EXHIBIT 10.7
LOAN AND STOCK WARRANT AGREEMENT
Chemokine Therapeutics Corp., a Delaware corporation (the "Company"), and
Pharmaceutical Product Development, Inc., a North Carolina corporation ("PPD"),
enter into this Loan and Stock Warrant Agreement (this "Agreement"), effective
as of October 16, 2002.
RECITALS:
A. Chemokine and its affiliates have acquired the expertise and related
know-how for the design, manufacture and development of high affinity based
chemokine-mimetics and chemokine antagonists using a unique technology for
treatment of human diseases.
B. Upon the terms and conditions set forth in this Agreement, the Company
wishes for PPD to loan the Company the sum of Two Hundred Fifty Thousand Dollars
($250,000) to be used to fund certain studies which are more particularly set
forth below.
C. In connection with the loan by PPD, the Company shall issue a warrant
to PPD giving it the right to purchase shares of Series A Preferred Stock of the
Company as hereinafter set forth.
WHEREFORE, in consideration of the premises and covenants set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
LOAN OF $250,000 IN FURTHERANCE OF STUDIES;
ISSUANCE OF WARRANT
SECTION 1.01 $250,000 LOAN BY PPD TO THE COMPANY.
Subject to and upon satisfaction by the Company of the terms and
conditions set forth herein (including, without limitation, the issuance by the
Company to PPD of the Warrant as provided in SECTION 1.02 below), PPD shall loan
to the Company by wire transfer the sum of Two Hundred Fifty Thousand Dollars
($250,000) (the "Loan"). The Company shall execute a promissory note
("Promissory Note") in favor of PPD in the form and upon the terms set forth in
Schedule 1.01 hereto to evidence the Loan. The entire principal balance, accrued
interest and other amounts required to be paid under the Promissory Note shall
be due and payable on or before the date which is one hundred eighty (180) days
from the date hereof (the "Maturity Date").
SECTION 1.02 ISSUANCE OF STOCK WARRANT BY THE COMPANY TO PPD.
At or before the Loan Closing (as hereinafter defined), the Company shall
issue to PPD a warrant (the "Warrant") to purchase up to Two Million shares of
the Company's Series A Preferred Stock (the "Preferred Stock") at a per share
price of $1.35. The Warrant shall be exercisable at PPD's sole option and
discretion during the Warrant Exercise Period, and shall be in
the form of SCHEDULE 1.02 attached and incorporated herein by reference. As used
herein, the "Warrant Exercise Period" shall commence on the date hereof and
terminate on the Warrant Termination Date. The "Warrant Termination Date" shall
mean and refer to the date which is forty-five (45) days after the date on which
PPD has received the results and findings of the completed Studies as required
in SECTION 1.03 below. Shares of Series A Preferred Stock purchased by PPD upon
exercise of the Warrant shall be referred to as the "Warrant Shares". The terms
of the Preferred Stock are as set forth in the Certificates of Designation filed
with the Delaware Secretary of State, a true, accurate and complete copy of
which have been furnished by the Company to PPD.
SECTION 1.03 USE OF LOAN PROCEEDS; STUDIES.
The Company shall immediately undertake four (4) studies as outlined in
SCHEDULE 1.03 to this Agreement (the "Studies"). The Company shall use the
proceeds from the Loan only in connection with and for the purpose of furthering
the conduct of the Studies (including reimbursement of funds already expended by
the Company in conducting these Studies). The Company shall complete the Studies
within one hundred twenty (120) days of the date of this Agreement. The Company
shall keep PPD reasonably informed as to the progress of the Studies and shall
communicate promptly the results and findings of the Studies to PPD in writing
and in such form as PPD reasonably requests, and the appropriate personnel of
the Company shall be available to discuss the Studies with PPD. The results and
findings of the Studies, together with other factors and information, will
assist PPD in determining whether to exercise the Warrant.
SECTION 1.04 CREDIT TO PURCHASE PRICE.
If PPD exercises the Warrant prior to the Maturity Date, then PPD may, at
its option, elect to receive a credit in the amount of all unpaid principal,
accrued interest and any other amounts due under the Promissory Note towards the
purchase price of the Warrant Shares. If PPD does not exercise the Warrant prior
to the Maturity Date, then:
(a) If the Company has Two Million Dollars ($2,000,000) or more in liquid
assets as of the Maturity Date, then the Company shall repay to PPD in cash all
principal, accrued interest and other amounts due under the Promissory Note on
the Maturity Date.
(b) If the Company does not have Two Million Dollars ($2,000,000) or more
in liquid assets as of the Maturity Date and if no Event of Default (as said
term is defined in the Promissory Note) has then occurred, then the Company may,
at its option in lieu of repaying the Loan in cash, issue to PPD on the Maturity
Date such number of shares of the Company's common stock, valued at a price of
$1.25 per share, as are necessary to satisfy in full all unpaid principal,
accrued interest and other amounts due under the Promissory Note.
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SECTION 1.05 REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES.
Upon the request of PPD at any time prior to the Warrant Termination Date,
the Company shall deliver to PPD a certificate executed by the Chief Executive
Officer of the Company which ratifies and confirms the accuracy and completeness
of each of the representations and warranties in ARTICLE III hereof as of the
date of such certificate (or, if a representation or warranty is no longer then
accurate and complete, a statement setting forth in detail the reason therefor).
SECTION 1.06 FEES AND EXPENSES OF COLLECTION.
In the event the Company shall default in any of its obligations under the
Promissory Note or in the other Transaction Documents, the Company shall pay all
attorneys' fees and all related costs of collection or enforcement that may be
incurred by PPD in redressing such default.
ARTICLE II.
PERFORMANCE OF CLINICAL TRIALS
In consideration of the extension of the Loan and other valuable
consideration, subject to and upon the exercise of the Warrant by PPD, the
Company and PPD agree in good faith to negotiate a services agreement pursuant
to which PPD shall conduct, on mutually acceptable terms, clinical trials for
the Company on compounds which the Company desires to develop. The Company's
obligation to negotiate the services agreement with PPD shall be subject to the
continuing ability of PPD at such time to have the capacity and expertise to
competently conduct such clinical trials.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Company hereby (i) represents and warrants to PPD that the following
are true, accurate and complete as of the date hereof, and (ii) acknowledges
that PPD is relying on such representations and warranties in entering into this
Agreement and the other Transaction Documents (as defined in SECTION 3.02):
SECTION 3.01 ORGANIZATION, STANDING AND QUALIFICATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. The Company has no subsidiaries and does
not have an equity interest in any other firm, partnership, association or other
entity, except Chemokine Therapeutics, Inc., a British Columbia company, that
serves as the research arm of the Company in British Columbia. The Company is
duly qualified to transact business as a foreign corporation and is in good
standing under the laws of each jurisdiction where the location of its
properties or the conduct of its business makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the Company or its business.
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SECTION 3.02 POWER AND AUTHORITY.
The Company has all requisite power and authority (i) to own its
properties and assets and to conduct its business as presently conducted and as
proposed to be conducted, (ii) to enter into and perform its obligations under
this Agreement and the other Transaction Documents, (iii) to issue the
Promissory Note, and (iv) to issue, sell and deliver the Warrant, the Warrant
Shares and the shares of common stock of the Company (the "Common Stock")
issuable upon conversion of the Warrant Shares (the "Conversion Shares"). This
Agreement and the other Transaction Documents have been duly authorized,
executed and delivered and constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, subject to any applicable bankruptcy, insolvency or other laws affecting
the rights of creditors generally and to general equitable principles and the
availability of specific performance. The Warrant has been duly authorized and,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable and not subject to any preemptive rights,
right of first refusal, liens, claims or encumbrances, or other restrictions on
transfer, except as contemplated by this Agreement and pursuant to federal and
state securities laws. The Company has reserved a sufficient number of shares of
Preferred Stock and shares of Common Stock for issuance to PPD of the Warrant
Shares and the Conversion Shares, respectively, upon the exercise of the Warrant
and the conversion of the Warrant Shares into Conversion Shares. Upon exercise
of the Warrant and/or conversion of the Warrant Shares into Conversion Shares in
accordance with the Warrant and the Certificates of Designation, the Warrant
Shares and the Conversion Shares will be duly authorized, validly issued, fully
paid and non-assessable and not subject to any preemptive rights, rights of
first refusal, liens, claims or encumbrances, or any other restrictions on
transfer, except as set forth in this Agreement and pursuant to federal and
state securities laws. All corporate action on the part of the Company and its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement, the other Transaction Documents and
the transactions contemplated herein and therein has been taken. As used herein,
the "Transaction Documents" shall mean and refer, collectively, to this
Agreement, the Promissory Note, the Warrant, the Warrant Shares, the Conversion
Shares and any other instruments, documents or certificates required by this
Agreement to be executed and delivered or otherwise necessary to consummate the
transactions contemplated herein.
SECTION 3.03 NO VIOLATION OF OTHER AGREEMENTS.
None of the execution and delivery of, or performance by the Company
under, this Agreement, the other Transaction Documents or the consummation of
the transactions contemplated herein or therein will (i) conflict with or
violate any term or provision of the Certificate of Incorporation, Certificates
of Designation filed with the Delaware Secretary of State or By-laws of the
Company, any term or provision of any other agreement, note or indenture binding
upon the Company, or any term or provision of any license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any of
its assets, or (ii) result in the creation or imposition of any lien, charge or
other encumbrance upon any of the assets of the Company under any agreement or
other instrument to which the Company is a party or by which the Company or its
assets may be bound.
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SECTION 3.04 CAPITAL STRUCTURE.
The issued and outstanding shares of capital stock of the Company consist
of 9,118,564 shares of common stock and 150,000 shares of Series A Preferred
Stock. The authorized number of shares of common stock is 24,000,000 shares and
the authorized number of shares of Series A Preferred Stock is 6,000,000 shares.
All outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable. The Company has granted
outstanding options and warrants to purchase up to 2,665,734 shares of common
stock. Except as disclosed in this paragraph and in SCHEDULE 3.04, (i) there are
no outstanding options, stock subscription agreements, warrants or other rights
permitting or requiring the Company or others to purchase, redeem or acquire any
shares of capital stock or other equity securities of the Company or to pay any
dividend or make any other distribution in respect thereof; (ii) there are no
securities issued or outstanding which are convertible into or exchangeable for
any of the foregoing and there are no contracts, commitments or understandings,
whether or not in writing, to issue or grant any such option, warrant, right or
convertible or exchangeable security; (iii) no shares of stock or other
securities of the Company are reserved for issuance for any purpose; (iv) there
are no voting trusts or other contracts, commitments, understandings,
arrangements or restrictions of any kind with respect to the ownership, voting
or transfer of shares of stock or other securities of the Company, including
without limitation, any preemptive rights, rights of first refusal, proxies or
similar rights; and (v) no person holds a right to require the Company to
register any securities of the Company under the Act or to participate in any
such registration. All issuances by the Company of its securities were (A)
exempt from registration under the Securities Act of 1933, as amended, and any
applicable state securities laws, and (B) in compliance with all state and
federal laws and regulations. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are or will be at Closing as set
forth in the Company's Certificate of Incorporation and the Certificates of
Designation filed with the Delaware Secretary of State, true, accurate and
complete copies of which have been delivered by the Company to PPD, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws.
SECTION 3.05 CONSENTS AND AUTHORIZATIONS.
All authority from and approval by any federal, state or local
governmental body, commission or agency necessary to the making, validity or
enforceability of this Agreement and the other Transaction Documents has been
obtained. No consent, authorization or filing of or with any court or
governmental authority is required in connection with the consummation by the
Company of the transactions contemplated hereby or thereby, or the issuance,
sale or delivery of the Warrant, the Warrant Shares issuable upon exercise of
the Warrant or the Conversion Shares issuable upon conversion of the Warrant
Shares (other than such notifications or filings required under applicable
federal or state securities laws, if any, which shall be made on a timely
basis.)
SECTION 3.06 FINANCIAL STATEMENTS.
