Exhibit 10.1
Execution Copy
Securities Purchase Agreement
Securities Purchase Agreement (as amended at any time, this
"Agreement"), dated as of June 22, 2001, between SafeScience, Inc., a Nevada
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corporation (the "Company"), and Elan International Services, Ltd., a Bermuda
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exempted limited liability company ("EIS").
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R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS desires to
purchase from the Company, on the date hereof, (i) 4,944.44 shares of a newly-
created series of the Company's preferred stock, par value U.S.$.01 per share,
designated "Series A Convertible Exchangeable Preferred Stock" (the "Series A
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Preferred Stock"), (ii) 1,116.79 shares of a newly-created series of the
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Company's preferred stock, par value U.S.$.01 per share, designated the "Series
C Convertible Preferred Stock" (the "Series C Preferred Stock"), (iii) 2.7
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million shares of the Company's common stock, par value U.S.$.01 per share (the
"Common Stock"), and (iv) a warrant, in a form reasonably satisfactory to the
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Company and EIS(as amended at any time, the "Warrant"), to purchase initially up
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to 381,679 shares of Common Stock. In addition, the Company may issue to EIS
from time to time in accordance with the terms hereof up to 5,654.1176 shares of
a newly-created series of the Company's preferred stock, par value U.S.$.01 per
share, designated the Series B Convertible Preferred Stock" (the "Series B
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Preferred Stock"; together with the Series A Preferred Stock and the Series C
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Preferred Stock, the "Preferred Stock"; and together with the Common Stock and
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the Warrant, the "Securities"). The rights, preferences and privileges of the
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Preferred Stock are as set forth in the Company's Certificate of Designations,
Preferences and Rights, in the form attached hereto as Exhibit A-1 (the
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"Certificate of Designations").
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B. The Company and EIS have formed SafeScience Newco, Ltd., an
exempted limited liability company organized under the laws of Bermuda
("Newco"), and pursuant to the terms of a Subscription, Joint Development and
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Operating Agreement, dated as of the date hereof (as amended at any time, the
"JDOA"), simultaneously with the transactions contemplated by this Agreement to
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occur on the Initial Closing Date (as defined below): (i) the Company shall
acquire 6,000 voting common shares of Newco, par value U.S.$1.00 per share (the
"Newco Common Shares"), representing 100% of the issued and outstanding Newco
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Common Shares and, on a fully-diluted basis, 50% of the aggregate outstanding
Newco Shares (as defined below), and 3,612 non-voting convertible preference
shares of Newco, par value of U.S.$1.00 per share (the "Newco Preferred Shares";
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together with the Newco Common Shares, the "Newco Shares"), representing 60.2%
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of the issued and outstanding Newco Preferred Shares and, on a fully-diluted
basis, 80.1% of the aggregate outstanding Newco Shares, and (ii) EIS shall
acquire 2,388 Newco Preferred Shares, representing 39.8% of the issued and
outstanding Newco Preferred Shares and, on a fully-diluted basis, 19.9% of the
aggregate outstanding Newco Shares. Additionally, as of the date hereof, Newco
has entered into license agreements with (a) Elan
(such agreement, as amended at any time, the "Elan License Agreement") and (b)
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the Company (such agreement, as amended at any time, the "Company License
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Agreement"; together with the Elan License Agreement, the "License Agreements").
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C. The Company and EIS are executing and delivering on the date
hereof a Registration Rights Agreement, in a form reasonably satisfactory to the
Company and EIS (as amended at any time, the "Company Registration Rights
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Agreement"), in respect of (i) the Common Stock issued and purchased hereunder,
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the Common Stock issued or issuable upon conversion of the Preferred Stock or
exercise of all or any portion of the Warrant and (ii) any other Common Stock
owned by EIS or any of its affiliates or their respective permitted transferees.
The Company, EIS and Newco are also executing and delivering on the date hereof
a Registration Rights Agreement, in a form reasonably satisfactory to the
Company and EIS (as amended at any time, the "Newco Registration Rights
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Agreement"). This Agreement, the Certificate of Designations, the Warrant, the
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JDOA, the Company Registration Rights Agreement, the Newco Registration Rights
Agreement, the License Agreements and each other document or instrument executed
and delivered in connection with the transactions contemplated hereby and by the
JDOA are referred to, collectively, herein as the "Transaction Documents".
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A G R E E M E N T:
In consideration of the foregoing premises and the mutual covenants
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. Closing.
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(a) Time and Place. The closing of the Initial Purchase (as defined
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below) (the "Initial Closing") shall occur the first business day that is at
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least 11 days after the mailing by the Company of a letter to its stockholders
regarding its exemption from stockholder approval for the execution of this
Agreement and the consummation of the transactions contemplated hereby or such
other date as mutually agreed by the Parties (the "Initial Closing Date"). The
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funding of each purchase of shares of Series B Preferred Stock (each, a "P.S.
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Closing") shall occur on such dates as set forth in Section 1(e) (each, a "P.S.
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Closing Date"). The Initial Closing and each P.S. Closing individually are
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referred to herein as a "Closing", and the Initial Closing Date and each P.S.
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Closing Date individually are referred to herein as a "Closing Date". The
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Initial Closing shall be held at the offices of Reitler Xxxxx LLC, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (by means of facsimile or overnight mail) and
each P.S. Closing shall be a "paper closing" by means of facsimile or as
otherwise agreed by the parties.
(b) Sale and Purchase. At the Initial Closing, subject to the terms
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and conditions hereof, the Company shall issue and sell to EIS, and EIS shall
purchase from the Company, (i) 4,944.44 shares of Series A Preferred Stock, (ii)
2.7 million shares of Common Stock, (iii) 1,116.79 shares of Series C Preferred
Stock and (iv) the Warrant (the "Initial Purchase").
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(c) Purchase Price. The aggregate purchase price for the Initial
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Purchase shall be U.S.$17.015 million (the "Initial Purchase Price"),
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U.S.$12.015 million of which represents the purchase price for the 4,944.44
shares of Series A Preferred Stock, and U.S.$5 million of which represents the
purchase price for the 2.7 million shares of Common Stock and 1,116.79 shares of
Series C Preferred Stock and the Warrant.
(d) Initial Closing Delivery. On or before the Initial Closing Date,
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subject to the terms and conditions hereof:
(i) EIS shall pay the Initial Purchase Price by wire transfer
of U.S.$17.015 million to an account designated in writing by the Company;
(ii) EIS shall execute and deliver or cause to be executed and
delivered to the Company: (A) the Company Registration Rights Agreement,
(B) the Newco Registration Rights Agreement, (C) the JDOA, and (D) the Elan
License Agreement;
(iii) the Company shall execute and deliver or cause to be
executed and delivered to EIS, as applicable: (A) certificates representing
4,944.44 shares of Series A Preferred Stock, 2.7 million shares of Common
Stock and 1,116.79 shares of Series C Preferred Stock, (B) the Warrant, (C)
the Company Registration Rights Agreement, (D) the Newco Registration
Rights Agreement, (E) the Certificate of Designations as filed with the
Secretary of State of the State of Nevada, (F) the JDOA, (G) the Company
License Agreement, (H) the pledged shares including the Stock Powers
executed pursuant to Section 7 hereof, (I) a customary secretary's
certificate from the secretary of the Company, including a certificate as
to the incumbency of the officers of the Company executing any of the
Transaction Documents, (J) the Cross Receipt, and (K) any other documents
or instruments reasonably requested by EIS; and
(iv) the Company shall cause to be delivered to EIS an opinion
of counsel in a form reasonably satisfactory to EIS.
