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EXHIBIT 99.1
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF ___________________, 1999
BY AND BETWEEN
ISIS PHARMACEUTICALS, INC.
AND
▇▇▇▇▇▇▇▇ INVESTMENT LIMITED
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TABLE OF CONTENTS
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ARTICLE I - Definitions
Section 1.1 Definitions............................................................1
ARTICLE II - Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock.............................................3
Section 2.2 The Shares.............................................................3
Section 2.3 Registration Statement and Prospectus..................................3
Section 2.4 Purchase Price and Closing.............................................3
ARTICLE III - Representations and Warranties
Section 3.1 Representation and Warranties of the Company...........................3
Section 3.2 Representations and Warranties of the Purchaser.......................11
ARTICLE IV - Covenants
Section 4.1 Securities Compliance.................................................13
Section 4.2 Registration and Listing..............................................13
Section 4.3 Registration Statement................................................13
Section 4.4 Distribution of Common Stock..........................................13
Section 4.5 Compliance with Laws..................................................13
Section 4.6 Keeping of Records and Books of Account...............................13
Section 4.7 Reporting Requirements................................................14
Section 4.8 Intentionally Omitted.................................................14
Section 4.9 Other Agreements......................................................14
Section 4.10 Effective Registration Statement......................................14
Section 4.11 No Stop Orders........................................................14
Section 4.12 Intentionally Omitted.................................................15
Section 4.13 Amendments to the Registration Statement..............................15
Section 4.14 Prospectus Delivery...................................................15
Section 4.15 No Shorting. ........................................................15
ARTICLE V - Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company
to Sell the Shares..................................................16
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close...............................................................17
Section 5.3 Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down and Purchase the Shares.......................18
Section 5.4 Conditions Precedent to the Obligation of the Company
to Issue Shares Upon Exercise of a Call Option......................18
ARTICLE VI - Draw Down Terms; Call Option
Section 6.1 Draw Down Terms.......................................................19
Section 6.2 Purchaser's Call Option...............................................21
ARTICLE VII - Termination
Section 7.1 Termination by Mutual Consent.........................................22
Section 7.2 Other Termination.....................................................22
Section 7.3 Effect of Termination.................................................22
ARTICLE VIII - Indemnification
Section 8.1 General Indemnity.....................................................22
Section 8.2 Indemnification Procedures............................................23
ARTICLE IX - Miscellaneous
Section 9.1 Fees and Expenses.....................................................24
Section 9.2 Specific Enforcement, Consent to Jurisdiction.........................25
Section 9.3 Entire Agreement; Amendment...........................................25
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Section 9.4 Notices...............................................................26
Section 9.5 Waivers...............................................................27
Section 9.6 Headings..............................................................27
Section 9.7 Successors and Assigns................................................27
Section 9.8 Governing Law.........................................................27
Section 9.9 Survival..............................................................27
Section 9.10 Counterparts..........................................................27
Section 9.11 Publicity.............................................................27
Section 9.12 Severability..........................................................28
Section 9.13 Further Assurances....................................................28
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
__________________, 1999 by and among between Isis Pharmaceuticals, Inc., a
Delaware corporation (the "Company") and ▇▇▇▇▇▇▇▇ Investment Limited, a
corporation incorporated in the Commonwealth of The Bahamas as an International
Business Company (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section I.1 Definitions.
(a) "Call Option" shall have the meaning assigned to such term
in Section 6.2 hereof.
(b) "Call Option Notice" shall mean a notice sent to the Company
on the trading day the Purchaser elects to exercise a Call Option.
(c) "Commission Documents" shall have the meaning assigned to
such term in Section 3.1(f) hereof.
(d) "Commission Filings" means the Company's Form 10-K for the
fiscal year ended December 31, 1998, Registration Statement on Form S-3 No.
333-71911, and all other filings made by the Company after the date hereof
pursuant to the Securities Exchange Act of 1934.
(e) "Draw Down Amount" means the actual amount of a Draw Down up
to $3,000,000.
(f) "Draw Down Notice" shall have the meaning assigned to such
term in Section 6.1(k) hereof.
(g) "Draw Down Pricing Period" shall mean a period of eighteen
(18) consecutive trading days following a Draw Down Notice.
(h) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby is
declared effective.