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The Company has furnished to PPD the audited, consolidated balance sheets
of the Company as of December 31, 2000, and the reviewed, consolidated financial
statements of the Company as of December 31, 2001; the audited, consolidated
statements of income, stockholders' equity and cash flows of the Company for the
year ended December 31, 2000, and the reviewed, consolidated statements of
income, stockholders' equity and cash flows of the Company for the year ended
December 31, 2001; the unaudited, internally prepared consolidated balance sheet
of the Company as of June 30, 2002 (the "Balance Sheet"); and the related
unaudited, internally prepared consolidated statements of income, stockholders'
equity and cash flows of the Company for the fiscal quarter ended June 30, 2002,
and for the period from the beginning of fiscal year 2002 to the end of such
fiscal quarter. These financial statements fairly present the financial position
of the Company on the date of such statements and the results of the operations
of the Company for the period covered. Since the date of the Balance Sheet, (i)
there has been no change in the assets, liabilities or financial condition of
the Company from that reflected in the Balance Sheet except for changes in the
ordinary course of business which in the aggregate have not been materially
adverse to the Company's business or prospects and except for those items
described in SCHEDULE 3.06 hereto, and (ii) none of the business, prospects,
financial condition, operations, property or affairs of the Company has been
materially adversely affected by any occurrence or development, individually or
in the aggregate, whether or not insured against. The Company has no material
liabilities which are not set forth on the Balance Sheet.
SECTION 3.07 EVENTS SUBSEQUENT TO THE DATE OF THE BALANCE SHEET.
Since the date of the Balance Sheet, and other than as set forth in
SCHEDULE 3.07 hereto, the Company has not (i) issued any stock, bond or other
corporate security; (ii) borrowed any amount or incurred or become subject to
any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business; (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business; (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any share of its capital stock or other security; (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable; (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim; (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service xxxx, copyright, trade secret or other
intangible asset; (viii) suffered any loss of property or knowingly waived any
right of substantial value whether or not in the ordinary course of business;
(ix) made any change in officer compensation except in the ordinary course of
business and consistent with past practice; (x) made any material change in the
manner of business or operations of the Company; (xi) entered into any
transaction except in the ordinary course of business or as otherwise
contemplated hereby; or (xii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
SECTION 3.08 LITIGATION; COMPLIANCE WITH LAW.
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There is no (i) action, suit, claim, proceeding or investigation pending
or, to the best of the Company's knowledge, threatened against or affecting the
Company, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign; (ii) arbitration proceeding to which the
Company is a party pending under collective bargaining agreements or otherwise;
or (iii) governmental inquiry pending or, to the best of the Company's
knowledge, threatened against or affecting the Company (including, without
limitation, any inquiry as to the qualification of the Company to hold or
receive any license or permit), and there is no basis for any of the foregoing.
The Company has not received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. Except as set forth in SCHEDULE 3.08 hereto, there is no
action or suit by the Company pending, threatened or contemplated against
others. The Company has materially complied with all laws, rules, regulations
and orders applicable to its business, operations, properties, assets, products
and services; the Company has all required permits, licenses and other
authorizations required to conduct its business as conducted and as proposed by
the Company to be conducted; and the Company has been operating its business
pursuant to and in material compliance with the terms of all such permits,
licenses and other authorizations. To the best of the Company's knowledge, there
is no law, rule, regulation or order, whether federal, state, county or local,
which would materially prohibit or restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its business in any
jurisdiction in which it is now conducting.
SECTION 3.09 PROPRIETARY INFORMATION AND INTELLECTUAL PROPERTY OF THIRD
PARTIES.
(a) No third party has claimed or, to the best knowledge of the Company,
has reason to claim that any person employed by or affiliated with the Company
has (i) violated or may be violating any of the terms or conditions of his or
her employment, non-competition or non-disclosure agreement with such third
party; (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party; or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company that suggests that such a claim might be
contemplated. To the best knowledge of the Company, no person employed by or
affiliated with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with the
development, manufacture, license, or sale of any product or proposed product or
the development, offering, or sale of any service or proposed service of the
Company. None of the execution or delivery of this Agreement, or the conduct of
the Business as presently conducted or as presently proposed to be conducted,
will materially conflict with or result in a breach of the terms, conditions or
provisions of or constitute a material default under any contract, covenant or
instrument under which any such person is obligated.
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(b) "Intellectual Property" means all patents, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
trade names, copyrights, manufacturing processes, formulae, trade secrets,
licenses, franchises, confidential information, customer lists, know-how and any
other intellectual property rights of any kind that are (i) owned, licensed, or
held by the Company; (ii) used, incorporated, or relied upon by the Company in
any manner; (iii) used, incorporated, embodied within, pertaining to, or
concerning any of the products or proposed products or services or proposed
services of the Company; or (iv) necessary, desirable, or used in the operations
of the Company (hereinafter, "Company Intellectual Property") as presently
conducted or as presently proposed to be conducted. To the best knowledge of the
Company, no employee, or consultant of the Company has used in any unauthorized
manner any Intellectual Property of any person in the course of his or her work
for the Company and the Company has not been sued, charged or threatened with
any such claim. The Company has no written or oral agreement with any employee
or consultant with respect to the ownership of Intellectual Property created by
him or her as a result of which any such employee or consultant may have rights
to any Company Intellectual Property. No other person has any rights to any item
of Company Intellectual Property. All Company Intellectual Property, all current
or proposed products of the Company, and all current or proposed services of the
Company are free and clear of all liens, claims, rights, encumbrances or demands
of third parties of any kind.
SECTION 3.10 PATENTS, TRADEMARKS, ETC.
Set forth in SCHEDULE 3.10 hereto is a list and brief description of all
domestic and foreign patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service xxxx applications, trade names
and copyrights, and all applications for such which are in the process of being
prepared, owned by or registered in the name of the Company, or of which the
Company is a licensor or licensee or in which the Company has any right, and in
each case a brief description of the nature of such right. The Company owns or
possesses all required licenses or other rights to use all Intellectual Property
necessary, desirable, or used in the conduct of its business as conducted, and
to the best knowledge of the Company without independent investigation, no claim
is pending or threatened to the effect that the operations, products or services
of the Company or any Company Intellectual Property infringe upon or conflict
with the asserted rights of any other person in any Intellectual Property, and
there is no basis for any such claim (whether or not pending or threatened). To
the best knowledge of the Company without independent investigation, no claim is
pending or threatened to the effect that any right in Company Intellectual
Property, or Intellectual Property which the Company otherwise has the right to
use, is invalid or unenforceable by the Company, and there is no basis for any
such claim (whether or not pending or threatened). All prior art known to the
Company which may be or may have been pertinent to the examination of any United
States patent or patent application listed in SCHEDULE 3.10 hereto has been
cited to the United States Patent and Trademark Office. To the best of the
Company's knowledge, all technical information developed by and belonging to the
Company that has not been patented has been kept confidential. The Company has
not granted or assigned to any other person or entity any right to manufacture,
have manufactured, assemble,
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distribute, license or sell the products or proposed products or to provide the
services or proposed services of the Company.
SECTION 3.11 TITLE TO PROPERTIES.
The Company does not own any real property. The Company has good title to
its personal properties and assets reflected on the Balance Sheet or acquired by
it since the date of the Balance Sheet (other than properties and assets
disposed of in the ordinary course of business since the date of the Balance
Sheet), and, except as disclosed in SCHEDULE 3.11 hereto, all such properties
and assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances (including, without
limitation, easements and licenses), except for liens for current taxes not yet
due and payable and minor imperfections of title, if any, not material in nature
or amount and not materially detracting from the value or impairing the use of
the property subject thereto or impairing the operations or proposed operations
of the Company, including, without limitation, the ability of the Company to
secure financing using such properties and assets as collateral. To the best of
the Company's knowledge, there are no condemnation, environmental, zoning or
other land use regulation proceedings, either instituted or planned to be
instituted, which would adversely affect the use or operation of the Company's
properties and assets for their respective intended uses and purposes, or the
value of such properties, and the Company has not received notice of any special
assessment proceedings which would affect such properties and assets.
SECTION 3.12 LEASEHOLD INTERESTS.
Each lease or agreement to which the Company is a party under which it is
a lessee of any property, real or personal, is a valid, subsisting and
enforceable agreement, duly authorized and entered into, without any material
default of the Company thereunder and, to the best of the Company's knowledge,
without any material default thereunder of any other party thereto. No event has
occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge, no claim has been asserted against
the Company adverse to its rights in such leasehold interests.
SECTION 3.13 INSURANCE.
The Company maintains, with financially sound and reputable insurers,
insurance against such casualties and contingencies and of such types and in
such amounts as is customary for companies similarly situated. Set forth on
SCHEDULE 3.13 hereto is a list of all insurance maintained by the Company.
SECTION 3.14 TAXES.
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The Company has filed all tax returns (foreign, federal, state, county and
local) required to be filed by it. All such returns are correct and complete in
all material respects, and the Company has paid all taxes owing (whether or not
shown on any such returns), as well as all other taxes, assessments and
governmental charges which have become due or payable, including without
limitation, all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. The Company has established
adequate reserves for all taxes accrued but not yet payable. Except as set forth
in SCHEDULE 3.14 hereto, all material tax elections of any type that the Company
has made as of the date hereof are set forth in the financial statements
referred to in SECTION 3.06 above. The federal income tax returns of the Company
have never been audited by the Internal Revenue Service. No deficiency
assessment with respect to or proposed adjustment of the Company's foreign,
federal, state, county or local taxes is pending or, to the best of the
Company's knowledge, threatened. There is no tax lien (other than for current
taxes not yet due and payable), whether imposed by any foreign, federal, state,
county or local taxing authority, outstanding against the assets, properties or
business of the Company. The Company represents and warrants that the Company's
net operating losses for Federal income tax purposes, as set forth in the
financial statements referred to in Section 3.06 above, are not subject to any
limitations imposed by Section 382 of the Internal Revenue Code of 1986, as
amended (hereinafter, the "Code"), and the full amount of such net operating
losses are available to offset the taxable income of the Company for the current
fiscal year and, to the extent not so used, succeeding fiscal years, based on
the capital structure of the Company immediately following the exercise of the
Warrant by PPD. The Company represents and warrants consummation of the
transactions contemplated by this Agreement or by any other agreement,
understanding or commitment (contingent or otherwise) to which the Company is a
party or by which it is otherwise bound will not have the effect of limiting the
Company's ability to use such net operating losses in full to offset such
taxable income.
SECTION 3.15 OTHER AGREEMENTS.
Except as set forth in SCHEDULE 3.15 hereto, the Company is not a party to
or otherwise bound by any written or oral agreement, instrument, commitment or
restriction which individually or in the aggregate could materially adversely
affect the business, prospects, financial condition, operations, property or
affairs of the Company or any other material written or oral:
(a) agreement with any labor union (and, to the knowledge of the Company
no organizational effort is being made with respect to any of its employees);
(b) agreement for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of its normal operating
requirements;
(c) agreement for the employment of any officer, employee or other person
(whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not terminable on
notice without cost or other liability to the Company, except normal severance
arrangements and accrued vacation pay;
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(d) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, agreement or
understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans which are not self-insured and are
applicable to employees generally);
(e) agreement relating to the borrowing of money or to the mortgaging or
pledging of, or otherwise placing a lien or security interest on, any asset of
the Company;
(f) guaranty of any obligation for borrowed money or otherwise;
(g) voting trust or agreement, stockholders' agreement, pledge agreement,
buy-sell agreement, or first refusal or preemptive rights agreement relating to
any securities of the Company;
(h) agreement, or group of related agreements with the same party or any
group of affiliated parties, under which the Company has advanced or agreed to
advance money or has agreed to lease any property as lessee or lessor;
(i) agreement or obligation (contingent or otherwise) to issue, sell or
otherwise distribute or to repurchase or otherwise acquire or retire any share
of its capital stock or any of its other equity securities;
(j) assignment, license or other agreement with respect to any
Intellectual Property;
(k) agreement under which it has granted any person any registration
rights; or
(l) agreement under which it has limited or restricted its right to
compete with any person in any respect.
The Company, and to the knowledge of the Company, each other party
thereto, have in all material respects performed all the obligations required to
be performed by them to date (or each non-performing party has received a valid,
enforceable and irrevocable written waiver with respect to its non-performance),
have received no notice of default and are not in material default (with due
notice or lapse of time or both) under any agreement, instrument, commitment,
plan or arrangement to which the Company is a party, or by which it or its
property may be bound. The Company has no present expectation or intention of
not fully performing all its obligations under each such agreement, instrument,
commitment, plan or arrangement, and the Company has no knowledge of any breach
or anticipated breach by the other party to any agreement, instrument,
commitment, plan or arrangement to which the Company is a party.