(v) the Company shall cause to be delivered to EIS, the
delivery of which shall be a condition to EIS's obligations hereunder, a
letter from Nasdaq confirming to the Company that the approval of the
Company's stockholders is not required to consummate the transactions
contemplated by this Agreement.
(e) Series B Preferred Stock Purchases. It is estimated that Newco
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will require additional funds to commence development of Newco's products.
Within the period commencing on the Initial Closing Date and ending on the
second year anniversary of the Initial Closing Date (the "Development Period"),
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EIS and the Company may provide to Newco up to an aggregate maximum amount of
U.S.$12 million (excluding paid-in-kind dividends thereon), such funding to be
provided by EIS and the Company on a pro rata basis based on their respective
equity interests, on a fully-diluted basis, in Newco (the "Development
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Funding"). In order to ensure the Company has funds available for its share of
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the Development Funding, EIS has agreed to purchase from the Company up to
U.S.$9.612 million of Series B Preferred Stock at U.S.$1,700.00 per share,
subject to the terms and conditions set forth below.
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(1) From time to time at the request of the Company, EIS shall
purchase shares of the Series B Preferred Stock, at a price of
U.S.$1,700.00 per share (each, a "Purchase"), up to an aggregate of
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5,654.1176 shares (the "Total Commitment"); provided, that the Total
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Commitment shall be reduced in an amount equal to amounts funded by the
Company to Newco as Development Funding (each a "Development Funding
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Contribution") for which a Purchase was not concurrently requested
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hereunder. The aggregate amount of Purchases hereunder shall not in any
event exceed the amount of Development Funding funded by the Company to
Newco (after giving effect to any concurrent Purchase made hereunder and
Development Funding Contribution made by the Company) (the "Maximum
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Amount").
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(2) Each Purchase shall be subject to the following terms and
conditions:
(A) each Purchase shall be made at such time that (x) each
Participant (as defined in the JDOA) shall have determined, pursuant to
Clauses 6.3 and 6.4 of the JDOA, that Development Funding shall be
provided, (y) Newco shall have provided written notice thereof to EIS and
to the Company and (z) the Company shall have delivered a written request
to EIS in the form attached hereto as Exhibit A-2 with attached thereto an
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executed copy of the officer's certificate (the "Funding Officer's
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Certificate") attached hereto as Exhibit A-3 (collectively, the "Purchase
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Notice") not less than 10 business days prior to the requested P.S. Closing
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Date;
(B) the minimum amount of each Purchase shall be not less than
U.S.$500,000, i.e., 294.11765 shares of Series B Preferred Stock (or such
lesser amount up to the Maximum Amount or the Total Commitment, as the case
may be, if the amount that remains available is less than U.S.$500,000).
The Company shall be entitled to request up to four Purchases in any
calendar year;
(C) each Purchase shall (x) occur only during the Development
Period, (y) together with all previous Purchases, not exceed the Total
Commitment, and (z) together with all previous Purchases, not exceed the
Maximum Amount;
(D) at the time of each Purchase, no material breach or default
by the Company under any Transactions Document shall have occurred and be
continuing;
(E) at the time of each Purchase, the representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date made and as of the Closing Date (except
those representations and warranties made as of a specific date which need
only be true and correct as of such date); and
(F) at the time of each Advance, EIS shall have received any
required approvals under the Mergers and Takeovers (Control) Acts 1978-1996
(Ireland), the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and any other similar law or regulation (collectively, the
"Applicable Anti-Trust Laws"); provided, that in the event that EIS shall
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not have obtained approval under all Applicable Anti-Trust Laws at the time
a determination of the necessity of such funding by the Newco Directors and
such
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approval would be required, the Company shall issue to EIS a non-
convertible note, in form reasonably satisfactory to EIS and the Company,
and the parties hereto shall work together in good faith to agree on an
alternative funding mechanism for future borrowings; it being understood
that such note shall subsequently be exchanged for the applicable number of
shares of Series B Preferred Stock at such time that approval under the
Applicable Anti-Trust Laws shall have been obtained.
(3) On each P.S. Closing Date (A) EIS shall fund the amount set
forth in the Purchase Notice by wire transfer of immediately available
funds and confirm, in writing, the aggregate number of shares of Series B
Preferred Stock outstanding immediately thereafter, (B) the Company shall
cause to be delivered to EIS an officers' certificate confirming (x) that
the conditions described in clauses (2)(A)-(F) above have been satisfied
and (y) the outstanding aggregate principal amount after such wire
transfer, and (C) the Company shall furnish such documents and instruments
that EIS shall reasonably request, including updates of the Company
documents referred to in Section 1(d)(iii)(G).
(f) Exemption from Registration; Legend. The Securities and any
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underlying shares of Common Stock will be issued under an exemption or
exemptions from registration under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and are also subject to certain rights and obligations
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set forth herein. Accordingly, the certificates evidencing the Preferred Stock,
the Common Stock, the Warrant and any shares of Common Stock or other securities
issuable upon the exercise, conversion or exchange of any of the Securities
shall, upon issuance, contain a legend, substantially in the form as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
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SECURITIES LAWS AND NO INTEREST THEREIN MAY BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR (2) SUCH SECURITIES ARE TRANSFERRED PURSUANT TO RULE 144
PROMULGATE UNDER THE ACT (OR ANY SUCCESSOR RULE), OR (3) THE ISSUER OF
THESE SECURITIES SHALL HAVE RECEIVED AN OPINION OF COUNSEL FOR THE HOLDER
OF THESE SECURITIES SATISFACTORY TO THE ISSUER THAT NO VIOLATION OF THE ACT
OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED IN SUCH TRANSFER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RIGHTS
AND OBLIGATIONS CONTAINED IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT,
DATED AS OF JUNE __, 2001, BY AND BETWEEN SAFESCIENCE, INC. AND ELAN
INTERNATIONAL SERVICES, LTD.
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Notwithstanding the foregoing, the second paragraph of the foregoing
legend shall only be included if then applicable.
SECTION 2. Representations and Warranties of the Company. The
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Company hereby represents and warrants to EIS, as of each Closing Date, as
follows:
(a) Organization and Qualification. The Company is duly organized,
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validly existing and in good standing under the laws of the State of Nevada and
has all requisite corporate power and authority to own and lease its properties,
to carry on its business as presently conducted and as proposed to be conducted
and to consummate the transactions contemplated hereby. The Company is duly
qualified as a foreign corporation and in good standing to do business in each
jurisdiction in which the nature of the business conducted or the property owned
by it requires such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, liabilities (contingent or otherwise), operations,
condition (financial or otherwise), or prospects of the Company (a "Company
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Material Adverse Effect").
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(b) Capitalization.
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(i) The authorized capital stock of the Company immediately
prior to the Initial Closing, consists of (A) 100,000,000 shares of Common
Stock, of which 25,770,403 shares are issued and outstanding, and of which
1,151,230 shares are reserved for issuance upon exercise of options granted
to employees, officers, directors and consultants, and (B) 7,500 shares of
Series A Preferred Stock, none of which are issued or outstanding, 10,000
shares of Series B Preferred Stock, none of which are issued or
outstanding, and 1,117 shares of Series C Preferred Stock, none of which
are issued or outstanding.
(ii) As of the Initial Closing Date, the Company has reserved a
sufficient number of shares of Common Stock for issuance upon conversion of
the Preferred Stock and exercise of the Warrant (and as pay-in-kind
dividends on the Preferred Stock).