(i) "Material Adverse Effect" shall mean any effect on the
business, operations, properties or financial condition of the Company that is
material and adverse to the Company and its subsidiaries, taken as a whole
and/or any condition, circumstance, or situation that would prohibit the Company
from entering into and performing any of its obligations under this Agreement in
any material respect.
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(j) "Material Change in Ownership" shall mean that the officers
and directors of the Company shall beneficially own in the aggregate less than
2% of the outstanding Common Stock of the Company that the officers and
directors beneficially own as of the date hereof.
(k) "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement, or, if the prospectus
included in the Registration Statement omits information in reliance on Rule
430A under the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "Securities Act"), and such
information is included in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Securities Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b).
(l) "Registration Statement" shall mean the registration
statement on Form S-3, Commission File Number 333-71911 under the Securities
Act, filed with the Securities and Exchange Commission for the registration of
the Shares, as such Registration Statement may be amended from time to time.
(m) "Settlement Date" shall have the meaning assigned to such
term in Section 6.1(b) hereof.
(n) "Shares" shall mean, collectively, the shares of Common Stock
of the Company being subscribed for hereunder and those shares of Common Stock
issuable to the Purchaser upon exercise of the Call Option.
(o) "Threshold Price" is the lowest VWAP at which the Company
will sell Shares during each Draw Down Pricing Period.
(p) "Total Value" shall mean the product of the VWAP and the
total volume of the shares of Common Stock traded on NASDAQ on the day the Call
Option Notice is issued as reported by Bloomberg Financial LP using the AQR
function.
(q) "VWAP" shall mean the daily volume weighted average price
(based on a trading day from 9:30 a.m. to 4:00 p.m.) of the Company on NASDAQ
(or any successor thereto) as reported by Bloomberg Financial LP using the AQR
function.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section II.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to $144,000,000 of the
Company's common stock, $.001 par value per share (the "Common Stock"), based on
up to twenty-four (24) Draw Downs of up to $3,000,000 per Draw Down, and Call
Options which may be exercised during any Draw Down Pricing Period of up to
$3,000,000 per Call Option. In no event shall the amount of Common Stock
purchased by the Purchaser exceed $3,000,000 per Draw Down or $3,000,000 per
Call Option.
Section II.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, subject to Section 4.5(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call Options
requested under this Agreement.
Section II.3 Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act, the
Registration Statement, including a prospectus subject to completion relating to
the Shares.
Section II.4 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser, agrees to purchase that number of the Shares to be issued in
connection with each Draw Down and exercise of each Call Option. The closing
under this Agreement shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Closing") at
10:00 a.m. E.S.T. on (i) March __, 1999, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Closing Date").
Each party shall deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section III.1 Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial
statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the
"Form 10-Q"), or on Schedule 3.1(a) attached hereto. The Company and each such
subsidiary 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 or property owned by it makes such qualification necessary except for
any jurisdiction in which the failure to be so qualified will not have a
material adverse effect on the Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Section 4.5(b), no further consent or authorization of the Company or its Board
of Directors or stockholders is required. This Agreement has been duly executed
and delivered by the Company. This Agreement constitutes, or shall constitute
when executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company
and the shares thereof issued and outstanding as of the date hereof are set
forth in the Registration Statement or on Schedule 3.1(c) attached hereto. All
of the outstanding shares of the Company's Common Stock have been duly and
validly authorized, and are fully paid and nonassessable. Except as set forth in
this Agreement or as set forth in the Registration Statement, the Commission
Documents or the Commission Filings or on Schedule 3.1(c) attached hereto, as of
the date hereof, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company.