SECTION 3.16 LOANS AND ADVANCES.
Except as set forth in SCHEDULE 3.16 hereto, the Company does not have any
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except,
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in each case, for advances to employees of the Company in respect of
reimbursable business expenses anticipated to be incurred by them in connection
with their performance of services for the Company.
SECTION 3.17 ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER PERSONS.
The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
SECTION 3.18 GOVERNMENTAL APPROVALS.
No registration or filing with, or consent or approval of or other action
by, any federal, state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and performance by the
Company of any of the Transaction Documents, the issuance, sale and delivery of
the Warrant or, upon exercise thereof, the issuance and delivery of the Warrant
Shares and the Conversion Shares, other than filings pursuant to federal and
state securities laws (all of which filings have been made by the Company, other
than those which are required or permitted to be made after the Closing and
which will be duly made on a timely basis) in connection with the issuance of
the Warrant, the Warrant Shares and, to the extent applicable, the Conversion
Shares.
SECTION 3.19 DISCLOSURE.
Neither this Agreement, nor any Schedule or Exhibit to this Agreement,
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading. To
the best knowledge of the Company, none of the statements, documents,
certificates or other items prepared or supplied by the Company to PPD at the
Loan Closing contains an untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein not misleading.
SECTION 3.20 OFFERING OF THE WARRANT SHARES.
Neither the Company nor, to the knowledge of the Company, any person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Warrant or Warrant Shares or any
security of the Company similar to the Warrant or Warrant Shares has offered the
Warrant or Warrant Shares or any such similar security for sale to, or solicited
any offer to buy the Warrant or Warrant Shares or any such similar security
from, or otherwise approached or negotiated with respect thereto with, any
person or persons, and the Company has not taken and has not authorized anyone
on its behalf to take any other action (including, without limitation, any
offer, issuance or sale of any security of the Company under
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circumstances which might require the integration of such security with the
Warrant or Warrant Shares under the Securities Act of 1933, as amended (the
"Securities Act"), or the rules and regulations thereunder, in either case so as
to subject the offering, issuance or sale of the Warrant or Warrant Shares to
the registration provisions of the Securities Act.
SECTION 3.21 BROKERS.
The Company has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
SECTION 3.22 OFFICERS.
SCHEDULE 3.22 hereto is a list of the names of the directors and officers
of the Company, together with the title or job classification of each such
person and the total compensation anticipated to be paid to each such person by
the Company in 2002. None of such persons has an employment agreement or
understanding, whether oral or written, with the Company, which is not
terminable on notice by the Company without cost or other liability to the
Company, except as set forth on SCHEDULE 3.22.
SECTION 3.23 TRANSACTIONS WITH AFFILIATES.
Except as set forth in SCHEDULE 3.23 hereto, no shareholder, director or
officer of the Company, or member of the family of such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock of such corporation, partnership, trust or other entity, is a
party to any transaction with the Company, including any contract, agreement or
other arrangement providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payments to any
such person or firm, other than employment-at-will arrangements in the ordinary
course of business.
SECTION 3.24 EMPLOYEES.
No officer or key employee of the Company has advised the Company (orally
or in writing) that he intends to terminate employment with the Company. The
Company has complied in all material respects with all applicable laws relating
to the employment of labor, including without limitation provisions relating to
wages, hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes.
SECTION 3.25 ENVIRONMENTAL PROTECTION.
The Company and the operation of its business are in material compliance
with all applicable Environmental Laws (as defined below) and orders or
directives of any governmental authorities having jurisdiction under such
Environmental Laws, including, without limitation, any
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Environmental Laws or orders or directives with respect to any cleanup or
remediation of any release or threat of release of Hazardous Substances. The
Company has not received any citation, directive, letter or other communication,
written or oral, or any notice of any proceeding, claim or lawsuit, from any
person arising out of the ownership or occupation of any properties owned or
leased by the Company, or the conduct of its operations, and the Company is not
aware of any basis therefor. The Company has obtained and is maintaining in full
force and effect all necessary permits, licenses and approvals, if any, required
by all Environmental Laws applicable to the Company's conduct of its business,
and is in material compliance with all such permits, licenses and approvals, if
any. For the purposes of this Agreement, the term "Environmental Laws" shall
mean any federal, state or local law or ordinance or regulation pertaining to
the protection of human health or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, the Emergency Planning and Community Right-to-Know Act and the Resource
Conservation and Recovery Act. For purposes of this Agreement, the term
"Hazardous Substances" shall include oil and petroleum products, asbestos,
polychlorinated biphenyls, urea formaldehyde and any other materials classified
as hazardous or toxic under any Environmental Laws.
SECTION 3.26 ERISA.
The Company has no "employee benefit plan," as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that (i) (A) is subject to any provision of ERISA and (B) is
maintained or contributed to by the Company, or (ii) (A) is subject to any
provision of Title IV of ERISA and (B) is maintained or contributed to by any of
the Company's ERISA Affiliates (as defined below) (collectively, an "Employee
Plan") that covers any employee of the Company. SCHEDULE 3.26 hereto also lists
each employment, severance or other similar contract, arrangement or policy
(written or oral) and each plan or arrangement (written or oral) providing for
severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (i) is not an Employee Plan and (ii) covers any
employee or former employee of the Company (each, a "Benefit Arrangement"),
copies or descriptions of all of which have been made available or furnished
previously to PPD. Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by ERISA, if
applicable, and any and all statutes, orders, rules and regulations which are
applicable to such Benefit Arrangement. An "ERISA Affiliate" means any entity
that, together with the Company, would be treated as a single employer under
Section 414 of the Code. No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
SECTION 3.27 PERMITS AND LICENSES.
The Company has obtained all material licenses, permits and other
governmental authorizations necessary to conduct its business as presently
conducted.
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SECTION 3.28 NO CURRENT VIOLATIONS.
The Company and the operation of its business as now operated are not in
violation of: (i) its Certificate of Incorporation or Bylaws; (ii) any
indenture, mortgage, deed of trust, note, lease or other agreement or instrument
to which the Company is a party or by which it is or may be bound or to which
any of its assets may be subject; (iii) any statute, rule or regulation
currently applicable to the Company; or (iv) any judgment, decree or order
applicable to the Company.
SECTION 3.29 CONFLICT OF INTEREST.
Except as set forth in Schedule 3.29 hereto, the Company and its executive
officers have no interest (other than as holders of securities of a publicly
traded company), either directly or indirectly, in any entity, including,
without limitation thereto, any corporation, partnership, joint venture,
proprietorship, firm, person, licensee, business or association (whether as an
employee, officer, director, stockholder, agent, independent contractor,
security holder, creditor, consultant or otherwise) that presently (i) provides
any services, or designs, produces and/or sells any products, or engages in any
activity which is the same, similar to or competitive with any activity or
business in which the Company is now engaged or proposes to become engaged; (ii)
is a supplier, customer, or creditor of the Company, or has an existing
contractual relationship with any of the Company's managing employees; or (iii)
has any direct or indirect interest in any asset or property, real or personal,
tangible or intangible, of the Company or any property, real or personal,
tangible or intangible, that is necessary or desirable for the conduct of the
Company's business.
ARTICLE IV.
COVENANTS OF THE COMPANY
The Company covenants and agrees with PPD that:
SECTION 4.01 FINANCIAL STATEMENTS, REPORTS, ETC.
Until the repayment or satisfaction of the Promissory Note in full and so
long as PPD has a right to purchase or holds, in the aggregate, 750,000 or more
of the Warrant Shares or Conversion Shares, or a combination thereof (which
number of shares shall be proportionately adjusted for stock splits,
combinations, reclassifications, mergers, consolidations, reorganizations or
otherwise), the Company shall furnish to PPD (and to any holder of the Warrant,
the Warrant Shares and/or the Conversion Shares who, in the aggregate, has a
right to purchase or holds 750,000 or more of the Warrant Shares or the
Conversion Shares, or a combination thereof):
(a) within ninety (90) days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of such fiscal year and the related, consolidated statements
of income, stockholders' equity and cash flows for the fiscal year then ended,
each reviewed and independently prepared in accordance with Generally Accepted
Accounting Principles;
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(b) within forty-five (45) days after end of each fiscal quarter in each
fiscal year (other than the last fiscal quarter in each fiscal year), a
consolidated balance sheet of the Company and its subsidiaries, if any, and the
related consolidated statements of income, stockholders' equity and cash flows,
unaudited and internally prepared in accordance with Generally Accepted
Accounting Principles (other than accompanying notes), such consolidated balance
sheet to be as of the end of such fiscal quarter and such consolidated
statements of income, stockholders' equity and cash flows to be for such fiscal
quarter and for the period from the beginning of the fiscal year to the end of
such fiscal quarter, in each case with comparative statements for the prior
fiscal year;
(c) within thirty (30) days after the end of each month in each fiscal
year (other than the last month in each fiscal year), a consolidated balance
sheet of the Company and its subsidiaries, if any, and the related consolidated
statements of income, stockholders' equity and cash flows, unaudited and
internally prepared in accordance with Generally Accepted Accounting Principles
(other than accompanying notes), such consolidated balance sheet to be as of the
end of such month and such consolidated statements of income, stockholders'
equity and cash flows to be for such month and for the period from the beginning
of the fiscal year to the end of such month, in each case with comparative
statements for the prior fiscal year;
(d) at the time of delivery of each quarterly statement pursuant to
SECTION 4.01(b), a management narrative report explaining all significant
variances from forecasts, and all significant current developments in staffing,
clinical trials, compound development, financings, marketing, sales and
operations;
(e) no later than thirty (30) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company and its subsidiaries in respect of
such fiscal year, all itemized in reasonable detail and prepared on a monthly
basis, and, promptly after preparation, any revisions to any of the foregoing;
(f) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries of the type described in
SECTION 3.08 that could materially adversely affect the Company or any of its
subsidiaries, if any;
(g) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its stockholders, directors or lenders; and
(h) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs of the
Company and its subsidiaries as PPD may reasonably request.
SECTION 4.02 RESERVE FOR WARRANT SHARES AND CONVERSION SHARES.
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The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Preferred Stock and Common Stock, for the
purpose of effecting the exercise of the Warrant and the conversion of the
Warrant Shares and otherwise complying with the terms of this Agreement, such
number of its duly authorized shares of Preferred Stock and shares of its Common
Stock as shall be sufficient to effect the exercise of the Warrant and the
conversion of the Warrant Shares into the Conversion Shares from time to time or
otherwise to comply with the terms of this Agreement.
SECTION 4.03 NEGATIVE COVENANTS.
During the period of time commencing upon the execution of this Agreement
and ending on the later of the Warrant Termination Date or the date on which the
Promissory Note is satisfied in full, the Company shall not:
(a) effect a change in the Company's authorized capital stock; grant any
stock option or right to purchase shares of capital stock of the Company at a
price below $1.25 per share for the Company's common stock or $1.35 per share
for the Company's Series A Preferred Stock or any other preferred stock of the
Company; purchase, redeem, retire, or otherwise acquire any shares of its
capital stock; or declare or pay any dividend or other distribution or payment
in respect of shares of capital stock;
(b) amend its Certificate of Incorporation or any Certificate of
Designation of the Company;
(c) pay or increase any bonuses, salaries, or other compensation to any
stockholder, director, officer, or employee or enter into any employment,
severance, or similar contract with any director, officer, or stockholder
(except in the ordinary course of business);
(d) adopt or increase payments to or benefits under, any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of the Company (except in the
ordinary course of business);
(e) assume, guaranty, endorse or otherwise become directly or contingently
liable for the obligations of a person or entity, except guaranties by
endorsement of negotiable instruments for deposit or collection;
(f) sell, lease or otherwise dispose of any of its assets other than in
the ordinary and usual course of business;
(g) make a loan to any director, officer, subsidiary or other person or
entity; or
(h) redeem any of the capital stock of the Company.
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SECTION 4.04 USE OF PROCEEDS.