(iii) There are no preemptive rights, voting agreements, rights
of first offer or refusal, options, warrants or other conversion or
exchange privileges or rights presently outstanding to purchase, subscribe
for or otherwise acquire, or any securities convertible into or exercisable
or exchangeable for or into, any of the Company's capital stock
(collectively, "Preemptive Rights"), except as described on Schedule 2(b)
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attached hereto. There are no agreements to register any of the Company's
outstanding securities under U.S. federal securities laws, other than the
Company Registration Rights Agreement and except as described on Schedule
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2(b).
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(iv) All of the outstanding shares of capital stock of the
Company have been issued in accordance with applicable state and federal
laws and regulations (or exemptions therefrom) governing the sale and
purchase of securities, except as described on Schedule 2(b), and all of
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such shares have been duly and validly issued and are fully paid and non-
assessable. The Securities, when issued against payment therefor in
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accordance with this Agreement (including upon any conversion of any
thereof), will be duly and validly issued, fully paid and non-assessable,
and the Warrant, when issued against payment therefor in accordance with
this Agreement, will be duly and validly issued, and in each case will not
be issued in violation of any Preemptive Rights. The shares of Common Stock
issuable upon conversion or exercise of the Preferred Stock or the Warrant,
or as payment for any required anti-dilution adjustment according to the
terms thereto, when issued upon conversion, exercise or in accordance with
the terms thereof (the "Underlying Shares"), will be duly and validly
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issued, fully paid and non-assessable, and will not be issued in violation
of any Preemptive Rights.
(c) Authorization of Transaction Documents. The Company has full
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corporate power and authority to execute and deliver this Agreement and each of
the other Transaction Documents to which it is a party, and to perform its
obligations hereunder and thereunder. The execution, delivery and performance
by the Company of this Agreement and each of the other Transaction Documents to
which it is a party (including the issuance and sale of the Securities and the
issuance of the Underlying Shares) have been duly authorized by all requisite
corporate action by the Company and, when executed and delivered by the Company,
this Agreement and each of the other Transaction Documents to which it is a
party will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to general
principles of equity.
(d) No Violations. The execution, delivery and performance by the
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Company of this Agreement and each of the other Transaction Documents to which
it is a party (including the issuance and sale of the Securities and the
issuance of the Underlying Shares) and the compliance with the provisions hereof
and thereof by the Company do not and will not violate, conflict with or
constitute or result in a breach of or default under (or an event which with
notice or passage of time or both would constitute a default) or give rise to
any right of termination, cancellation or acceleration under, or result in the
creation of any Encumbrance (as defined below) upon any properties or assets of
the Company under (i) the Articles of Incorporation or bylaws of the Company,
(ii) any applicable law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, arbitrator, administrative
agency or other governmental body applicable to the Company or any of its
properties or assets or (iii) any contract, indenture, mortgage, deed of trust,
lease, agreement or other instrument, to which the Company is a party or by
which the Company or any of its property is bound, except, in each case, where
such violation, conflict, breach, default, termination, cancellation,
acceleration or Encumbrance would not, individually or in the aggregate, have a
Company Material Adverse Effect. As used herein, the term "Encumbrance" shall
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mean any material lien, charge, encumbrance, claim, option, proxy, pledge,
security interest, or other similar right of any nature other than statutory
liens securing payments not yet due and payable or due but not yet delinquent.
(e) Approvals. Except as set forth on Schedule 2(e) attached hereto
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and for consent which may be required under any Applicable Anti-Trust Law, no
permit, authorization, consent, approval, or order of or by, or any notification
of or filing with, any person or entity (governmental or otherwise) is required
in connection with the execution, delivery or
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performance of this Agreement or the other Transaction Documents (including the
issuance and sale of the Securities and the issuance of the Underlying Shares)
by the Company.
(f) Financial Statements. Schedule 2(f) attached hereto contains (i)
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the audited balance sheets of the Company at December 31, 2000 (the "Last Audit
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Date"), and 1999 and the related statements of operations, stockholders' equity
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(deficit) and cash flows for the years then ended, together with the reports and
opinions thereon of Xxxxxx Xxxxxxxx LLP (the "Audited Financial Statements"),
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and (ii) the unaudited balance sheet of the Company at March 31, 2001 and the
related statements of operations and cash flows for the three months then ended
(the "Unaudited Financial Statements"; collectively with the Audited Financial
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Statements, the "Financial Statements"). The Financial Statements are accurate
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and complete and fairly present the financial position of the Company and the
results of its operations and its cash flows at such dates and for the periods
indicated and were prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as may be otherwise indicated therein), subject, in the case
of the Unaudited Financial Statements, to normal year-end audit adjustments
(which shall not be material in the aggregate) and the absence of footnote
disclosures. As of the Initial Closing Date, the Company has not incurred and
is not liable for any material liabilities or obligations except as set forth on
the face of the March 31, 2001 balance sheet or Schedule 2(f).
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(g) Taxes. The Company has filed in a timely manner any federal,
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state, local and foreign tax returns, reports and filings (collectively,
"Returns"), including income, franchise, property and other taxes, and has paid
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or accrued the appropriate amounts reflected on such Returns heretofore required
to be filed. Except as set forth on Schedule 2(g) attached hereto, none of the
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Returns have been audited or challenged, nor has the Company received any notice
of challenge nor have any of the amounts or other data included in the Returns
been challenged or reviewed by any governmental authority. Prior to the Initial
Closing, the Company provided EIS with true and complete copies of each Return.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the Initial Closing that is not adequately provided
for.
(h) Plans. Except as set forth on Schedule 2(h) attached hereto,
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which sets forth an accurate and complete list and description of all employee
benefit plans maintained or sponsored by the Company or to which the Company is
required to make contributions (the "Benefit Plans"), the Company does not
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maintain, sponsor, is not required to make contributions to or otherwise have
any liability with respect to any pension, profit sharing, thrift or other
retirement plan, employee stock ownership plan, deferred compensation, stock
ownership, stock purchase, performance share, bonus or other incentive plan,
severance plan, health or group insurance plan, welfare plan, or other similar
plan, agreement, policy or understanding (whether written or oral), whether or
not such plan is intended to be qualified under Section 401(a) of the U.S.
Internal Revenue Code of 1986, as amended, or within the meaning of Section 3(3)
of the U.S. Employee Retirement Income Security Act of 1974, as amended, which
plan covers any employee or former employee of the Company. The Benefit Plans
have been and are administered in substantial compliance with their terms and
the requirements of applicable law.
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(i) Absence of Certain Events. Since March 31, 2001, except as
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contemplated by the Transaction Documents or as set forth on Schedule 2(i)
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attached hereto, (A) the Company has not (i) made, paid or declared any dividend
or distribution to any equity holder (in such capacity) or redeemed any of its
capital stock, (ii) varied its business plan or practices, in any material
respect, from past practices, (iii) entered into any financing, joint venture,
license or similar arrangement that would limit or restrict its ability to
perform its obligations hereunder and under each of the other Transaction
Documents or (iv) suffered or permitted to be incurred any liability or
obligation or any Encumbrance against any of its properties or assets that would
limit or restrict its ability to perform its obligations hereunder and under
each of the other Transaction Documents; and (B) there has not been any change
or development which has had, or could reasonably be expected to have, a Company
Material Adverse Effect.