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Furthermore, except as set forth in this Agreement, the Registration Statement,
the Commission Documents or the Commission Filings or on Schedule 3.1(c)
attached hereto, as of the date hereof, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as described in the
Registration Statement, the Commission Documents or the Commission Filings, or
on Schedule 3.1(c) attached hereto, as of the date hereof, the Company is not a
party to any agreement granting registration rights to any person with respect
to any of its equity or debt securities. Except as set forth in the Registration
Statement, the Commission Documents or the Commission Filings or on Schedule
3.1(c) attached hereto, as of the date hereof, the Company is not a party to,
and it has no knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of the Company. Except as set forth in the
Registration Statement, the Commission Documents or the Commission Filings or on
Schedule 3.1(c) attached hereto, the offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable federal and state securities laws,
and no stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect on the Company's financial condition
or operating results. The Company has furnished or made available to the
Purchaser true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof (the "Articles"), and the Company's Bylaws as in
effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. Except as disclosed on Schedule 3.1(e) attached
hereto, the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated therein do
not (i) violate any provision of the Company's Articles or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or
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regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Securities and
Exchange Commission (the "Commission"), or Nasdaq subsequent to the Closing,
and, any registration statement which may be filed pursuant hereto); provided
that, for purpose of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock
of the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, except as
disclosed in the Registration Statement, or the Commission Documents or the
Commission Filings or on Schedule 3.1(f) attached hereto, as of the date hereof,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since December 31, 1998 and prior to the Closing Date. The Company
has not provided to the Purchaser any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the Form 10-K for
the year ended December 31, 1998 complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and, as of their respective dates,
such Form 10-K did not contain any 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 light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis 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 financial position
of the Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement,
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"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. Except as set
forth in the Commission Documents or the Commission Filings, none of such
subsidiaries is a "significant subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Change. Since December 31, 1998, the
Company has not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed in the
Commission Documents or the Commission Filings or on Schedule 3.1(i) attached
hereto, neither the Company nor any of its subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries respective businesses since December 31, 1998 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect on the Company or its
subsidiaries.
(k) Indebtedness. The Form 10-K sets forth as of December 31,
1998 all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $100,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company's
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $100,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any subsidiary is in default with respect to
any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the
Commission Documents or the Commission Filings or on Schedule 3.1(l) attached
hereto or such that could not reasonably be expected to cause a Material Adverse
Effect on the
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Company's financial condition or operating results. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect in all material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or the Commission Filings or on Schedule 3.1(m) attached hereto, there
is no action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company, any
subsidiary or any of their respective properties or assets and which, if
adversely determined, is reasonably likely to result in a Material Adverse
Effect.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or the Commission
Filings or on Schedule 3.1(n) attached hereto or such that do not cause a
Material Adverse Effect. The Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(o) Certain Fees. Except as set forth on Schedule 3.1(o) attached
hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary with respect to the transactions
contemplated by this Agreement.
(p) Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(q) Operation of Business. The Company or one of the subsidiaries
owns or possesses all patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings or on Schedule 3.1(q) attached hereto and all rights
with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others, except
to the extent set forth in the Commission Documents or that a Material Adverse
Effect could not reasonably be expected to result from such conflict.
(r) Environmental Compliance. Except as disclosed in the
Commission Filings or on Schedule 3.1(r) attached hereto, the Company and each
of its subsidiaries have obtained all
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material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, to the best of the Company's knowledge, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its subsidiaries that violate or could
reasonably be expected to violate any Environmental Law after the Closing or
that could reasonably be expected to give rise to any environmental liability,
or otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation (i) under any Environmental Law, or (ii) based
on or related to the manufacture, processing, distribution, use, treatment,
storage (including without limitation underground storage tanks), disposal,
transport or handling, or the emission, discharge, release or threatened release
of any hazardous substance.
(s) Material Agreements. Except as set forth in the Commission
Documents or on Schedule 3.1(s) attached hereto, neither the Company nor any
subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form S-3 or applicable form (collectively, "Material Agreements") if the Company
or any subsidiary were registering securities under the Securities Act. The
Company and each of its subsidiaries has in all material respects performed all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect, the
result of which could reasonably be expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings or on Schedule 3.1(t) attached
hereto, there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions exceeding
$100,000 between (a) the Company, any subsidiary or any of their respective
customers (excluding agreements related to the purchase or lease of the
Company's products) or suppliers on the one hand, and (b) on the other hand, any
officer, employee, consultant or director of the Company, or any of its
subsidiaries, or any person who would be covered by Item 404(a) of Regulation
S-K or any corporation or other entity controlled by such officer, employee,
consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all
material respects with all applicable federal and state securities laws in
connection with the offer, issuance and sale
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of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the provisions of
the Securities Act. The Commission has not issued any order preventing
or suspending the use of any Prospectus.