If the Warrant is exercised, PPD may direct that the Company limit its use
of the proceeds therefrom for the continued development and/or commercialization
of one or more products and services that are the subject of the Studies. If so
requested by PPD, the Company and PPD shall enter into such agreements as
reasonably necessary to effect the same.
SECTION 4.05 PAYMENT OF DOCUMENTARY, STAMP AND OTHER TAXES.
The Company shall pay any and all documentary, stamp, transfer and other
taxes that may become due and payable with respect to or as a result of the
issuance and delivery of the Warrant, the Warrant Shares, the Conversion Shares
and/or any other Transaction Documents.
SECTION 4.06 CORPORATE EXISTENCE.
The Company (a) shall maintain and cause each of its subsidiaries (if any)
to maintain, their respective corporate existence, good standing, rights and
franchises in full force and effect, and (b) remain qualified as a foreign
corporation in each jurisdiction where such qualification is required.
SECTION 4.07 PROPERTIES, BUSINESS, INSURANCE.
The Company shall maintain and cause each of its subsidiaries (if any) to
maintain as to their respective properties and business, with financially sound
and reputable insurers, insurance against such casualties and contingencies and
of such types and in such amounts as is customary for companies similarly
situated, which insurance shall be deemed by the Company to be sufficient.
SECTION 4.08 INSPECTION, CONSULTATION AND ADVICE.
The Company shall permit and cause each of its subsidiaries (if any) to
permit PPD (or its assignee or successor) and such persons as it may designate,
so long as PPD (or any successor or assignee) shall own at least seven hundred
fifty thousand (750,000) Warrant Shares or Conversion Shares, or a combination
thereof (which number of shares shall be proportionately adjusted for stock
splits, combinations, reclassifications, mergers, consolidations,
reorganizations or otherwise), at its expense, to visit and inspect any of the
properties of the Company and its subsidiaries; examine their books and take
copies and extracts therefrom; and discuss the affairs, finances and accounts of
the Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
PPD and such designees such affairs, finances and accounts), all during normal
business hours and upon reasonable notice and as often as may be reasonably
requested but not more than once per calendar quarter; provided, however, that
the Company shall not be obligated to provide any information that it reasonably
considers to be a trade secret or to contain confidential information.
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SECTION 4.09 RESTRICTIVE AGREEMENTS PROHIBITED.
Neither the Company nor any of its subsidiaries shall become a party to
any agreement that by its terms restricts the ability of the Company to perform
its material obligations under any of the Transaction Documents.
SECTION 4.10 TRANSACTIONS WITH AFFILIATES.
Except for transactions contemplated by this Agreement or as otherwise
approved by the Board of Directors, neither the Company nor any of its
subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than five percent (5%) of the outstanding capital
stock of any class or series of capital stock of the Company or any of its
subsidiaries, member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of
more than five percent (5%) of the outstanding capital stock of such
corporation, partnership, trust or other entity, except for transactions on
customary terms related to such person's employment.
SECTION 4.11 MEETINGS OF BOARD OF DIRECTORS.
The Company shall use its best efforts to ensure that meetings of its
Board of Directors are held at least once each quarter.
SECTION 4.12 ACTIVITIES OF SUBSIDIARIES.
The Company will not organize or acquire any entity that is a subsidiary
unless such subsidiary is wholly owned (directly or indirectly) by the Company.
Neither the Company nor any subsidiary of the Company will consolidate or merge
into or with another entity or sell, license, sublicense, assign or transfer all
or substantially all of its assets, except that any subsidiary may merge into or
sell or transfer assets to the Company. The Company shall not sell, license,
sublicense, assign or transfer all or any part of the Restricted Products (as
defined below). The Company shall not sell or otherwise transfer any shares of
capital stock of any subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary or to sell all or substantially all of such subsidiary's assets,
except to the Company or except in exchange for fair value. Neither the Company
nor any subsidiary of the Company shall purchase or set aside any sums for the
purchase of, or pay any dividend or make any distribution on, any shares of its
stock, except for dividends or other distributions payable to the Company. As
used herein, "Restricted Products" means the compounds listed in SCHEDULE 1.03
hereto, together with all products, services and technology related thereto or
derived therefrom.
SECTION 4.13 COMPLIANCE WITH LAWS.
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The Company shall comply, and cause each subsidiary to comply, with all
applicable laws, rules, regulations and orders, noncompliance with which would
materially adversely affect its business or condition, financial or otherwise.
SECTION 4.14 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 Generally Accepted Accounting Principles consistently applied,
reflecting all financial transactions of the Company and such subsidiary, 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 4.15 CHANGE IN NATURE OF BUSINESS.
The Company shall not make, or permit any subsidiary to make, any material
change in the nature of its business as now conducted and as proposed to be
conducted.
SECTION 4.16 QUALIFIED SMALL BUSINESS STOCK.
The Company shall submit to its stockholders (including PPD) and to the
Internal Revenue Service any reports that may be required under Section
1202(d)(1)(C) of the Code and any related Treasury Regulations. In addition,
within ten (10) days after PPD has delivered to the Company a written request
therefor, the Company shall deliver a written statement informing PPD whether
PPD's interest in the Company constitutes "qualified small business stock" as
defined in Section 1202(c) of the Code. The Company's obligation to furnish a
written statement pursuant to this SECTION 4.16 shall continue notwithstanding
the fact that a class of the Company's stock may be traded on an established
securities market.
SECTION 4.17 ADDITIONAL NEGATIVE COVENANTS.
For the period set forth in SECTION 4.18 below, the Company shall not:
(a) effect a change in the Company's authorized capital stock; grant any
stock option or right to purchase shares of capital stock of the Company at a
price below $1.25 per share for the Company's common stock or $1.35 per share
for the Company's Series A Preferred Stock or any other preferred stock of the
Company; issue any shares of the Company's Preferred Stock at price below $1.35
per share; purchase, redeem, retire, or otherwise acquire any shares of its
capital stock; or declare or pay any dividend or other distribution or payment
in respect of shares of capital stock;
(b) amend its Certificate of Incorporation or any Certificate of
Designation of the Company; or
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(c) sell, lease or otherwise dispose of any of its assets other than in
the ordinary and usual course of business.
SECTION 4.18 TERMINATION OF COVENANTS.
All of the covenants set forth in SECTIONS 4.01 through 4.05 shall remain
in full force and effect until the Company has fulfilled such covenant or until
expiration of the time period provided for therein. If the Warrant is not
exercised, then all of the covenants set forth in SECTIONS 4.06 through 4.17
shall terminate and be of no further force or effect upon the later of the
Warrant Termination Date or the date on which the Promissory Note is satisfied
in full. If the Warrant is exercised, all of the covenants set forth in SECTIONS
4.06 through 4.17 shall terminate and be of no further force and effect only
when PPD (or any successor or assignee) ceases to hold less than 750,000 of the
Warrant Shares or the Conversion Shares, or a combination thereof (which number
of shares shall be proportionately adjusted for stock splits, combinations,
reclassifications, mergers, consolidations, reorganizations or otherwise).
ARTICLE V.
CONDITIONS OF PPD'S OBLIGATION
The obligation of PPD to extend the Loan to the Company is subject to the
following additional conditions:
SECTION 5.01 ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE.
Each of the representations and warranties of the Company shall be true
and correct when made on the date hereof and on and as of the closing of the
Loan (the "Loan Closing") as though made on and as of the Loan Closing. The
Company shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Loan Closing.
SECTION 5.02 CERTIFICATE OF COMPANY.
PPD shall have received a certificate of the Chief Executive Officer of
the Company, dated as of the Loan Closing, certifying, in such detail as PPD may
reasonably request, as to the fulfillment of the conditions set forth in this
Article V.
SECTION 5.03 DELIVERIES.
The Company shall have delivered to PPD (i) a current good standing
certificate from the secretary of state of its jurisdiction of incorporation and
each jurisdiction in which the Company is qualified to do business as a foreign
corporation, (ii) certified resolutions of the Company's Board of Directors
approving this Agreement, and the transactions and agreements contemplated by
this
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Agreement, (iii) certified copies (including all amendments thereto and
restatements thereof) of the Company's Certificate of Incorporation, any
Certificate of Designation filed by the Company with the Delaware Secretary of
State, and of the Company's Bylaws, and (iv) a certificate of incumbency
certifying as to the names of the officers and directors of the Company and as
to the signatures of the officers of the Company authorized to execute this
Agreement and the other Transaction Documents.
SECTION 5.04 NO MATERIAL ADVERSE CHANGES.
On or prior to the date hereof and at the Loan Closing, the Chief
Executive Officer of the Company shall have provided a certificate to PPD
confirming (i) that there have been no material and adverse changes in the
condition (financial or otherwise), prospects, properties, assets, liabilities,
business or operations of the Company since the date of the Balance Sheet, and
(ii) the absence of material undisclosed liabilities.
SECTION 5.05 OPINION OF COUNSEL.
There shall have been delivered to PPD a signed opinion of counsel to the
Company, dated as of the Loan Closing, substantially in the form attached as
SCHEDULE 5.05 and acceptable to PPD and its counsel.
SECTION 5.06 GENERATION OF ADDITIONAL CASH.
During the period commencing on September 1, 2002 and terminating on the
date of the Loan Closing, the Company shall have raised at least Three Hundred
Thousand Dollars ($300,000) in additional cash through the issuance of its
common stock or shares of its Series A Preferred Stock (the "Pre-closing
Issuance"). No shares of common stock shall have been sold in the Pre-closing
Issuance at a per share price of less than $1.25 and no shares of Series A
Preferred Stock shall have been sold in the Pre-closing Issuance at a per share
price of less than $1.35. The Company also shall have provided to PPD on or
before the Loan Closing a written summary of the Pre-closing Issuance (which
shall include, without limitation, the number of shares sold, the price per
share, the identity of the purchaser(s), etc.), together with such other
information concerning the Pre-closing Issuance that PPD may reasonably request.
SECTION 5.07 MINIMUM CASH BALANCE.
At the Loan Closing, the Company shall have delivered to PPD an unaudited,
internally prepared consolidated balance sheet of the Company as of the Loan
Closing date (the "Closing Date Balance Sheet"). The Closing Date Balance Sheet
shall (i) reflect a balance of cash and cash equivalents of no less than
$440,000 as of such date, and (ii) be certified as true and accurate by the
President of the Company.
ARTICLE VI.
NOTICES
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All communications hereunder will be in writing and, except as otherwise
expressly provided by like notice by one party to the other of a change of
address, will be hand-delivered, sent by U.S. certified mail, return receipt
requested, or telefaxed (with a written record of completed transmission to the
applicable number) to:
Company: Chemokine Therapeutics Corp.
00000 XxxXxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx, President
Telefax number: 000-000-0000.
Copies to: Chemokine Therapeutics Corp.
McGuardian Bldg.
0000 Xxxx Xxxx
Xxxx 000 Xxxxxxxxx, XX X0X 0X0
Telefax number: 000-000-0000
Xxxxxxx X. Xxxxxxxx
Xxxxxx Xxxxxxx & Xxxxxxx L.L.P.
000 Xxxxx Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telefax number: 000-000-0000
PPD: Pharmaceutical Product Development, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx, Esq., General Counsel
Telefax number: 000-000-0000
All notices shall be deemed given and received on the date of delivery, if
hand-delivered or sent by facsimile, or on the date of receipt or refusal of
receipt, as evidenced by the certified mail receipt, if sent by U.S. mail. Any
change of address notice shall not be effective without ten (10) days prior
written notice to the other party.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.01 CAPTIONS.
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All captions contained in this Agreement are for reference only and do not
interpret, define, or limit the scope, extent, or intent of this Agreement or
any of its provisions.
SECTION 7.02 COUNTERPART EXECUTION.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, with the same effect as if all parties had
executed the same counterpart. All counterparts shall be construed together and
shall constitute one Agreement.
SECTION 7.03 TIME.
Time is of the essence of this Agreement.
SECTION 7.04 INTEGRATED AGREEMENT.
This Agreement constitutes the entire understanding and agreement between
the parties with respect to the subject matter of this Agreement, and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral
or written, of the parties; there are no agreements, understandings,
restrictions, representations, or warranties other than those set forth in this
Agreement.