Without limiting the generality of the foregoing, since March 31,
2001, except as set forth on Schedule 2(i), there has not been (1) any lapse of
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any of the Company's trade secrets, inventions, patents, patent applications or
continuations (in whole or in part), trademarks, trademark registrations,
service marks, service xxxx registrations, copyrights, copyright registrations,
or any application therefor or filing in respect thereof (collectively, and
together with any and all know-how, trade secrets and proprietary business or
technology information, the "Intellectual Property") that could reasonably be
---------------------
expected to result in a Company Material Adverse Effect; (2) any loss of the
services of any of the key officers or key employees of the Company; (3) any
incurrence of or entry into any liability, mortgage, Encumbrance, commitment or
transaction, including without limitation, any borrowing (or assumption or
guarantee thereof) or guarantee of a third party's obligations, or capital
expenditure (or lease in the nature of a conditional purchase of capital
equipment) in excess of U.S.$50,000, other than in the ordinary course of
business; (4) any material change by the Company in accounting methods or
principles; or (5) any change in the assets, liabilities, condition (financial
or otherwise), results or operations or prospects of the Company from those
reflected on the Financial Statements, except changes in the ordinary course of
business and changes that have not had or could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
(j) No Liabilities. Since March 31, 2001, the Company has not
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incurred or suffered any liability or obligation, matured or unmatured,
contingent or otherwise, except in the ordinary course of business and except
any such liability or obligation that have not had and could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(k) Properties and Assets; Etc.
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(i) Except as set forth on Schedule 2(k) attached hereto, the
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Company has good and marketable title to its properties and assets shown in
the Financial Statements to be owned by the Company, and has valid
leasehold interests to the properties and assets shown in the Financial
Statements to be leased by the Company, in each case subject to no
Encumbrances.
(ii) The Company owns or possesses sufficient legal rights to
use pursuant to license, sublicense, agreement or permission all
Intellectual Property used in the
9
operation of its business as presently conducted, in each case, subject to
no Encumbrances required to be disclosed in the Financial Statements except
as set forth therein, other than any failure to own or possess sufficient
legal rights which, individually or in the aggregate, would not have a
Company Material Adverse Effect. All of the Intellectual Property which is
owned by the Company is owned free and clear of all Encumbrances; none of
the Company's rights in or use of the Intellectual Property has been or, to
the Company's knowledge, is currently threatened to be challenged; to the
Company's knowledge, without making any inquiry other than those, if any,
routinely conducted by the Company in the ordinary course of business, no
current or currently planned product based upon the Company's Intellectual
Property would infringe any patent, trademark, service xxxx, trade name or
copyright of any other person or entity issued or pending on the Closing
Date if the Company were to distribute, sell, market or manufacture such
products, and the Company is not aware of any actual or threatened claim by
any person or entity alleging any infringement by the Company of a patent,
trademark, service xxxx, trade name or copyright possessed by such person
or entity. None of such Intellectual Property, whether foreign or domestic,
has been canceled, abandoned, or otherwise terminated, other than such
cancellations, abandonments or terminations which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(iii) Schedule 2(k) lists the material contracts and agreements
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of the Company, and each is a legal and valid agreement binding upon the
Company and, to the Company's knowledge, is in full force and effect. To
the Company's knowledge, there is no breach or default by any party
thereunder except any such breach or default that has not had and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(iv) The Company has and maintains adequate and sufficient
insurance, including liability, casualty and products liability insurance,
covering risks associated with its business, properties and assets,
including insurance that is customary for companies similarly situated.
(v) The Company, its business and properties and assets are in
compliance in all material respects with all applicable statutes, laws and
regulations, including without limitation, those relating to (i) health,
safety and employee relations, (ii) environmental matters, including the
discharge of any hazardous or potentially hazardous materials into the
environment, and (iii) the development, commercialization and sale of
pharmaceutical and biotechnology products, including all applicable
regulations of the U.S. Food and Drug Administration and comparable
applicable foreign regulatory authorities and to its knowledge, no material
expenditures are or will be required in order to comply with any such
existing statute, law or regulation, except any such non-compliance that
could not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect. No Hazardous Materials (as defined
below) are used or have been used, stored, or disposed of by the Company
or, to the Company's knowledge after reasonable investigation, by any other
person or entity on any property owned, leased or used by the Company. For
the purposes of the preceding sentence, "Hazardous Materials" shall mean
10
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control
of hazardous wastes, or other activities, involving hazardous substances,
including building materials, or (b) any petroleum products or nuclear
materials.
(l) Legal Proceedings, etc. There is no legal, administrative,
----------------------
arbitration or other action or proceeding or governmental or investigation
pending, or to the Company's knowledge, threatened against the Company, or any
director, officer or employee of the Company in their capacities as such that
(i) challenges the validity or performance of this Agreement or the other
Transaction Documents or (ii) could reasonably be expected to have a Company
Material Adverse Effect, other than the Staff Determination contained in the
June 6, 2001 letter received by the Company from the Nasdaq Stock Market. The
Company is not in violation of, or default under, any material laws, judgments,
injunctions, orders or decrees of any court, governmental department,
commission, agency, instrumentality or arbitrator applicable to its business,
other than any violations or defaults which, individually or in the aggregate,
would not have a Company Material Adverse Effect.
(m) Disclosure. The representations and warranties set forth herein
----------
and in the other Transaction Documents, when viewed collectively, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained herein not misleading in light of the
circumstances in which they were made.
(n) Brokers or Finders. There have been no investment bankers,
------------------
brokers or finders used by the Company in connection with the transactions
contemplated by the Transaction Documents and no persons or entities are
entitled to a fee or compensation in respect thereof, other than the Shemano
Group and Michaelangelo, LLC.
(o) SEC Filings. Except as set forth on Schedule 2(o) attached
----------- -------------
hereto, the Company has timely filed with the Securities and Exchange Commission
(the "SEC") all forms, reports, schedules, statements, exhibits and other
---
documents (collectively, the "SEC Filings") required to be filed by the Company
-----------
on or before the date hereof. At the time filed, the SEC Filings, including
without limitation, any financial statements, exhibits and schedules included
therein or documents incorporated therein by reference (i) did not contain any
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (ii)
complied in all material respects with the applicable requirement of the
Securities Act of 1934, as amended (the "Exchange Act"), as the case may be.
------------
SECTION 3. Representations and Warranties of EIS . EIS hereby
-------------------------------------
represents and warrants to the Company, as of the date hereof, as follows:
(a) Organization. Such Investor is duly organized, validly existing
------------
and, where applicable, in good standing under the laws of the jurisdiction of
its organization and has all requisite corporate power and authority to own and
lease its properties, to carry on its business as
11
presently conducted and as proposed to be conducted and to consummate the
transactions contemplated hereby. EIS, where applicable, is duly qualified as a
foreign corporation and in good standing to do business in each jurisdiction in
which the nature of the business conducted or the property owned by it requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, liabilities (contingent or otherwise), operations, condition
(financial or otherwise), or prospects of EIS, as applicable (an "EIS Material
------------
Adverse Effect").
--------------
(b) Authorization of Transaction Documents. EIS has full corporate
--------------------------------------
power and authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party, and to perform its obligations
hereunder and thereunder. The execution, delivery, and performance by EIS of
this Agreement and each other Transaction Document to which it is a party
(including the purchase and acceptance of the Securities) have been duly
authorized by all requisite corporate action by EIS and, when executed and
delivered by EIS, this Agreement and each of the other Transaction Documents to
which it is a party will be the valid and binding obligations of EIS, as
applicable, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
(c) No Violation. The execution, delivery and performance by such
------------
Investor of this Agreement and each other Transaction Document to which it is a
party (including the purchase and acceptance of the Securities) and compliance
with provisions hereof and thereof by EIS will not violate conflict with or
constitute or result in a breach of or default under (or an event which with
notice or passage of time or both would constitute a default) or give rise to
any right of termination, cancellation or acceleration under (i) the charter or
bylaws of EIS, (ii) any applicable law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment or decree of any court, arbitrator,
administrative agency or other governmental body applicable to EIS or any of
their properties or assets or (iii) any material contract to which EIS is a
party, except, in each case, where such violation, breach, default, termination,
cancellation or acceleration would not, individually or in the aggregate, have
an EIS Material Adverse Effect.