(ii) The Company meets the requirements for the use of
Form S-3 under the Securities Act. The Registration Statement in the
form in which it became effective and also in such form as it may be
when any post-effective amendment thereto became effective and the
Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Securities Act, complied in all
material respects with the provisions of the Securities Act and did not
at any such times 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 (in the case of the Prospectus, in the light
of the circumstances under which they made) not misleading, except that
this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information relating to the
Purchaser furnished to the Company in writing by or on behalf of the
Purchaser through you expressly for use therein.
(iii) The Company has not distributed and, prior to the
completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering and sale of the Shares
other than the Registration Statement, the Prospectus or other
materials, if any, permitted by the Securities Act.
(v) Employees. As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the
Commission Filings or on Schedule 3.1(v) attached hereto. As of the date hereof,
except as set forth in the Commission Documents or the Commission Filings or on
Schedule 3.1(v) attached hereto, neither the Company nor any subsidiary has any
employment contract, agreement regarding proprietary information, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
subsidiary. As of the date hereof, since December 31, 1998, except as disclosed
in the Registration Statement, the Commission Documents or the Commission
Filings or Schedule 3.1(v), no officer, consultant or key employee of the
Company or any subsidiary whose termination, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
subsidiary.
(w) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.
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(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which is or would have a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Shares will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchaser, or any person or entity that owns a beneficial interest in any of
the Purchaser, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(ac), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
Section III.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is
a corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by
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all necessary corporate action, and no further consent or authorization of the
Purchaser, its Board of Directors or stockholders is required. This Agreement
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumrance on any property of the Purchaser under any agreement or any
commitment to which the Purchaser is party or by which the Purchaser is on or by
which any of its respective properties or assets are bound or (iv) result in a
violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Purchaser or its properties,
except for such conflicts, defaults and violations as would not, individually or
in the aggregate, prohibit or otherwise interfere with the ability of the
Purchaser to enter into and perform its obligations under this Agreement in any
material respect. The Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Shares in accordance with
the terms hereof, provided that for purposes of the representation made in this
sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Shares. Investor understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
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ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined
herein).
Section IV.1 Securities Compliance. The Company shall notify the
Commission and NASD, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares to the Purchaser or subsequent holders.
Section IV.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock and the
listing of the Shares purchased by Purchaser hereunder on the NASDAQ or any
relevant market or system, if applicable, and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD or any relevant market or system.
Section IV.3 Registration Statement. Before the Purchaser shall be
obligated to accept a Draw Down request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover
the Shares to be issued in connection with this Agreement.
Section IV.4 Distribution of Common Stock. The Company and the Purchaser
agree that the Purchaser shall sell the shares of Common Stock purchased
hereunder only to institutional investors.
Section IV.5 Compliance with Laws.
(a) The Company shall comply, and cause each subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could have a Material Adverse Effect.
(b) The Company will not be obligated to issue and the Purchaser
will not be obligated to purchase any shares of the Company's Common Stock which
would result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued
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and outstanding shares of the Company's Common Stock.
Section IV.6 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section IV.7 Reporting Requirements. Upon request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as
soon as available, and in any event within 47 days after the end of each of the
first three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon
as available, and in any event within 92 days after the end of each fiscal year
of the Company.
Section IV.8 Intentionally Omitted.
Section IV.9 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would (i) restrict or impair the
right to perform of the Company or any subsidiary under this Agreement or the
Articles of the Company, or (ii) cause the Company to issue any Common Stock or
securities convertible into Common Stock during a Draw Down Pricing Period under
this Agreement. If, the Company enters into any equity financing facility which
will result in the issuance of the Company's Common Stock, excluding any equity
financing facility (including securities convertible into common stock) in
conjunction with a strategic corporate partnering transaction, without the
Purchaser's prior written consent, which consent shall not be unreasonably
withheld, the Purchaser may, at its option, terminate this Agreement or abstain
from accepting a Draw Down Request under this Agreement for a period of three
consecutive months.
Section IV.10 Effective Registration Statement. If, at the time this
Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become effective as
soon as reasonably practicable and will advise you promptly and, if requested by
the Purchaser, will confirm such advice in writing, when it receives notice that
the Registration Statement or such post-effective amendment has become
effective.