SECTION 7.05 NUMBER; GENDER; DOLLARS.
As used in this Agreement and when required by the context, the singular
number shall include the plural and the masculine gender shall include the
feminine and neuter genders and the word "person" shall include corporation,
firm, partnership, individual, or other form of association. All references to
"dollars" or "$" in this Agreement shall mean and refer to dollars in United
States currency.
SECTION 7.06 NO WAIVER.
No term or provision of this Agreement shall be waived or any breach of
this Agreement excused except in writing signed by the party that is claimed to
have so waived or excused. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision. Any consent or waiver by any party
to any breach of this Agreement by the other party, whether expressed or
implied, shall not constitute a consent to, waiver of, or excuse for, any other
breach. The failure of any party to give notice to the other party, or to take
any other step in respect of, any breach of any provision of this Agreement
shall not constitute a waiver thereof. Acceptance of payment by a party after
the breach of any provision of this Agreement by the other party shall not
constitute a waiver thereof.
SECTION 7.07 AMENDMENT.
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This Agreement may be amended only by an instrument in writing signed by
all parties that expressly refers to this Agreement and specifically states that
it is intended to amend it. Furthermore, this Agreement may not be modified by
an oral agreement even though supported by new consideration.
SECTION 7.08 SURVIVAL OF WARRANTIES.
The representations and warranties set forth in this Agreement shall
survive the execution of this Agreement, any termination of this Agreement prior
to the closing of the Loan due to the Company's inability to satisfy any
conditions to the extension of the Loan contained herein, the closing of the
Loan, the issuance of the Warrant and the issuance of the Warrant and Conversion
Shares (if applicable), and shall in no way be affected by any investigation of
the subject matter thereof by or on behalf of PPD.
SECTION 7.09 ASSIGNMENT.
This Agreement, and all rights and obligations hereunder, are personal to
the parties, and, except as otherwise provided herein and except for the right
of PPD to assign and transfer the Warrant, the Warrant Shares and/or the
Conversion Shares, neither this Agreement nor any of the rights or obligations
hereunder may be assigned or delegated by a party without the prior written
consent of the other party, which shall not be unreasonably withheld. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
SECTION 7.10 EXPENSES.
Except as specifically provided in this Agreement, each party hereto shall
bear its own fees and expenses associated with the preparation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby
SECTION 7.11 REMEDIES.
Each party shall be entitled to exercise all remedies at law or in equity.
All remedies shall be cumulative. The pursuit by one party of a particular
remedy shall not constitute a waiver of any right to pursue any other remedy,
either concurrently or subsequently to seeking any other remedy. A waiver of one
remedy at one point in time shall not constitute a waiver of the same remedy at
another point in time. A party shall be entitled to prejudgment interest at the
highest legal rate from the time of default until the time of judgment, and
shall be entitled to postjudgment interest at the highest legal rate until the
judgment is satisfied.
SECTION 7.12 DRAFTING AGREEMENT.
The parties are of equal bargaining strength and have had the opportunity
to discuss and negotiate this Agreement in detail. Each of the parties waives
all provisions of law that would
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otherwise require this Agreement to be construed against the party drafting this
Agreement. Each party shall be deemed to have drafted this Agreement.
SECTION 7.13 FURTHER ASSURANCES.
The parties shall from time to time, without further consideration, do and
perform all such further acts and things and execute all such further documents
and instruments that may be reasonably requested to ensure the carrying out of
the intent and purpose of this Agreement. Each party shall perform its
obligations under this Agreement in accordance with all applicable laws, rules,
and regulations now or hereafter in effect. Except where expressly stated to the
contrary in this Agreement, all rights and remedies specified are cumulative and
are not exclusive of any rights or remedies provided by law or in equity.
SECTION 7.14 RELATIONSHIP BETWEEN THE PARTIES.
This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between the parties. No party shall
have the right to obligate or bind the other party in any manner whatsoever.
Neither party is an agent of the other party.
SECTION 7.15 SEVERABILITY.
If any provision in this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
SECTION 7.16 BINDING ON SUCCESSORS.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not.
SECTION 7.17 TERMINATION OF PPD'S OBLIGATION
The obligation of PPD to extend the Loan shall terminate, without further
notice or election, in the event all of the conditions contained herein to the
extension of the Loan (including, without limitation, the conditions set forth
in Article V above) are not satisfied in full on or before November 8, 2002,
whereupon PPD shall have no further obligation, liability or responsibility
under this Agreement.
[SIGNATURE PAGE FOLLOWS]
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EXECUTION PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
Chemokine Therapeutics Corp. Pharmaceutical Product Development, Inc.
By: ________________________________ By: ________________________________
Xx. Xxxxxx Xxxxxx, President Title: _____________________________
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SCHEDULE 1.01
PROMISSORY NOTE
$250,000.00 October ___, 2002
FOR VALUE RECEIVED, CHEMOKINE THERAPEUTICS CORP., a Delaware corporation
("Maker"), promises to pay to the order of PHARMACEUTICAL PRODUCT DEVELOPMENT,
INC., a North Carolina corporation (herein, together with any subsequent holder
of this Note, referred to as "Payee"), in lawful money of the United States of
America, the principal sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00), together with interest in arrears on the unpaid principal balance
at an annual rate equal to ten percent (10%) (the "Rate"), in the manner and
subject to the terms and conditions set forth hereinbelow. Interest shall be
calculated on the basis of actual days elapsed over a 360-day year.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Loan and Stock Warrant Agreement dated
October __, 2002, by and between Maker and Payee (the "Loan Agreement"), and is
subject to the terms and conditions of the Loan Agreement, which are, by this
reference, incorporated herein and made a part hereof. However, neither this
reference to the Loan Agreement nor any provision thereof shall impair the
absolute and unconditional obligation of Maker to pay the principal and interest
on this Note as herein provided. Capitalized terms used in this Note without
definition shall have the respective meanings set forth in the Loan Agreement.
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
(a) Interest shall accrue at the Rate and shall be payable on the
Maturity Date. As used herein, the "Maturity Date" shall mean and refer to
_________________, 2003.
(b) The entire unpaid principal balance, accrued interest and all
other amounts due under this Note shall be due and payable in full on the
Maturity Date. Payments made by Maker to Payee shall be applied in such order as
Payee may determine in Payee's discretion.
1.2 CREDIT TO PURCHASE PRICE; PAYMENT IN SHARES
Pursuant to the terms of the Loan Agreement, Maker has issued the Warrant
to Payee contemporaneously with the extension of the Loan by Payee to Maker. If
Payee exercises the Warrant in accordance with its terms prior to the Maturity
Date, then Payee may, at its option, elect to receive a credit in the amount of
all unpaid principal, accrued interest and any other
amounts due under this Note towards the purchase price of the Warrant Shares. If
Payee does not exercise the Warrant prior to the Maturity Date, then:
(a) If Maker has Two Million Dollars ($2,000,000) or more in liquid
assets as of the Maturity Date, then Maker shall repay to Payee in cash all
principal, accrued interest and other amounts due under this Note on the
Maturity Date.
(b) If Maker does not have Two Million Dollars ($2,000,000) or more
in liquid assets as of the Maturity Date and if no Event of Default has then
occurred, then Maker may, at its option in lieu of repaying the Loan in cash,
issue to Payee on the Maturity Date such number of shares of Maker's common
stock, valued at a price of $1.25 per share, as are necessary to satisfy in full
all unpaid principal, accrued interest and other amounts due under this Note.
1.3 MANNER OF PAYMENT
All payments of principal and interest on this Note, whether in cash or in
shares of stock in accordance with Section 1.2 above, shall be made to Payee at
0000 Xxxxxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxxxxxxx, XX 00000, or at such other place
in the United States of America as Payee shall designate to Maker in writing.
All cash payments of principal and interest on this Note shall be made by
certified or bank cashier's check or by wire transfer of immediately available
funds to an account designated by Payee in writing. All payments shall be made
without set-off, counterclaim or deduction of any kind. If any payment of
principal or interest on this Note is due on a day which is not a Business Day,
such payment shall be due on the next succeeding Business Day, and such
extension of time shall be taken into account in calculating the amount of
interest payable under this Note. "Business Day" means any day other than a
Saturday, Sunday or legal holiday in the State of North Carolina.
1.4 PREPAYMENT
Maker may, without premium or penalty, at any time and from time to time,
prepay all or any portion of the outstanding principal balance due under this
Note in cash, provided that each such prepayment is accompanied by accrued
interest on the amount of principal prepaid calculated to the date of such
prepayment.
2. DEFAULT
2.1 EVENTS OF DEFAULT
An "Event of Default" shall occur under this Note upon the happening of
any one or more of the following events: (a) in the event of default in the
repayment of the entire principal balance, accrued interest and other amounts
due hereunder on or before the Maturity Date; (b) any other breach or default in
payment or performance by Maker of any covenant, term, obligation or agreement
under this Note or under any of the other Transaction Documents which is not
cured within any applicable cure period (or, if no cure period is prescribed,
then within ten (10) days of receipt by
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Maker of notice of default from Payee); or (c) in the event of the dissolution,
insolvency, receivership, bankruptcy (voluntary or involuntary), assignment for
the benefit of creditors or reorganization under any bankruptcy or similar laws
of the Maker.
2.2 REMEDIES
Upon the occurrence of an Event of Default, the entire unpaid principal
balance of this Note, together with all accrued interest and any other amounts
due hereunder, shall be immediately due and payable, whereupon Payee, at its
option, may (a) exercise any and all rights and remedies available to Payee
under the Transaction Documents, and (b) exercise any and all rights and
remedies available to Payee under applicable law. All rights and remedies
available to Payee to redress an Event of Default, whether granted herein or
otherwise, shall be cumulative and may be exercised singly or concurrently
and/or from time to time in Payee's discretion.
2.3 COSTS OF COLLECTION
Upon an Event of Default, Maker shall pay all reasonable costs and
expenses incurred by or on behalf of Payee in connection with Payee's exercise
of any or all of its rights and remedies under this Note, including, without
limitation, reasonable attorneys' fees and costs of collection not to exceed
fifteen percent (15%) of the unpaid principal and interest of this Note.
2.4 NOTICE BY MAKER
Maker shall notify Payee in writing of the occurrence of an Event of
Default immediately upon Maker's acquiring knowledge of such occurrence.
2.5 DEFAULT RATE OF INTEREST
From and after the date of the occurrence of an Event of Default, accrued
interest on the outstanding principal hereunder shall be calculated at the rate
of twelve percent (12%) per annum.
3. MISCELLANEOUS
3.1 WAIVER
All parties to this Note, including any co-makers, endorsers, sureties and
guarantors, hereby waive presentment for payment, demand, protest, notice of
nonpayment or dishonor, and any and all other notices and demands whatsoever,
and any and all defenses on the grounds of (a) any extension of time for payment
which may be granted by the holder of this Note or any other amendment to or
modification of this Note, (b) any release, surrender, exchange, modification or
substitution of any security for this Note, and (c) any failure to assert any
legal rights available to the holder of this Note. All parties to this Note,
including any co-makers, endorsers, sureties and guarantors, agree to remain
bound until the entire indebtedness evidenced by this Note is paid in
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full. Maker acknowledges the sufficiency and receipt of the full consideration
required of Payee for this Note and that this Note is the legal and binding
obligation of the Maker, enforceable in accordance with its terms. No waiver by
Payee of any right or remedy under this Note shall be effective unless in a
writing signed by Payee. Neither the failure nor the delay in enforcing any
right, power or privilege under this Note will operate as a waiver or release of
any such right, power or privilege and no single or cumulative exercise of any
such right, power or privilege by Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. To the maximum extent permitted by law, (i) no claim or
right of Payee arising out of this Note can be discharged by Payee, in whole or
in part, by a waiver or renunciation of the claim or right unless in a writing
signed by Payee; (ii) no waiver that may be given to Maker will be applicable
except in the specific instance for which it is given; and (iii) no notice to or
demand on Maker will be deemed to be a waiver of any obligation of Maker or of
the right of Payee to take further action without notice or demand as provided
in this Note.
3.2 NOTICES
Any notice required or permitted to be given hereunder shall be given in
accordance with the terms of the Loan Agreement.