(d) Approvals. Except for consents which may be required under
---------
Applicable Anti-Trust Laws, no material permit, authorization, consent, approval
or order of or by, or any notification of or filing with, any person or entity
(governmental or otherwise) is required in connection with the execution,
delivery or performance of this Agreement by EIS or the other Transaction
Documents to which it is a party.
(e) Investment Representations.
--------------------------
(i) EIS is sophisticated in transactions of this type and
capable of evaluating the merits and risks of the transactions described
herein and in the other Transaction Documents to which it is a party, and
has the capacity to protect its own interests. EIS has not been formed
solely for the purpose of entering into the transactions described herein
and therein and is acquiring the Securities (and the Underlying Shares) for
investment for its own account, not as a nominee or agent, and not with the
view to, or for
12
resale, distribution or fractionalization thereof, in whole or in part, and
no other person (other than Elan) has a direct or indirect interest,
beneficial or otherwise in the Securities (or the Underlying Shares);
provided, that EIS shall be permitted to convert or exchange such
--------
Securities in accordance with their terms.
(ii) EIS has not and does not intend to enter into any
contract, undertaking, agreement or arrangement with any person or entity
to sell, transfer or pledge the Securities (or the Underlying Shares),
other than to an affiliate of EIS.
(iii) EIS acknowledges its understanding that the private
placement and sale of the Securities (and the Underlying Shares) is exempt
from registration under the Securities Act. In furtherance thereof, EIS
represents and warrants that it is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act, has the
financial ability to bear the economic risk of its investment, has adequate
means for providing for its current needs and personal contingencies and
has no need for liquidity with respect to its investment in the Company.
(iv) EIS agrees that it shall not sell or otherwise transfer
any of the Securities (or the Underlying Shares) without registration under
the Securities Act, pursuant to Rule 144 (or any successor rule) under the
Securities Act or pursuant to an opinion of counsel reasonably satisfactory
to the Company that no violation of the Securities Act will be involved in
such transfer, and fully understands and agrees that it must bear the total
economic risk of its purchase for an indefinite period of time because,
among other reasons, none of the Securities (or the Underlying Shares) have
been registered under the Securities Act or under the securities laws of
any applicable state or other jurisdiction and, therefore, cannot be
resold, pledged, assigned or otherwise disposed of unless subsequently
registered under the Securities Act and under the applicable securities
laws of such states or jurisdictions or an exemption from such registration
is available. EIS understands that the Company is under no obligation to
register the Securities (or the Underlying Shares) on its behalf with the
exception of certain registration rights with respect to certain of the
Securities (and the Underlying Shares), as provided in the Company
Registration Rights Agreement. EIS understands the lack of liquidity and
restrictions on transfer of the Securities (and the Underlying Shares) and
that this investment is suitable only for a person or entity of adequate
financial means that has no need for liquidity of this investment and that
can afford a total loss of its investment.
(f) Legal Proceedings; Etc. There is no legal, administrative,
----------------------
arbitration or other action or proceeding or governmental investigation pending,
or to the knowledge of EIS threatened, against EIS or its affiliates that
challenges the validity or performance of this Agreement or the other
Transaction Documents to which such Investor is a party.
(g) Brokers or Finders. There have been no investment bankers,
------------------
brokers or finders used by EIS or its affiliates in connection with the
transactions contemplated by the Transaction Documents and no persons or
entities are entitled to a fee or compensation in respect thereof.
13
SECTION 4. Covenants of the Parties.
------------------------
(a) Certain Covenants. From and after the Initial Closing Date and
-----------------
until the earlier to occur of the exercise or expiration of the Exchange Right
(as such term is defined in Section 5(c) hereof), the Company shall not without
the prior written consent of EIS: (i) sell, transfer, encumber, pledge or
otherwise affect, in any respect, the Newco Preferred Shares transferable to EIS
upon exercise by EIS of the Exchange Right; or (ii) affect, in any respect, the
Company's ability to permit EIS to exercise the Exchange Right in full, as
provided herein; or (iii) enter into any material transaction with a director,
officer or more than 20% beneficial owner of Common Stock other than on an
arm's-length basis; or (iv) otherwise vary in any material respect its business,
business plan or method or lines of business; provided, however that the Company
may sell its consumer and industrial business area, agricultural business area,
or specific assets of such business areas on 20 days' prior written notice to
EIS.
(b) Fully-diluted Stock Ownership. Notwithstanding any other
-----------------------------
provision of this Agreement, in the event that EIS shall have determined that at
any time it (together with its affiliates, if applicable) hold or have the right
to receive Common Stock (or securities or rights, options or warrants
exercisable, exchangeable or convertible for or into Common Stock) representing
in the aggregate in excess of 9.9% of the Company's outstanding Common Stock on
a fully-diluted basis, EIS shall have the right to elect to convert all or any
part of the Securities or the Underlying Shares into other preferred, non-voting
securities of the Company (on terms mutually satisfactory to EIS and SafeScience
and no more favorable than the Securities or the Underlying Shares being so
converted by EIS) such that EIS and its affiliates will not directly or
indirectly own more than 9.9% of the Common Stock (in aggregate) for a period of
at least two years from the Initial Closing Date. In the event that EIS shall
elect such conversion, EIS and its affiliates shall retain the right to transfer
all or a portion of such securities (including the Common Stock issuable upon
conversion thereof) to its affiliates. Each of the Company and EIS shall use
commercially reasonable efforts to promptly effect such transactions and any
required subsequent conversions or adjustments to the securities position of
EIS, on a quarterly basis, within 15 business days of the end of each of EIS's
fiscal quarters.
(c) Use of Proceeds. The Company shall use the proceeds of (i) the
---------------
issuance and sale of the Series A Preferred Stock solely to meet its initial
capitalization obligations to Newco as described in the JDOA; (ii) the issuance
and sale of the Common Stock and Series C Preferred Stock for general working
capital purposes and (iii) the issuance and sale of the Series B Preferred Stock
solely to make a substantially concurrent Developmental Funding Contribution to
Newco, as described Section 1(e), and, in each case, for no other purpose.
(d) Confidentiality; Non-Disclosure. Prior to issuing the initial
-------------------------------
press release or public disclosure in respect of this Agreement or the
transactions contemplated hereby (the "Initial Press Release"), the party
---------------------
proposing such issuance shall obtain the consent of the other party to the
contents thereof, which consent shall not be unreasonably withheld or delayed.
Thereafter, the Company may issue press releases made in the ordinary course of
its business, referring to research collaborations involving the Company, and
which do not differ from or go beyond the terms of the Initial Press Release
(except that no quotes from EIS shall be repeated) unless required by applicable
law, without obtaining the consent of the other parties to the
14
contents thereof; provided, that any other type of press release or public
--------
disclosure by the Company in respect of this Agreement or the transactions
contemplated hereby, unless required by applicable law, will require the consent
of EIS to the contents thereof, which consent shall not be unreasonably withheld
or delayed; it being understood that if such second party shall not have
responded to such consent request within three business days, such consent shall
be deemed given.