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Section IV.11 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time.
Section IV.12 Intentionally Omitted.
Section IV.13 Amendments to the Registration Statement. The Company will
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus of which the Purchaser shall not previously have
been advised or to which the Purchaser shall reasonably object after being so
advised or (ii) so long as, in the reasonable opinion of counsel for the
Purchaser, a Prospectus is required to be delivered in connection with sales by
any Purchaser or dealer, file any information, documents or reports pursuant to
the Exchange Act without delivering a copy of such information, documents or
reports to the Purchaser, promptly following such filing.
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Section IV.14 Prospectus Delivery. Prior to the execution and delivery
of this Agreement, the Company will deliver to the Purchaser, without charge, in
such quantities as reasonably requested by the Purchaser, copies of each form of
Prospectus. As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Purchasers a prospectus is required by the Securities Act to be
delivered in connection with sales by the Purchaser, the Company will
expeditiously deliver to the Purchaser, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as the Purchaser may
reasonably request. The Company consents to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchasers is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and, subject to the
provisions of paragraph (d) above, file with the Commission an appropriate
supplement or amendment thereto, and will expeditiously furnish to the Purchaser
a reasonable number of copies thereof.
Section IV.15 No Shorting. During the term of this Agreement, neither
the Purchaser nor any affiliates of the Purchaser will ever be in a net short
position with regard to shares of the Company's Common Stock in any account
directly or indirectly managed by the Purchaser or by any affiliate of the
Purchaser.
ARTICLE V
CONDITIONS TO CLOSING AND DRAW DOWNS
Section V.1 Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Shares to the Purchaser is subject to the satisfaction or waiver, at or before
the Closing and with respect to each Draw Down and Call Option, of each of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing as though
made at that time, except for representations and warranties that are expressly
made as of a particular date.
(b) Effective Registration Statement. The Registration Statement
registering the
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Shares shall have been declared effective by the Commission and shall have been
amended or supplemented, as required, to disclose the sale of the Shares prior
to the Closing Date or each Settlement Date, as applicable.
(c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing.
(d) No Injunction. No statute, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the Commission or the NASD (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to Closing), and, at any time prior to the
Closing, trading in securities generally as reported on NASDAQ shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by American Stock Exchange, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of the Company, makes it impracticable or inadvisable to issue the
Shares.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
Section V.2 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made at that time (except for representations and warranties that
speak as of a particular date).
(b) Effective Registration Statement. The Registration Statement
registering the
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Shares shall have been declared effective by the Commission and shall have been
amended or supplemented, as required, to disclose the sale of the Shares prior
to the Closing Date or each Settlement Date, as applicable.
(c) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(d) No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the Commission or the NASD (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to Closing), and, at any time prior to the
Closing, trading in securities generally as reported on NASDAQ shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by the American Stock Exchange, or on the
New York Stock Exchange, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of the Purchaser, makes it impracticable or inadvisable to purchase the
Shares.
(e) No Injunction. 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 which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(g) Opinion of Counsel, Etc. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit B hereto, and such other certificates and documents as
the Purchaser or its counsel shall reasonably require incident to the Closing.
Section V.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before each Draw Down Exercise
Date, of each of the conditions set forth below. The conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
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(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Draw
Down Exercise Date as though made at that time (except for representations and
warranties that speak as of a particular date).
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to the Closing Date or each Settlement Date, as applicable.
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the NASD (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to each Draw Down request), and, at any time prior to such
request, trading in securities generally as reported by the American Stock
Exchange shall not have been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by the American
Stock Exchange.
(d) Material Adverse Effect; Material Change in Ownership. No
Material Adverse Effect and no Material Change in Ownership shall have occurred.
Section V.4 Conditions Precedent to the Obligation of the Company to
Issue Shares Upon Exercise of a Call Option. The obligation hereunder of the
Company to issue Shares upon the exercise of a Call Option by the Purchaser is
subject to the satisfaction or waiver, at or before each Settlement Date, of
each of the conditions set forth below. The conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Purchaser's Representations and Warranties.
Each of the representations and warranties of the Purchaser shall be true and
correct in all material respects as of the date when made and as of the Draw
Down Exercise Date as though made at that time (except for representations and
warranties that speak as of a particular date).