3.3 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
3.4 GOVERNING LAW
This Note will be governed by the laws of the State of North Carolina
without regard to conflicts of laws principles and without regard to the
location of any Maker, any guarantor hereof, or of any properties or assets
granted as security for this Note.
3.5 PARTIES IN INTEREST
This Note shall bind each Maker and its successors and assigns and inure
to the benefit of Payee and its successors and assigns. No Maker may assign its
rights or obligations hereunder without the prior written consent of Payee.
3.6 SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified. All words used in this Note will be construed
to be of such gender or number as the circumstances require. Unless
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otherwise expressly provided, the words "hereof" and "hereunder" and similar
references refer to this Note in its entirety and not to any specific section or
subsection hereof. This Note may not be amended, changed or modified in any
respect except by a written document which has been executed by Maker and Payee.
3.7 TIME OF THE ESSENCE
Time is of the essence with respect to all dates and time periods set
forth in this Note.
3.8. JURISDICTION; VENUE
Maker hereby irrevocably agrees that any legal action or proceeding
arising out of or relating to this Note may be instituted in the Superior Court
in New Hanover County, North Carolina or in the United States District Court for
the Eastern District of North Carolina. Maker consents to the jurisdiction of
such courts and waives any objection to the maintenance of any legal action or
proceeding in any state or federal courts of the State of North Carolina on the
basis of improper venue or inconvenient forum.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Maker has
caused its duly authorized officer to execute this Note under seal as of the
date first written above.
MAKER: CHEMOKINE THERAPEUTICS CORP.
By: _____________________________
Name: ___________________________
Title: __________________________
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SCHEDULE 1.02
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement"), dated as of October __, 2002, is
made and entered into by and between CHEMOKINE THERAPEUTICS CORP., a Delaware
corporation (the "Company"), and PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. (the
"Warrantholder").
This Agreement is executed and delivered pursuant to the terms and
conditions of that certain Loan and Stock Warrant Agreement of even date by and
between the Company and the Warrantholder (the "Loan Agreement"). Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement. Pursuant to and in accordance with the terms and conditions
of the Loan Agreement, the Company agrees to issue and sell, and the
Warrantholder agrees to purchase, for a purchase price of $1.00, warrants, as
hereinafter described (the "Warrants"), to purchase a number of shares (the
"Shares"), subject to adjustment pursuant to the terms hereof, of the Company's
Series A Convertible Preferred Stock, $.001 par value (the "Preferred Stock").
The Shares may be converted into shares of the Company's common stock, $.001 par
value ("Conversion Shares"), according to the terms of the Certificate of
Designations of Chemokine Therapeutics Corp. dated February 1, 2001 and filed
with the Delaware Secretary of State on March 28, 2001, as amended (the
"Certificate of Designations").
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
Section 1. Transferability and Form of Warrants.
1.1 Registration. The Warrants shall be numbered and shall be registered
on the books of the Company when issued. The Company may deem and treat the
Warrantholder of record as the owner of the Warrants for the purpose of any
exercise thereof and any distribution to the holder thereof and for all other
purposes.
1.2 Transfer. The Warrants shall be transferable in whole or in part only
on the books of the Company maintained at its principal office in Irvine,
California, or wherever its principal office may then be located, upon delivery
thereof duly endorsed by the Warrantholder or by its duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer, and if reasonably determined by counsel to the Company,
an opinion of counsel reasonably satisfactory to the Company that such transfer
is exempt from registration under the Securities Act of 1933, as amended (the
"Act"). Upon any registration of transfer, the Company shall execute and deliver
new Warrants to the person or persons entitled thereto, and the surrendered
Warrants shall be canceled by the Company.
1.3 Transfer of the Warrants. The Warrants are freely transferable by the
Warrantholder. The Warrants may be divided or combined, upon request to the
Company by the Warrantholder,
into a certificate or certificates representing the right to purchase the same
aggregate number of Shares. Unless the context indicates otherwise, the term
"Warrantholder" shall include any transferee or transferees of the Warrants
pursuant to this subsection 1.3, and the term "Warrants" shall include any and
all warrants outstanding pursuant to this Agreement, including those evidenced
by a certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to this Agreement. The Warrantholder agrees that prior to
making any disposition of the Warrants or the Shares, the Warrantholder shall
give written notice to the Company describing briefly the manner in which any
such proposed disposition is to be made; and no such disposition shall be made
if the Company has notified the Warrantholder that, in the opinion of counsel
selected by the Company, a registration statement or other notification or
post-effective amendment thereto (hereinafter collectively a "Registration
Statement") under the Act is required with respect to such disposition and no
such Registration Statement has been filed by the Company with, and declared
effective, if necessary, by, the Securities and Exchange Commission (the
"Commission").
1.4 Form of Warrants. The text of the Warrants and the form of election to
purchase Shares shall be substantially as set forth in Exhibit A attached
hereto. The number of Shares issuable upon exercise of the Warrants is subject
to adjustment upon the occurrence of certain events, all as hereinafter
provided. The Warrants shall be executed on behalf of the Company by its
President or by a Vice President. A Warrant bearing the signature of an
individual who was at the time of signature the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold such office prior to the delivery of such Warrant or did not hold such
office on the date of this Agreement.
The Warrants shall be dated as of the date of signature thereof by the
Company either upon initial issuance or upon division, exchange, substitution or
transfer.
1.5 Legend on Shares. Each Warrant certificate and certificate of Shares
initially issued upon exercise of the Warrants shall bear the following legend,
unless, at the time of exercise, such Shares are subject to a currently
effective registration statement under the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT PURSUANT TO A
REGISTRATION OR AN EXEMPTION FROM SUCH REGISTRATION AND IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act, of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of the Company's counsel, the securities represented thereby need no
longer be subject to such restrictions. In addition, if the Shares deliverable
upon exercise of any Warrants are not subject to a currently effective
Registration Statement under the Act, the Warrantholder shall deliver to the
Company such representations and certifications as the
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Company, or the Company's counsel, shall reasonably require in order to comply
with applicable federal and state securities laws for the issuance of such
Shares.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling the Warrantholder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled the Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person or persons entitled thereto a new
Warrant certificate as so requested and the Warrants so surrendered for exchange
shall be canceled by the Company.
Section 3. Term of Warrants; Exercise of Warrants.
3.1 Subject to the terms of this Agreement, the Warrantholder shall have
the right, at any time during the period commencing at 9:00 a.m., Pacific Time,
on October __, 2002, and ending at 5:00 p.m., Pacific Time, on the Warrant
Termination Date (as said term is defined in the Loan Agreement), to purchase
from the Company up to the number of fully paid and nonassessable Shares to
which the Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly filled in and signed, and upon payment to the
Company of the Warrant Price (as defined in and determined in accordance with
the provisions of this Section 3 and Sections 7 and 8 hereof), for the number of
Shares in respect of which such Warrants are then exercised, but in no event for
less than 100 Shares (unless less than an aggregate of 100 Shares are then
purchasable under all outstanding Warrants held by a Warrantholder). Payment of
the aggregate Warrant Price shall be made in cash, by check, or as set forth in
Section 3.3. The Warrantholder shall be entitled to a credit against the Warrant
Price in accordance with the provisions of Section 1.04 of the Loan Agreement.
3.2 The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part. Any Warrants not
surrendered to the Company for exercise in accordance with this Section 3.1
prior to 5:00 p.m., Pacific Time, on the Warrant Termination Date shall be void.
3.3 The Warrants shall be deemed to have been exercised immediately prior
to the close of business on the date of their surrender for exercise as provided
above, and the person entitled to receive the Shares issuable upon such exercise
shall be treated for all purposes as the holder of record of such shares as of
the close of business on such date. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the Company at its
expense shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full Shares issuable upon
such exercise together with cash, as provided in Section 9 hereof, in respect of
any fractional Shares otherwise issuable upon such surrender; provided that if
the Shares deliverable upon exercise of any Warrants are not subject to a
currently effective Registration Statement under the Act, the Warrantholder has
delivered such representations and certifications as the Company, or the
Company's counsel, may reasonably
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require pursuant to Section 1.5 hereof. In the event that the Warrants are
exercised in part, the Company at its expense will execute and deliver new
Warrants of like tenor exercisable for the number of Shares for which the
Warrants may then be exercised.
Section 4. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of the Warrants or the
Shares; provided, however, that the Company shall not be required to pay any tax
which may be payable with respect to any secondary transfer of the Warrants or
the Shares.
Section 5. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant.
Section 6. Reservation of Shares. There has been reserved, and the Company
shall at all times keep reserved so long as the Warrants remain outstanding, (i)
out of its authorized Preferred Stock, such number of Shares of Preferred Stock
as shall be subject to purchase under the Warrants, and (ii) out of its
authorized common stock, such number of Conversion Shares as the Shares may be
converted into in accordance with the terms of the Certificate of Designations.
Section 7. Warrant Price. The price per Share at which Shares shall be
purchasable upon the exercise of the Warrants (the "Warrant Price") shall be
$1.35 subject to further adjustment pursuant to Section 8 hereof.
Section 8. Adjustments. The number and kind of securities purchasable upon
the exercise of the Warrants and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events (if and to the
extent such events are permitted or consented to in accordance with the terms
and covenants in the Loan Agreement), as follows:
8.1 Mergers, Consolidations or Sale of Assets. If at any time there shall
be a capital reorganization (other than a combination or subdivision of
Preferred Stock otherwise provided for herein), or a merger or consolidation of
the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the Warrantholder shall thereafter be entitled
to receive upon exercise of the Warrants and payment of the Warrant Price, the
number of Shares of Preferred Stock or other securities or property of the
Company or the successor corporation resulting from such reorganization, merger,
consolidation or sale, to which a holder of the Shares deliverable upon exercise
of the Warrants would have been entitled under the provisions of the agreement
in such reorganization, merger, consolidation or sale if the Warrants had been
exercised immediately before consummation of such reorganization, merger,
consolidation or sale. In any such case, appropriate adjustment (as determined
in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of the Warrants with respect to the rights and
interests of the Warrantholder after
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the reorganization, merger, consolidation or sale to the end that the provisions
of the Warrants (including adjustment of the Warrant Price then in effect and
the number of Shares) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of the Warrants.
8.2 Splits, Subdivisions and Dividends. In the event the Company should at
any time or from time to time fix a record date for the effectuation of a split
or subdivision of the outstanding Shares of Preferred Stock or the determination
of the holders of Preferred Stock entitled to receive a dividend or other
distribution payable in additional Shares of Preferred Stock or other securities
or rights convertible into, or entitling the holder thereof to receive directly
or indirectly, additional Shares of Preferred Stock (hereinafter referred to as
the "Preferred Stock Equivalents") without payment of any consideration by such
holder for the additional Shares of Preferred Stock or Preferred Stock
Equivalents (including the additional Shares of Preferred Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such distribution, split or subdivision if no record date is fixed), the per
share Warrant Price shall be appropriately decreased and the number of Shares
shall be appropriately increased in proportion to such increase of outstanding
shares so that the Warrantholder would have the number of shares to which a
holder of the Shares deliverable upon exercise of the Warrants would have been
entitled had the warrants been exercised immediately prior to such split,
subdivision or dividend for the same aggregate price as would have been paid
immediately prior to such split, subdivision or dividend.
8.3 Combination or Reverse Split of Shares. If the number of Shares of
Preferred Stock outstanding at any time after the date hereof is decreased by a
combination of, or a reverse split affecting, the outstanding Shares of
Preferred Stock, the Warrant Price shall be appropriately increased and the
number of Shares shall be appropriately decreased in proportion to such decrease
in outstanding shares so that the Warrantholder would have the number of shares
to which a holder of the Shares deliverable upon exercise of the Warrants would
have been entitled had the warrants been exercised immediately prior to such
combination or reverse split for the same aggregate price as would have been
paid immediately prior to such combination or reverse split.
8.4 No Adjustment. No adjustment in the number of Shares purchasable
pursuant to the Warrants shall be required unless such adjustment would require
an increase or decrease of at least one percent in the number of Shares then
purchasable upon the exercise of the Warrants or, if the Warrants are not then
exercisable, the number of Shares purchasable upon the exercise of the Warrants
on the first date thereafter that the Warrants become exercisable; provided,
however, that any adjustments which by reason of this subsection 8.4 are not
required to be made immediately shall be carried forward and taken into account
in any subsequent adjustment.