(e) Further Assurances. From and after the date hereof, each of the
------------------
parties hereto agree to do or cause to be done such further acts and things and
deliver or cause to be delivered to each other such additional assignments,
agreements, powers and instruments, as each may reasonably require or deem
advisable to carry into effect the purposes of this Agreement and the other
Transaction Documents.
SECTION 5. Certain Rights of EIS.
---------------------
(a) Right of First Refusal on Certain Issuances. Until the fourth
-------------------------------------------
anniversary of the Initial Closing Date, EIS shall have the right (but not the
obligation) to participate in any equity financing, any financing involving
securities convertible or exchangeable for equity, or any grant of options,
warrants or other rights to purchase any capital stock of the Company or any
security convertible or exchangeable for any capital stock of the Company
("Rights"), in each case, consummated, or proposed to be consummated, by the
------
Company, on the same or monetarily equivalent terms and conditions offered to
the other proposed investors in such financing or recipient of such grant (the
"Right of First Refusal"). If, in connection with such an issuance, securities
----------------------
are to be issued and sold for consideration other than cash, then the Board (as
defined in Section 5(b) below) shall, in good faith, determine the fair market
value of such non-cash consideration, subject to EIS's reasonable approval
(provided, that if EIS shall not approve such valuation, the Company and EIS
--------
shall agree upon a third party appraiser who shall determine the cash valuation
of such non-cash consideration), and offer to sell the subject securities as set
forth herein for the cash equivalent of such non-cash consideration. Notice of
such a proposed offering shall be given by the Company to EIS at least 30 days
prior to the closing of such financing (the "New Issue Notice") and shall state
----------------
the Company's bona fide intent to offer such securities or Rights, the number of
securities or Rights to be offered (a calculation of the number of shares of
Common Stock into which such securities may be converted or exchanged or such
Rights may be exercised), the identity of the parties to whom such securities or
Rights are being offered, and the price and terms, if any, upon which it
proposes to offer such securities. The Right of First Refusal may be exercised
by EIS, in whole or in part, at any time within the 15 day period after receipt
of the New Issue Notice by delivery to the Company of a writing notifying the
Company of such exercise. If the proposed offering of securities is altered in
any material respect, the Company shall send to EIS a revised New Issue Notice
and EIS shall respond thereto, each within a 15 day period commencing upon
receipt of such revised notice. If EIS elects not to exercise the Right of
First Refusal, the Company may sell such securities and/or grant such Rights to
the parties set forth in the New Issue Notice, at any time within 60 days of the
expiration of the applicable 15-day period, on terms no more favorable to the
offerees than as set forth in the New Issue Notice; provided that if such
--------
offering is not completed within such 60-day period, such offering shall again
be subject to such Right of First Refusal and the Company shall comply with the
terms of this Section 5(a). The Right of First Refusal shall not apply to (i)
15
offering under a stock option or similar plan approved by the Board for the
benefit of its officers, directors, employees and/or consultants as of the
Initial Closing Date or approved by the Board (including the director nominated
by EIS), after the Initial Closing Date, (ii) asset or company acquisition by
merger or purchase of substantially all of the assets or stock of such Company
paid for, in whole or in part, in shares of Common Stock that do not exceed, in
the aggregate, 10% of the outstanding shares of Common Stock on an as-converted
basis as of the Initial Closing Date, or (iii) any securities issued pursuant to
the exercise of currently outstanding options, warrants or other written
agreements. The Right of First Refusal shall automatically convert into a
preemptive right (and thereafter terminate) at such time as the Company's
Articles of Incorporation do not prohibit the granting of preemptive rights.
Such preemptive right shall continue through the fourth anniversary of the
Initial Closing Date and enable EIS and its affiliates to maintain their pro
rata, fully diluted interest in the Company, based on the number of shares of
Common Stock owned by EIS and its affiliates, assuming conversion or exercise of
all Securities with respect to transactions to which the Right of First Refusal
was formerly applicable.
(b) Board Seat Rights.
-----------------
(i) For as long as EIS and/or its affiliates, directly or
indirectly, collectively own at least 10% of the Common Stock (assuming the
exercise, conversion or exchange thereof by EIS and its affiliates but not of
any other securities convertible, exercisable or exchangeable into Common
Stock), EIS shall be entitled to nominate one member to the Company's board of
directors (the "Board"). In connection with the foregoing, the Company will take
-----
all necessary and/or appropriate steps to effect such appointment and any
appointment of an EIS designated replacement, including, without limitation,
using its best efforts to promote the election of an EIS designee by the then
current Board and the inclusion of the EIS designee as part of the management
recommended slate of directors presented at any regular or special meeting or
consent of the stockholders of the Company at which directors of the Company are
to be elected. Notwithstanding the forgoing provisions of this Section 5(b), the
EIS director shall not in any event have greater than 15% of the voting power on
the Board during the period from the date of Closing through the second
anniversary thereof and if there are fewer then six members on the Board, (x)
EIS shall not be entitled to appoint a director and shall be entitled to an
observer instead and (y) at the next regularly-scheduled meeting of stockholders
after the date hereof, the Company shall cause the Board to be expanded to at
least six members, at which time EIS shall be entitled to appoint its director.
The Company will take all necessary or appropriate steps to effect the
appointment and any replacement of EIS's designee.
(ii) The Company shall reimburse EIS's designee, whether or not
serving as a member of the Board, for his or her out-of-pocket expenses
reasonably incurred in connection with his or her attendance of the Board
meetings.
(c) Conversion and Exchange Rights. The Company acknowledges that the
------------------------------
Certificate of Designations sets forth certain rights of the holders of shares
of Series A Preferred Stock to convert such shares of Preferred Stock into newly
issued fully paid, non-assessable shares of Common Stock, or to exchange such
of Series A Preferred Stock (or the shares of Common Stock into which such
shares of Series A Preferred Stock were converted under
16
certain specified circumstances) for the Newco Preferred Shares issued to the
Company on the Initial Closing Date (including stock distributions and dividends
issued thereon and securities into which such Newco Preferred Shares were
converted, the "Exchange Shares") (the "Exchange Right"), and agrees that it
--------------- --------------
will not take any action which would impair such rights other than as otherwise
permitted by the provisions thereof.
(d) Make-Whole. If EIS shall have exercised its Exchange Right (as
----------
such term is defined in the Company's articles of incorporation as amended on
the Initial Closing Date), EIS, pursuant to Section 5(c), shall cause to be paid
to the Company within 30 days of such exercise, an amount equal to 30.1% of the
aggregate amount of the Development Funding actually provided by each of the
parties to Newco from and after the Initial Closing Date through the date of
such exercise (the "Make-Whole Amount"). EIS may pay the Make-Whole Amount
-----------------
payable upon such exercise, at its option, either (i) in cash, which cash
payment shall include any interest thereon actually paid by the Company in cash
up to the rate of interest charged hereunder (ii) by the Company canceling
shares of Series B Preferred Stock, including accrued and unpaid dividends
thereon (which shall not be declared and shall not be due), at a value of
U.S.$1,700.00 per share so canceled, or (iii) in a combination of (i) and (ii).
If the payment of the Make-Whole Amount, or any portion of the Make-Whole
Amount, is effected by such cancellation, such payment shall be evidenced in
writing by an appropriate written instrument reasonably satisfactory to the
Company and EIS.
(e) Required Conversion. In the event of a Required Conversion (as
-------------------
defined in the Certificate of Designations), the Common Stock delivered upon
such conversion shall have the benefit of the Exchange Right identical to that
with respect to the Series A Preferred Stock so converted and shall be evidenced
by a security substantially in the form of Exhibit B.