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to each Settlement Date.
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ARTICLE VI
DRAW DOWN TERMS; CALL OPTION
Section VI.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise
a draw down of up to $3,000,000 (a "Draw Down") during each Draw Down Pricing
Period, which Draw Down the Purchaser will be obligated to accept.
(b) The number of Shares to be issued in connection with each
Draw Down shall be equal to the sum of the quotients (for each trading day of
the Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/18th of the Draw Down Amount divided by (y) 94.50% of the VWAP
(the "Draw Down Discount Price") of the Common Stock.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period.
(d) The number of Shares purchased by the Purchaser with respect
to each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on a weekly basis (the "Settlement Date"). If the
VWAP is less than $5.00 per share on any Settlement Date, the Purchaser shall
not be obligated to fund its Draw Down obligation for the preceding week.
(e) There shall be a minimum of five (5) trading days between
Draw Downs.
(f) There shall be a maximum of twenty-four (24) monthly Draw
Downs during the term of this Agreement.
(g) At the end of each Draw Down Pricing Period, the Purchaser's
total Draw Down commitment shall be reduced by $3,000,000 regardless of the Draw
Down Amount requested by the Company.
(h) Each Draw Down will expire on the last trading day of each
Draw Down Pricing Period.
(i) If the VWAP on a given trading day is less than the Threshold
Price, then the total amount of the Draw Down will be reduced by 1/18th and no
Shares will be purchased or sold with respect to such trading day. At no time
shall the Threshold Price be set below $5.00 unless agreed upon by the Company
and the Purchaser. If trading in the Company's Common Stock is suspended for any
reason for more than three (3) hours in any trading day, the price of the Common
Stock shall be deemed to be below the Threshold Price for that trading day.
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(j) The Company must inform the Purchaser via facsimile
transmission as to the Draw Down Amount the Company wishes to exercise before
commencement of trading on the first trading day of the Draw Down Pricing Period
(the "Draw Down Notice"). In addition to the Draw Down Amount, the Company shall
set the Threshold Price with each Draw Down Notice and shall designate the first
trading day of the Draw Down Pricing Period. At no time shall the Purchaser be
required to purchase more than $3,000,000 of the Company's Common Stock for a
given Draw Down Pricing Period (excluding the Company's Common Stock purchased
pursuant to a Call Option) so that if the Company chooses not to exercise the
Draw Down in a given Draw Down Pricing Period the Purchaser is not obligated to
purchase more than $3,000,000 in a subsequent Draw Down Pricing Period.
(k) With respect to any Draw Down, if the Threshold Price is set
below $9.50, the Draw Down Discount Price shall be reduced to 94.125% of the
VWAP and the Call Option Discount Price (as defined in Section 6.2) shall be
reduced to 95.125% of the VWAP. With respect to any Draw Down, if the Threshold
Price is set below $7.50, the maximum Draw Down Amount shall be reduced to
$2,000,000, the Draw Down Discount Price shall be 94.125% and the Call Option
Discount Price shall be reduced to 94.25%.
(l) The Purchaser shall not sell on any trading day during a Draw
Down Period shares of Common Stock in excess of the quotient of (A) the sum of
(x) 1/18 of the applicable Draw Down Amount and (y) the amount of any Call
Option exercised by the Purchaser for such trading day divided by (B) the VWAP
on such trading day.
(m) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf. The Company and the Purchaser shall cause
such Shares to be credited to the DTC account designated by the Purchaser upon
receipt by the Company of payment for the Draw Down into an account designated
by the Company. The delivery of the shares of Common Stock into the Purchaser's
DTC account in exchange for payment therefor shall be referred to herein as
"Settlement". The Purchaser shall coordinate Settlement with the Company through
DTC.
Section VI.2 Purchaser's Call Option.
(a) The Purchaser shall have the right to exercise multiple call
options during each Draw Down Pricing Period (a "Call Option"); provided, that
each Call Option shall be for a minimum of $50,000 and all Call Options
exercised during a Draw Down Pricing Period may not exceed $3,000,000; provided,
further, that in no event shall the Purchaser exercise a Call Option for an
amount which will exceed twenty percent (20%) of the Total Value on the day the
applicable Call Option Notice is issued.