8.5 Notice of Adjustment. Whenever the number of Shares purchasable upon
the exercise of the Warrants is adjusted as herein provided, the Company shall
cause to be promptly mailed to the Warrantholder by first class mail, postage
prepaid, notice of such adjustment and a certificate of the chief financial
officer of the Company setting forth the number of Shares purchasable upon the
exercise of the Warrants and the Warrant Price after such adjustment, a brief
statement of the facts requiring such adjustment and the computation by which
such adjustment was made.
-5-
Section 9. Fractional Interests; Current Market Price. The Company shall
not be required to issue fractional Shares on the exercise of the Warrants. If
any fraction of a Share would, except for the provisions of this Section 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the then Current Market Price
multiplied by such fraction. For purposes of this Agreement, the term, "Current
Market Price" shall mean the average of the per share closing bid prices of the
Company's Preferred Stock quoted in the Over-the-Counter Market summary or the
average of the per share closing prices quoted on the NASDAQ National Market or
on any exchange on which the Preferred Stock is listed, whichever is applicable,
as published in the Western Edition of the Wall Street Journal (or, if not so
reported, as otherwise reported by the NASDAQ System) for five (5) trading days
prior to the date notice of exercise is given to the Company. If trading in the
Preferred Stock is not reported by the NASDAQ system, the bid price referred to
above shall be the average of the lowest bid price for five (5) trading days as
reported in the "pink sheets" published by the National Quotation Bureau,
Incorporated. If the Preferred Stock is quoted on the NASDAQ National Market or
listed on any exchange, the closing price referred to above shall be the last
reported sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices.
Section 10. No Rights as Stockholders; Notices to Warrantholders. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or its respective transferees any rights as a stockholder
of the Company, including the right to vote, receive dividends, consent or
receive notices as a stockholder in respect of any meeting of stockholders for
the election of directors of the Company or any other matter. If, however, at
any time prior to the expiration of the Warrants and prior to their exercise,
any one or more of the following events shall occur:
(a) any action which would require an adjustment pursuant to Section 8; or
(b) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger or sale of its property, assets and
business as an entirety or substantially as an entirety) shall be proposed:
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 14 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. The failure to mail or receive such
notice or any defect therein shall not affect the validity of any action taken
with respect thereto.
Section 11. Registration Rights.
11.1 Company Registration. If the Company shall determine to register any
of its securities either for its own account or the account of security holders
of the Company on a registration statement on form X-0, X-0, X-0, XX-0, XX-0 or
other applicable form, the Company
-6-
will (i) promptly give to each Warrantholder, each holder of Shares and each
holder of Conversion Shares, at their respective addresses as they appear on the
records of the Company, written notice thereof and (ii) use its best efforts to
include in such registration (and any related qualification under blue sky laws
or other compliance), and in any underwriting involved therein, all the
Conversion Shares (but only Conversion Shares, including Conversion Shares
obtained upon the exercise of the Warrants and conversion of the Shares into
Conversion Shares occurring after the date of the notice) specified in a written
request made by any Warrantholder, holder of Shares or holder of Conversion
Shares within thirty (30) days after delivery of the written notice from the
Company. Such written request may specify some or all of a holder's Conversion
Shares.
11.2 Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Warrantholder, holder of Shares or holder of
Conversion Shares as a part of the written notice given. In such event the right
of any such holder to registration pursuant to Section 11.1 shall be conditioned
upon such holder's participation in such underwriting and the inclusion of such
holder's Conversion Shares in the underwriting to the extent provided herein.
11.3 Expenses. All fees, disbursements and out-of-pocket expenses in
connection with the filing of any registration statement under this Section 11
(or obtaining the opinion of counsel and any no-action position of the
Commission with respect to sales under Rule 144) and in complying with
applicable securities and Blue Sky laws shall be borne by the Company including
reasonable fees of one counsel for the holders of Conversion Shares. The Company
at its expense will supply any holder of Conversion Shares with copies of such
registration statement and the prospectus included therein and other related
documents, and any opinions and no-action letters in such quantities as may be
reasonably requested by the holder of Conversion Shares.
11.4 The Company agrees that until all Conversion Shares have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
will keep current in filing all materials required to be filed with the
Commission in order to permit the holders of such securities to sell the same
under Rule 144.
Section 12. Indemnification.
12.1 In the event of the filing of any registration statement with
respect to the Conversion Shares pursuant to Section 11 hereof, the Company will
indemnify the holder of Conversion Shares, its officers, directors and partners,
legal counsel and accountants and each person controlling such holder of
Conversion Shares within the meaning of Section 15 of the Act, with respect to
which registration, qualification or compliance has been effected pursuant to
Section 11 hereof, against all expenses, claims, losses, damages and liabilities
(or actions, proceedings or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Act or any rule or regulation
-7-
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse such holder of Conversion Shares, its officers,
directors, partners, legal counsel and accountants and each person controlling
such holder of Conversion Shares, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or settling
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by the
holder of Conversion Shares and stated to be specifically for use therein.
12.2 The holder of Conversion Shares will, if Conversion Shares held
by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, legal counsel and accountants against all
claims, losses, damages and liabilities (or actions, proceedings, or settlements
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other offering document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, its directors, officers, partners, legal counsel and
accountants, for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other offering document in reliance upon and in conformity with written
information furnished to the Company by the holder of Conversion Shares
specifically for use in such registration statement, prospectus, offering
circular or other offering document; provided, however, that the obligations of
the holder of Conversion Shares hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of the
holder of Conversion Shares (which consent shall not be unreasonably withheld).
12.3 Each party entitled to indemnification under this Section 12
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 12, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
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 in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in
-8-
question as an Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and litigation
resulting therefrom.
Section 13. Contribution. If the indemnification provided for in Section
12 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Section 14. Notices. Any notice pursuant to this Agreement by the Company
or by a Warrantholder or a holder of Shares shall be in writing and shall be
deemed to have been duly given on the date of delivery or refusal indicated on
the return receipt if delivered or mailed by certified mail, return receipt
requested:
(a) If to the Warrantholder or a holder of Shares addressed to
Pharmaceutical Product Development, Inc., 0000 Xxxxx 00xx Xxxxxx, Xxxxxxxxxx, XX
00000; Attention: President.
(b) If to the Company addressed to it at 00000 XxxXxxxxx Xxxxxxxxx, Xxxxx
000, Xxxxxx, XX 00000, Attention: Xxxxxx Xxxxxx, President.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
Section 15. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company, the Warrantholder, or the holders of
Shares shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 16. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of Section 8 are complied with.
Section 17. Applicable Law. This Agreement shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be construed in accordance with the laws of said State.
Section 18. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrantholder and the holders of
-9-
Shares any legal or equitable right, remedy or claim under this Agreement. This
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrantholder, the holder of Shares and the holders of Conversion Shares.
Section 19. Amendments. This Agreement may be amended only by a written
instrument executed by duly authorized representatives of the Company and the
Warrantholder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
CHEMOKINE THERAPEUTICS CORP.
By: _________________________
Name: Xxxxxx Xxxxxx
Title: President
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By: __________________________
Name: ____________________
Title: Authorized Officer
-10-
Exhibit A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER
EXCEPT PURSUANT TO A REGISTRATION OR AN EXEMPTION FROM SUCH
REGISTRATION AND IN COMPLIANCE WITH THE AGREEMENT PURSUANT TO
WHICH THEY WERE ISSUED
Warrant Certificate No. 1
WARRANT TO PURCHASE 2,000,000 SHARES OF SERIES A
CONVERTIBLE PREFERRED STOCK
VOID AFTER 5:00 P.M.
PACIFIC TIME ON THE WARRANT TERMINATION DATE
CHEMOKINE THERAPEUTICS CORP.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received, Pharmaceutical Product
Development, Inc., the registered holder hereof or assigns ("Warrantholder"), is
entitled to purchase from Chemokine Therapeutics Corp. (the "Company"), at any
time and from time to time during the period commencing at 9:00 a.m., Pacific
Time, on October __, 2002, and before 5:00 p.m., Pacific Time, on the Warrant
Termination Date (as determined in the Agreement referred to below), at the
purchase price per share of $1.35 (the "Warrant Price"), the number of shares of
Series A Preferred Convertible Stock of the Company, par value $.001 per share
("Preferred Stock"), set forth above (the "Shares"). The number of Shares
issuable upon exercise of each Warrant evidenced hereby and the Warrant Price
shall be subject to adjustment from time to time as set forth in the Agreement
referred to below.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed and simultaneous payment of the Warrant Price at the principal
office of the Company pursuant to the terms of the Agreement.
The Warrants evidenced hereby represent the right to purchase an aggregate
of up to 2,000,000 Shares, subject to certain adjustments, and are issued under
and in accordance with a
certain Warrant Agreement, dated as of October __, 2002, (the "Agreement"),
between the Company and Warrant Holder and are subject to the terms and
provisions contained in the Agreement, to all of which the Warrantholder by
acceptance hereof consents.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder a new Warrant Certificate in respect of
the Shares of Preferred Stock as to which the Warrants evidenced hereby shall
not have been exercised. These Warrants may be exchanged at the office of the
Company by surrender of this Warrant Certificate properly endorsed for one or
more new Warrants of the same aggregate number of Shares of Preferred Stock as
evidenced by the Warrant or Warrants exchanged. No fractional Shares of
Preferred Stock will be issued upon the exercise of rights to purchase
hereunder, but the Company shall pay the cash value of any fraction upon the
exercise of one or more Warrants. These Warrants are transferable at the office
of the Company in the manner and subject to the limitations set forth in the
Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a stockholder of the Company.
CHEMOKINE THERAPEUTICS CORP.
By:
Xx. Xxxxxx Xxxxxx, President
Dated: October __, 2002
-2-
CHEMOKINE THERAPEUTICS CORP.
PURCHASE FORM
CHEMOKINE THERAPEUTICS CORP.
00000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, President
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, __________ Shares of Series A Convertible Preferred Stock (the
"Shares") provided for therein, and requests that certificates for the Shares be
issued in the name of:
___________________________
(Please Print or Type Name)
_____________________________
(Address, including zip code)
_____________________________________
(Social Security No. or Tax I.D. No.)
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the Shares purchasable under
the Warrant Certificate be registered in the name of the undersigned
Warrantholder or his Assignee as below indicated and delivered to the address
stated below.
Name of Warrantholder or Assignee: ___________________________________
(Please Print)
Address: ________________________
Signature: ______________________ Dated: ____________________________
Note: The signature on this purchase must correspond with the name as it appears
upon the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatever.
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the assignee named below all of the rights of the
undersigned represented by the attached Warrant with respect to the number
of Shares covered by the Warrant set forth below:
(Name and Address of Assignee Must Be Printed or Typewritten)
Social Security No. No. of
Name of Assignee or Tax I.D. No. Address Shares
and does hereby irrevocably constitute and appoint Attorney to transfer
said Warrants on the books of the Company, with full power of substitution
in the premises.
Dated: ________
_______________________________________
Signature of Registered Holder
Note: The signature on this assignment must correspond with the names as it
appears upon the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change whatever.
SCHEDULE 1.03
COMPOUND CTCE-9908 (ANTI-METASTASIS), SEE STRUCTURE IN APPENDIX 1.
TESTS TO BE CARRIED OUT DURATION RATIONALE
TEST ONE:
Skin hypersensitivity reaction (mouse 3 months Whether long term use of the drug
or rats model) induces allergic reaction.
Standards to be satisfied: No immediate hypersensitivity
reaction greater than currently
marketed taxol or herceptin.
TEST TWO:
Nude mouse study or in vitro study 2 months Potential for compound to induce
with human cancer cell cancer cell growth.
Standards to be satisfied: Compound should not increase
cancer cell survival or growth
as assessed by metabolic studies.
COMPOUND CTCE-021-4 (STEM CELL MOBILIZER), SEE STRUCTURE IN APPENDIX 1
Tests to be carried out Duration Rationale
TEST THREE:
Single and multiple dose study in 3 months Compare efficacy of G-CSF to
animals and comparison to G-CSF. CTCE-021-4 and ensure the effect is
noted within 14 days and vascular
irritation
Standards to be satisfied: Compound should increase stem cell
mobilization or neutrophil
mobilization after several days
of multiple injections in comparison
to G-CSF.