---------
SECTION 6. Pledge of and Charge Over Exchange Shares. As continuing
-----------------------------------------
security for the Company's obligations pursuant to the Exchange Right, the
Company, as the legal and beneficial owner of the Exchange Shares hereby
pledges, assigns, sets over charges by way of a first fixed charge in favor of,
and grants a security interest to EIS in respect of all of the Company's right,
title and interest in and to all Exchange Shares deliverable by the Company upon
exercise of the Exchange Right for such period of time as the Exchange Right
shall be exercisable. The Company shall cause to be delivered to EIS all of the
certificates together with duly executed stock powers in favor of EIS evidencing
such shares, and cause to be filed with the Secretaries of State of the
Commonwealth of Massachusetts and the State of Nevada an appropriate UCC-1
financing statement in respect of such pledge, assignment or setting over, and
take all other necessary, appropriate and customary actions in connection
therewith or otherwise reasonably requested by EIS, including, without
limitation, to the extent necessary, the filing of particulars of the charge
with the Bermuda Registrar of Companies pursuant to the terms of the Bermuda
Companies Xxx 0000. Such pledge shall be governed by the applicable provisions
of the UCC (as defined in Section 7). Upon exercise of the Exchange Right, EIS
shall be entitled to keep and retain such share certificates, which shall then
be owned by EIS in accordance with the terms thereof. Until such time period EIS
exercises the Exchange Right, the Company shall retain all rights in and to the
pledged Exchange Shares (including without limitation all voting, dividend,
liquidation and other rights), subject only to this pledge, the JDOA and the
Security Interests (as defined in Section 7 hereof) granted in favor of EIS
pursuant to Section 7 hereof.
17
SECTION 7. Security Interest. (a) Certain Definitions. For purposes
----------------- -------------------
of this Section 7, the following definitions shall apply:
"Proceeds" means all proceeds of, and all other profits, products,
--------
rents or receipts, in whatever form, arising from the sale, exchange,
assignment, or other disposition of the Collateral (as defined in Section 7(b)
below).
"Secured Obligations" means the Company's obligations hereunder and in
-------------------
the Certificate of Designations in respect of the Exchange Right.
"Security Interests" means the security interests in the Collateral
------------------
(as defined in Section 7(b)) granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the date
---
hereof in the State of New York; provided, that if by reason of mandatory
--------
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect is such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or non-
perfection.
(b) Grant of Security Interest. As continuing security for the full
--------------------------
and punctual payment of the Secured Obligations in accordance with the terms
thereof, the Company hereby charges by way of a first fixed charge in favor of
EIS in respect, and grants to EIS a continuing security interest in and to all,
of the Exchange Shares, owned or held by the Company and any other capital stock
of Newco that is acquired in the future by the Company or any affiliates of the
Company in respect of the Exchange Shares (the "Collateral"), and all Proceeds
----------
of all or any of the Collateral.
(c) Covenants and Representations Regarding Security Interest.
---------------------------------------------------------
(i) The Security Interests constitute valid security interests
under the UCC securing the Secured Obligations. When UCC financing
statements shall have been filed in the appropriate UCC filing offices for
a debtor with a chief executive office and principal place of business
located in the County of Suffolk, of the Commonwealth of Massachusetts, the
Security Interests shall constitute perfected security interests in the
Collateral, prior to all other Encumbrances and rights of others therein,
except as otherwise provided in Section 6.
(ii) The Company will not change its name, identity or corporate
structure in any manner unless it shall have given EIS prior written notice
thereof. The Company will not change the location of (i) its chief
executive office or principal place of business or (ii) the locations where
it keeps or holds any Collateral or any records relating thereto unless it
shall have given EIS prior written notice thereof. The Company shall not
in any event change the location of any Collateral if such change would
cause the Security Interests in such Collateral to lapse or cease to be
perfected.
18
(iii) The Company will, from time to time (and will, as of the
Initial Closing Date) at its expense, execute, deliver, file and record any
statement, assignment, instrument, document, agreement or other paper and
take any other action (including, without limitation, any filings of
financings or continuation statements under the UCC and the filing of
particulars of the charge with the Bermuda Registrar of Companies pursuant
to the terms of the Bermuda Companies Act 1981) that from time to time may
be necessary or desirable, or that EIS may reasonably request, in order to
create, preserve, perfect, confirm or validate the Security Interests, or
to enable EIS to exercise or enforce any of its rights, powers and remedies
hereunder with respect to any of the Collateral. To the extent permitted
by applicable law, the Company hereby authorizes EIS to execute and file
financing statements or continuation statements without the Company's
signature appearing thereon. The Company agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
(d) Remedies. If any event of default or breach relating to the
--------
Exchange Right has occurred and is continuing, EIS may exercise all rights of a
secured party under the UCC (whether or not in effect in the jurisdiction where
such rights are exercised). EIS may be the purchaser of any or all of the
Collateral so sold at any public sale. The Company will execute and deliver
such documents and take such other action as EIS deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale, the Collateral shall be delivered, assigned and transferred to EIS. At
any such sale, EIS shall hold the Collateral absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Company which may be waived, and the Company, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted.
(e) Termination of Security Interest. Upon the repayment,
--------------------------------
performance in full or termination of all Secured Obligations, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Company (except as otherwise provided in Section 6 hereof). Upon such
termination, EIS shall take, at the Company's expense, all commercially
reasonable actions reasonably requested by the Company to effect and evidence
the termination of the Security Interests, including, without limitation, the
preparation and filing of any UCC-3 termination statements.
SECTION 8. Survival and Indemnification.
----------------------------
(a) Survival. For the purposes of this Section, the representations
--------
and warranties of the Company and EIS contained herein shall survive for a
period of 24 months from and after the date hereof.
(b) Indemnification. In addition to all rights and remedies
---------------
available to the parties hereto at law or in equity, each party hereto (in such
capacity, "Indemnifying Party") shall indemnify the other party, its respective
------------------
stockholders, officers, directors, employees, agents, representatives,
affiliates and successors and assigns (each, an "Indemnified Person"), and save
------------------
and hold each Indemnified Person harmless from and against and pay on behalf of
or reimburse
19
each such Indemnified Person, as and when incurred, for any and all loss,
liability, demand, claim, action, cause of action, cost, damage, deficiency,
tax, penalty, fine or expense, whether or not arising out of any claims by or on
behalf of such Indemnified Person or any third party, including interest,
penalties, reasonable attorneys' fees and expenses and all reasonable amounts
paid in investigation, defense or settlement of any of the foregoing (including
all reasonable attorneys' fees and expenses incurred in connection with the
enforcement of this Section 8) (collectively, "Losses"), that any such
------
Indemnified Person may suffer, sustain incur or become subject to, as a result
of, in connection with, relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on the part of
the Indemnifying Party under Sections 2 or 3 of this Agreement or any of
the other Transaction Documents (it being understood that neither the
Company nor EIS shall be responsible for any such misrepresentation or
breach of warranty by Newco); or
(ii) any nonfulfillment, default or breach of any covenant or
agreement on the part of the Indemnifying Party under Sections 4, 6 or 7 of
this Agreement.
(c) Maximum Recovery. Notwithstanding anything in this Agreement to
----------------
the contrary, in no event shall the Indemnifying Party be liable for
indemnification under this Section 8 in an amount in excess of the aggregate of
the purchase price paid for the Securities, the Warrant and including Purchases
made in respect of the Series B Preferred Stock. No Indemnified Person shall
assert any such claim unless Losses in respect thereof incurred by any
Indemnified Person, when aggregated with all previous Losses hereunder, equal or
exceed U.S.$50,000, but at such time that an Indemnified Person is entitled to
assert a claim, such claim shall include all Losses covered by this Section 8.