(b) The number of shares of Common Stock to be issued in
connection each Call Option shall be based on a price of 95.50% of the VWAP (the
"Call Option Discount Price") for the Common Stock on the day the Purchaser
issues its Call Option Notice and shall be
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determined in accordance with Section 6.1 (b) and shall not be less than the
Threshold Price.
(c) Each Call Option exercised shall be settled on a weekly basis
on the next Settlement Date. If the VWAP is less than $5.00 per share on any
Settlement Date, the Purchaser shall not be obligated to fund its Call Option
obligation for such preceding week.
(d) The Threshold Price designated by the Company in its Draw
Down Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to
this Section, the Purchaser must issue a Call Option Notice to the Company no
later than 5:00 p.m. (New York time) on the day such Call Option is exercised.
If the Purchaser does not exercise a Call Option by 5:00 p.m. (New York time) on
the last day of the applicable Draw Down Pricing Period, the Purchaser's Call
Options with respect to that Draw Down Pricing Period shall terminate.
(f) During the period from the Effective Date and the date which
is the fourteenth (14th) month anniversary of the Effective Date (the "First
Call Option Period"), the Purchaser will exercise Call Options for an aggregate
amount equal to at least the product of (i) $10,000,000 multiplied by (ii) the
fraction, the numerator of which is the total of all Draw Down Amounts during
the First Call Option Period and the denominator of which is $36,000,000. During
the period commencing after the end of the First Call Option Period and ending
on the date which is the twenty-eighth (28th) month anniversary of the Effective
Date (the "Second Call Option Period"), the Purchaser will exercise Call Options
for an aggregate amount equal to at least the product of (A) $8,000,000
multiplied by (B) the fraction, the numerator of which is the total of all Draw
Down Amounts during the Second Call Option Period and the denominator of which
is $36,000,000.
ARTICLE VII
TERMINATION
Section VII.1 Termination by Mutual Consent. The term of this Agreement
shall be twenty eight (28) months from the Effective Date. This Agreement may be
terminated at any time by mutual consent of the parties.
Section VII.2 Other Termination. The Purchaser may terminate this
Agreement upon (x) one (1) day's notice if the Company issues convertible
debentures or enters an equity financing facility as set forth in Section 4.9
without the Purchaser's prior written consent, or (y) ten (10) days' notice if
an event resulting in a Material Adverse Effect or a Material Change of Control
in Ownership has occurred. In addition, the Company may terminate this Agreement
on one (1) day's notice (which notice may not be given during a Draw Down
Pricing Period); provided, that the Company pays any fee which is otherwise
payable pursuant to Section 9.1(b) upon such termination if such termination
occurs prior to the eighth month anniversary of the Closing.
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Section VII.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.10.
Nothing in this Section 7.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section VIII.1General Indemnity
(a) Indemnification by the Company. The Company will indemnify
and hold harmless the Purchaser and each person, if any, who controls the
Purchaser within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act from and against any losses, claims, damages,
liabilities and expenses (including reasonable costs of defense and
investigation and all attorney's fees) to which the Purchaser and each person,
if any, who controls the Purchaser may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages, liabilities and expenses
(or actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement relating to Common
Stock being sold to the Purchaser (including the Prospectus dated
____________________, 1999, the Prospectus Supplement dated _________________
(the "Prospectus Supplement") which are a part of it), or any amendment or
supplement to it, or (ii) the omission or alleged omission to state in that
Registration Statement or any document incorporated by reference in the
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading.
The Company will reimburse the Purchaser and each such
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by or the controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company will not be liable to the extent a claim or
action which results in a loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in any Prospectus or Prospectus Supplement or any
amendment or supplement to the Prospectus or Prospectus Supplement in reliance
upon, and in conformity with, written information furnished by the Purchase to
the Company for inclusion in the Prospectus or Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will
indemnify and hold harmless the Company, each of its directors and officers, and
each person, if any, who controls the
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Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act from and against any expenses (including reasonable costs of
defense and investigation and all attorneys fees) to which the Purchaser and
each person, if any, who controls the Purchaser may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus or Prospectus Supplement or any amendment or
supplement to it or (ii) the omission or alleged omission to state in any
Prospectus or Prospectus Supplement or any amendment or supplement to it a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, the untrue
statement, alleged untrue statement, omission or alleged omission was made in
reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Prospectus or Prospectus
Supplement or an amendment or supplement to it, and the Purchaser will reimburse
the Company and each such director, officer or controlling person promptly upon
demand for any legal or other costs or expenses reasonably incurred by the
Company or the other person in investigating, defending against, or preparing to
defend against any such claim, action, suit or proceeding.
