claims (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that the Indemnified Party elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such claim on behalf of
the Indemnified Party). If such defense is not assumed by the Indemnifying
Party, the Indemnifying Party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld). No Indemnifying Party or Indemnified Party will be required to
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability with respect to such
claim or litigation. An Indemnifying Party who is not entitled to, or elects not
to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all Indemnified Parties with respect to
such claim, unless in the reasonable judgment of any such Indemnified Party a
conflict of interest exists between such Indemnified Party and any other of such
Indemnified Parties with respect to such claim, in which event the Indemnifying
Party shall be obligated to pay the fees and expenses of such additional counsel
or counsels.
(d) Contribution. To the extent any indemnification by an
Indemnifying Party provided for in this Section 4 of this Schedule A is
prohibited or limited by law, the Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions which resulted
in such Liabilities, as well as any other relevant equitable considerations;
provided, however, in no event shall Kings be required to contribute an amount
greater than the dollar amount of the net proceeds received by Kings upon the
sale of the Remaining Restricted Shares giving rise to such contribution
obligation. The relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4 of this Schedule A were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(e) Other Indemnification Provisions. The indemnification and
contribution provided for in this Section 4 of Schedule A will remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party or any officer, director, employee or controlling Person of
such indemnified party and will survive the transfer of securities.
5. Rule 144. Pilot covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder or, if Pilot is not required
to file such reports, it will, upon the request of Kings make publicly available
other information so long as necessary to permit sales pursuant to Rule 144
under the Securities Act. Pilot further covenants that it will take such further
action as Kings may reasonably request, all to the extent required from time to
time to enable Kings to sell the Remaining Restricted Shares without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar or successor rule or regulation hereafter
adopted by the SEC. Upon the request of Kings, Pilot will deliver to Kings a
written statement as to whether it has complied with such information and
requirements.