TEST FOUR:
Ex-vivo study of the whole bone marrow 3 months Effect of CTCE-021-4 on CD34+
and purified CD34+ stem cells expansion, and bone marrow colony.
Toxicity on hematopoeitic cells.
Standards to be satisfied: Compound should increase CD34+ cells
migration in an in vitro assay
system.
APPENDIX 1
TO
SCHEDULE 1.03
Structure of compound XXXX-0000
Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx
\
Lys-NH(2)
/
Lyr-Gly-Val-Ser-Leu-Ser-Tyr-Arg
Structure of compound XXXX-000-0
Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx-Xxx
-Lys-Trp-Ile-Gln-Glu-Tyr-Leu-Glu-Lys-Ala-Leu-Asn-NH(2)
| |
|_ _ _ _ _ _ _ _ |
SCHEDULES 3.04 TO 3.29
SCHEDULE 3.04 Options, Warrants, etc.:
Response: X.X. Xxxxxxxxxx has registration rights on 400,000 shares. Chemokine
has arranged and is arranging to issue additional shares in return for
additional capital contributions as required by section 5.06 of the Agreement.
SCHEDULE 3.06 Changes in Financial Position:
Response: No adverse changes, other than simply using the Company's cash
resources for the ordinary expenses of the Company.
SCHEDULE 3.07 Events Subsequent to date of the Balance Sheet:
Response: None.
SCHEDULE 3.08: Litigation:
Response: None.
SCHEDULE 3.10 Intellectual Property:
Response:
The following is a summary of the patents filed by the Company.
Patent Application Description Remark
------------------ ----------- ------
March 1998 Composition of matter and method of Therapeutic chemokine receptor
use. Patent Allowed. WO-99/47158. antagonists -
May 2000 U.S., PCT composition of matter and CXCR4 agonists treatment of
method of use. Allowed. WO 01/76615. hematopoietic cells
December 2000 U.S., PCT composition of matter and CXCR4 antagonists treatment of
method of use. Allowed. WO 01/85196. hematopoietic cells
January 2001 U.S., PCT composition of matter and Therapeutic use of a novel MCP-1
method of use. Allowed. WO 02/45702 antagonist for treatment of Chemokine
mediated diseases
January 2001 U.S., PCT composition of matter and IL-8 receptor antagonist-drug for
method of use. Allowed. U.S.09/992,541 inflammatory and autoimmune diseases
February 2001 U.S., PCT composition of matter and MIP-1(alpha) receptor antagonists
method of use. Filed - drug for T-cell mediated and
autoimmune diseases
April 2001 U.S., PCT composition of matter and Tricyclic RANTES receptor ligands
method of use. Filed
May 2001 PCT patent Application, Composition of Bicyclic Aromatic chemokine receptor
matter and use. Filed ligands
August 2002 US patent Application, Filed Design of chemokine analogs for
treatment of human diseases
SCHEDULE 3.11 Encumbrances:
Response: None
SCHEDULE 3.13 Insurance:
Response: Directors & Officers Insurance; Workers Compensation Insurance;
General Liability Insurance;
SCHEDULE 3.14 Tax Elections:
Response: None
SCHEDULE 3.15 Agreements:
Response: (j) License Agreement with the University of British Columbia;
(k) X.X. Xxxxxxxxxx Agreement
SCHEDULE 3.16 Loans and Advances:
Response: None
SCHEDULE 3.22 Names of the directors and officers of the Company:
Response: Directors: Xxxxxx Xxxxxx ($250,000 salary, but Xx. Xxxxxx has not yet
drawn any salary; if the Company achieves sufficient capital, Xx. Xxxxxx might
take $50,000 in 2002), Xxxxx Xxxxxxxxx, Xxxxxxx Xxxx, C. Xxxxxxx Xxxxxx
(directors receive only warrants or stock to serve as directors). Xxxxxx Xxxxxx
is the only officer, serving as Chairman, President, and Secretary. Xxxxxxx
Xxxxx is an outside accountant, who serves part-time as the outside CFO.
2
SCHEDULE 3.23 Agreements with affiliates or insiders:
Response: Xx. Xxxxxx has an employment agreement.
SCHEDULE 3.26 Employment-related agreements:
Response: See Schedule 3.23.
SCHEDULE 3.29 Conflicts of Interest:
Response: None.
3
SCHEDULE 5.05
October __, 2002
Pharmaceutical Product Development, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxxx
Re: Chemokine Therapeutics Corp.
Ladies and Gentlemen:
We have acted as counsel to Chemokine Therapeutics Corp. (the
"Company").
Our representation of the Company has been limited to discreet legal
issues that have arisen from time to time, including in connection with the
negotiation, preparation, execution and delivery of the following documents,
each of even date unless otherwise indicated: Loan and Stock Warrant Agreement
between the Company and you dated October 15, 2002, Warrant Agreement between
the Company and you, Warrant Certificate issued by the Company to you and
Promissory Note made by the Company payable to your order (collectively, the
"Transaction Documents"). This opinion is furnished to you pursuant to Section
5.05 of the Loan and Stock Warrant Agreement and at the instruction of the
Company. Except as otherwise indicated herein, capitalized terms used in this
Opinion Letter are defined as set forth in the Loan and Stock Warrant Agreement.
This opinion is prepared in accordance with standard practices and principles
governing third party legal opinions as reflected in such reports as the
Third-Party Legal Opinion Report of the ABA Section of Business Law (dated May,
1992), the Business Law Section of the State Bar of California Report on the
Third-Party Legal Opinion Report of the ABA Section of Business Law (dated May,
1992), the Legal Opinion Principles By the Committee on Legal Opinions of the
Section of Business Law, American Bar Association, 53 Bus. Law. 831 (1998), and
Third-Party "Closing" Opinions, A Report of The Tribar Opinion Committee, 53
Bus. Law. 591 (1998)
For purposes of this Opinion Letter, the phrase "to our knowledge"
means the conscious awareness of facts or other information by those lawyers in
our firm who have
Pharmaceutical Product Development, Inc.
October ___, 2002
Page 2
rendered legal services in connection with the representation described in the
preceding paragraph. Furthermore, we have relied upon factual representations
made by the Company, upon certificates of officers or individuals attesting to
such facts contained therein, or upon the contents of documents actually
reviewed. We have also made such examinations of law and facts as we deemed
appropriate to form the basis for our opinions. No inference as to our knowledge
of the existence or absence of facts should be drawn from the fact of our
limited representation of the Company.
The law covered by the opinions expressed herein is limited to
Federal Law of the United States and the laws of the States of California and
Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, is
duly qualified and in good standing as a foreign corporation in
California, and is not required to be duly qualified and in good standing
as a foreign corporation in any other jurisdiction and has all requisite
and material corporate power and authority to own or lease its properties
and to conduct its business as currently conducted and to execute, deliver
and perform its obligations under the Transaction Documents.
(ii) The Warrants issued to you pursuant to the Warrant Agreement,
the Shares of Series A Convertible Preferred Stock issuable upon the
exercise of the Warrants ("Shares"), and the shares of the Company's
Common Stock, $.001 par value, issuable upon the conversion of the Shares
of Series A Preferred Stock ("Conversion Shares") have been duly
authorized and (or in the case of the Conversion Shares) will be, upon
exercise of the Warrants and payment therefor and conversion of the
Shares, validly issued, fully paid and non-assessable securities of the
Company, and the holders thereof are not and will not be subject to
personal liability by reason of being such holders; none of the Shares and
the Conversion Shares are subject to the preemptive rights of any
stockholder of the Company, and all corporate action required to be taken
for the authorization, issuance and sale of such securities has been
validly and sufficiently taken; the Warrants constitute legal, valid and
binding obligations of the Company, enforceable in accordance with their
terms, and the certificates proposed to represent the Shares are in due
and proper form. The Company has reserved sufficient shares of Common
Stock to permit the full conversion of the Shares.
(iii) Each of the Transaction Documents has been duly and validly
authorized, executed and delivered by the Company and is a legally valid
and binding agreement of the Company enforceable in accordance with its
terms.
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(iv) The authorized and outstanding capital stock of the Company
consists of 24,000,000 authorized shares of Common Stock, par value
$0.001, and 9,118,564 validly issued and outstanding shares of Common
Stock, 6,000,000 authorized shares of Preferred Stock, and 150,000 validly
issued and outstanding shares of Preferred Stock, such shares are fully
paid and nonassessable with no personal liability attaching to the
ownership thereof.
(v) The execution and delivery by the Company of the Transaction
Documents and the performance by the Company of its obligations therein
(1) do not violate the Certificate of Incorporation (including the
Certificate of Designations filed by the Company with the Delaware
Secretary of State, as amended) or Bylaws of the Company, (2) do not
violate applicable provisions of statutory laws or regulations, and (3) to
our knowledge, do not violate or breach or result in a default under any
order, writ, injunction or decree of any court, administrative agency or
other governmental authority or any agreement or contract by which the
Company is or may be bound.
Our opinions above are subject to bankruptcy, insolvency and other similar
laws affecting the rights and remedies of creditors generally and general
principles of equity. The opinion that any agreement is enforceable is subject
to the qualification that certain provisions of an agreement covered by this
letter may be unenforceable, but such unenforceability will not, subject to the
other exceptions, qualifications, and limitations in this letter, render the
agreement invalid as a whole or substantially interfere with the realization of
the principal benefits provided by the agreement. Furthermore, our opinions are
subject to the qualifications set forth in the "California Understanding" and
the "California Qualifications" as set forth in the Business Law Section of the
State Bar of California Report on the Third-Party Legal Opinion Report of the
ABA Section of Business Law (dated May, 1992). The "California Understanding"
and the "California Qualifications" are attached to this letter.
Subject to the foregoing, this opinion may be relied upon by you in
connection with the Loan and Stock Warrant Agreement, the Warrant Agreement and
the Promissory Note, but it may not be used or relied upon by you or any other
person for any other purpose whatsoever, except to the extent authorized herein,
without our prior written consent.
Very truly yours,
XXXXXX XXXXXXX & XXXXXXX L.L.C.
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California Understanding. When a Remedies Opinion is given: (i) the
Opinion Giver shall review each agreement of the Client to which the Remedies
Opinion applies; (ii) the Opinion Giver need not conduct legal research as to
any such agreement unless the Opinion Giver, in applying reasonable professional
judgment to that agreement, should recognize, without conducting legal research,
that there is a not insignificant degree of uncertainty as to the enforceability
of such agreement based on the existence of California Law (or federal Law and
Delaware Law if the Opinion is also given under federal Law and Delaware Law)
directly applicable to the Client, the Transaction, or both; and (iii) the
Opinion Giver may rely on general contract law principles to support an opinion
as to the enforceability of such an agreement in the absence of California Law
(or federal Law and Delaware Law if the Opinion is also given under federal Law
and Delaware Law) that the Opinion Giver, in applying reasonable professional
judgment to that agreement, should recognize, in accordance with (ii) above, as
being directly applicable to the Client, the Transaction, or both.
California Qualifications. The following shall be deemed to be excluded
from the coverage of any Remedies Opinion unless the Opinion Giver has
explicitly addressed the specific legal issue in the Opinion Letter:
1. Choice-of-law provisions;
2. Covenants not to compete;
3. Provisions for penalties, liquidated damages, acceleration of future amounts
due (other than principal) without appropriate discount to present value, late
charges, prepayment charges, and increased interest rates upon default;
4. Time is-of-the essence clauses;
5 . Confession of judgment clauses;
6. Provisions that contain a waiver of (i) broadly or vaguely stated rights,
(ii) the benefits of statutory, regulatory, or constitutional rights, unless and
to the extent the statute, regulation, or constitution explicitly allows waiver,
(iii) unknown future defenses, and (iv) rights to damages;
7. Provisions that attempt to change or waive rules of evidence or fix the
method or quantum of proof to be applied in litigation or similar proceedings;
8. Provisions that provide for the appointment of a receiver;
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9. Forum selection clauses and consent to jurisdiction clauses (both as to
personal jurisdiction and subject matter jurisdiction); and
10. Provisions appointing one party as an attorney-in-fact for an adverse party.
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