Section VIII.2Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party will pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Paragraph (a)
or (b) or Section 8.1, will cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
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If for any reason the indemnification provided for in this
Agreement is not available to, or is not sufficient to hold harmless, an
indemnified party in respect of any loss or liability referred to in paragraph
(a) or (b) of Section 8.1, each indemnifying party will, in lieu of indemnifying
the indemnified party, contribute to the amount paid or payable by the
indemnified party, contribute to the amount paid or payable by the indemnified
party as a result of the loss or liability, (i) in the proportion which is
appropriate to reflect the relative benefits received by the indemnifying party
on the one hand and by the indemnified party on the other from the sale of stock
which is the subject of the claim, action, suit or proceeding which resulted in
the loss or liability or (ii) if that allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits of the sale of stock, but also the relative fault of the indemnifying
party and the indemnified party with respect to the statements or omissions
which are the subject of the claim, action, suit or proceeding that resulted in
the loss or liability, as well as any other relevant equitable considerations.
ARTICLE IX
MISCELLANEOUS
Section IX.1 Fees and Expenses.
(a) The Company shall pay the Purchaser a fee equal to
one-quarter of one percent (0.25%) of each Draw Down Amount and the amount of
each Call Option, which fee shall be paid on each Settlement Date.
(b) The Company shall pay all reasonable fees and expenses
related to the transactions contemplated by this Agreement; provided, that the
Company shall pay, at the Closing, all reasonable attorneys fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by the
Purchaser up to $50,000 in connection with the preparation, negotiation,
execution and delivery of this Agreement. In addition, the Company shall pay all
reasonable fees and expenses incurred by the Purchaser in connection with any
amendments, modifications or waivers of this Agreement or incurred in connection
with the enforcement of this Agreement, including, without limitation, all
reasonable attorneys fees and expenses. The Company shall pay all stamp or other
similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
(c) If on the twelve (12) month anniversary of the Closing Date,
the Company has not requested Draw Downs in an aggregate amount of at least
$24,000,000, the Company, at its option, shall pay the Purchaser a fee (the
"Fee") equal to either (x) $300,000, in cash, or (y) issue three-year warrants
to purchase 300,000 shares of the Company's Common Stock at an exercise price of
110% of the VWAP of the Common Stock on the date of issuance. However, if the
Purchaser has terminated this Agreement prior to the twelve (12) month
anniversary of the Closing Date, the Company will not be required to pay any
portion of this Fee.
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Section IX.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of Delaware for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section IX.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section IX.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
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If to the Company: Isis Pharmaceuticals, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: B. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
With copies to: ▇▇▇▇▇▇ Godward LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇.▇. ▇▇▇▇
If to the Purchaser: ▇▇▇▇▇▇▇▇ Investment Limited
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box N 9204
Nassau, Bahamas
Telephone Number:
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Director and President
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section IX.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
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Section IX.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section IX.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, which consent
will not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
Section IX.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving effect to the choice of law provisions.
Section IX.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article VIII of this Agreement shall survive the execution and delivery hereof
and the Closing hereunder.
Section IX.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section IX.11 Publicity. Prior to the Closing, neither the Company nor
the Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, that the
Company must issue a press release or otherwise make a public statement or
announcement with respect to this Agreement prior to the Closing, the Company
shall consult with the Purchaser on the form and substance of such press
release. After the Closing, the Company may issue a press release or otherwise
make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided,
that prior to issuing any such press release, making any such public statement
or announcement, the Company obtains the prior consent of the Purchaser, which
consent shall not be unreasonably withheld or delayed.
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Section IX.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section IX.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
ISIS PHARMACEUTICALS, INC.
By:
--------------------------------------
Name:
Title
▇▇▇▇▇▇▇▇ INVESTMENT LIMITED
By:
--------------------------------------
Name:
Title
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