(d) Investigation. All indemnification rights hereunder shall survive
-------------
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, irrespective of any investigation, inquiry or
examination made for or on behalf of, or any knowledge of the Indemnified Person
or the acceptance of any certificate or opinion.
(e) Contribution. If the indemnity provided for in this Section 8
------------
shall be, in whole or in part, unavailable to any Indemnified Person, due to
Section 8(b) being declared unenforceable by a court of competent jurisdiction
based upon reasons of public policy, so that Section 8(b) shall be insufficient
to hold each such Indemnified Person harmless from Losses which would otherwise
be indemnified hereunder, then the Indemnifying Party and the Indemnified Person
shall each contribute to the amount paid or payable for such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Party on the one hand and the Indemnified Person on the
other, but also the relative fault of the Indemnifying Party and be in addition
to any liability that the Indemnifying Party may otherwise have. The indemnity,
contribution and expense reimbursement obligations that the Indemnifying Party
has under this Section 8 shall survive the expiration of the Transaction
Documents. The parties hereto further agree that the indemnification and
reimbursement commitments set forth in this Agreement shall apply whether or not
the Indemnified Person is a formal party to any such lawsuit, claims or other
proceedings.
20
(f) Limitation. This Section 8 is not intended to limit the rights
----------
or remedies otherwise available to any party hereto with respect to this
Agreement or the Transaction Documents.
SECTION 9. Notices. All notices, demands and requests of any kind to
-------
be delivered to any party in connection with this Agreement shall be in writing
and shall be deemed to have been duly given if personally or hand delivered or
if sent by an internationally-recognized overnight delivery courier or by
registered or certified mail, return receipt requested and postage prepaid, or
by facsimile transmission addressed as follows:
(i) if to SafeScience, Inc.:
SafeScience, Inc.
Park Square Building
00 Xx. Xxxxx Xxxxxx, 0/xx/ Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
XxXxxxxxx, Will & Xxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
(ii) if to EIS, to:
Elan International Services, Ltd.
000 Xx. Xxxxx Xxxxx
Xxxxxx, Xxxxxx Xxxxxx
Xxxxxxx XX 04
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Reitler Xxxxx LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 9. Any such notice or
21
communication shall be deemed to have been effectively given (i) in the case of
personal or hand delivery, on the date of such delivery, (ii) in the case of an
internationally-recognized overnight delivery courier, on the second business
day after the date when sent, (iii) in the case of mailing, on the fifth
business day following that day on which the piece of U.S. mail containing such
communication is posted, and (iv) in the case of facsimile transmission, the
date of telephone confirmation of receipt.
SECTION 10. Entire Agreement. This Agreement and the other Transaction
----------------
Documents contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among the parties with respect thereto.
SECTION 11. Amendments and Waiver. This Agreement may not be modified
---------------------
or amended, or any of the provisions hereof waived, except by written agreement
of the Company and EIS dated after the date hereof.
SECTION 12. Counterparts and Facsimile. The Transaction Documents may
--------------------------
be executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts together
shall constitute one agreement. Each of the Transaction Documents may be signed
and delivered to the other party by facsimile transmission; such transmission
shall be deemed a valid signature.
SECTION 13. Headings. The section and paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of the Agreement.
SECTION 14. Governing Law; Disputes. This Agreement shall be governed
-----------------------
by and construed in accordance with the internal laws of the State of New York,
without giving effect to principles of conflicts of laws. Any dispute under the
Transaction Documents that is not settled by mutual consent shall be finally
adjudicated by any federal or state court sitting in the City, County and State
of New York, and each party consents to the exclusive jurisdiction of such
courts (or any appellate court therefrom) over any such dispute.
SECTION 15. Expenses. Except as provided in Section 8 hereof, each of
--------
the parties shall be responsible for its own costs and expenses incurred in
connection with the transactions contemplated hereby and by the other
Transaction Documents.
SECTION 16. Exhibits and Schedules. The exhibits to and schedules
----------------------
delivered by or on behalf of any party in connection with this Agreement are an
integral part of this Agreement, and any statements contained in such schedules
shall be deemed to be representations and warranties under this Agreement.
SECTION 17. Assignments. This Agreement and all of the provisions
-----------
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. All or any part of this
Agreement may be assigned by EIS and its permitted assigns to its affiliates and
subsidiaries, as well as any special purpose financing or
22
similar vehicle established by EIS. Other than as set forth above, no party
shall assign all or any part of this Agreement without the prior written consent
of the other party.
SECTION 18. Severability. In case any provision of this Agreement
------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be in any way affected or
impaired thereby.
[Signature page follows]
23
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement as of the date first written above.
SAFESCIENCE, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Xxxxx Xxxxx Boryj
---------------------------
Name: Xxxxx Xxxxx Boryj
Title: Vice President
EXHIBIT A-1
FORM OF CERTIFICATE OF DESIGNATIONS
EXHIBIT A-2
FORM OF NOTICE OF REQUEST FOR
PURCHASE OF SERIES B PREFERRED STOCK
Date: _________, 200__
To: Elan International Services, Ltd.
From: SafeScience, Inc.
Re: Request for Purchase of Series B Preferred Stock
--------------------------------------------------------------------------------
Pursuant to Section 1(e) of the Securities Purchase Agreement between
(the "Company") and Elan International Services, Ltd., dated June 22, 2001 (as
-------
amended at any time, the "Purchase Agreement"), the Company hereby notifies EIS
------------------
of its request for a purchase of Series B Preferred Stock as amended at any
time, in the amount of U.S.$__________ on __________, 200__ (the "P.S. Closing
------------
Date"). Please provide funding on the Closing Date in the requested amount to
----
the Company in accordance with the following wire instructions:
[wire instructions:
Bank Name: ______________________
ABA No.: ________________________
Acct. No.: ______________________
For credit to: __________________]
After giving effect to the requested disbursement, total Purchases (as
defined in the Purchase Agreement) shall equal U.S. $___________.
SAFESCIENCE, INC.
By: _____________________________
Name:
Title:
EXHIBIT A-3
FORM OF OFFICER'S CERTIFICATE
OFFICER' CERTIFICATE
--------------------
The undersigned, [__________________] being the [title of officer] of
SafeScience, Inc., a Nevada corporation (the "Company"), does hereby certify on
-------
behalf of the Company under Section 1(e) of the Securities Purchase Agreement,
as amended at any time, the "Securities Purchase Agreement"), dated as of 2001,
-----------------------------
between Elan International Services, Ltd., a Bermuda exempted limited liability
company, and the Company, as follows (capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Securities
Purchase Agreement):
1. As of the date of this Officer's Certificate, the Company is not in default
or breach in any respect under any of the terms and provisions of the
Securities Purchase Agreement, the JDOA or any other Transaction Document;
2. The representation and warranties made by the Company referenced in clause
(1)(e)(2)(E) of the Securities Purchase Agreement are true and correct as at
the times specified therein; and
3. The purchase of shares of Series B Preferred Stock requested in connection
with this Officer's Certificate (a) is in respect of the Securities Purchase
Agreement and the JDOA in the amount of U.S.$[_____] as approved by the
appropriate parties as provided therein, respectively, and (b) is in
compliance with applicable laws and regulations and no regulatory approval
therefor (that has not been obtained) is required in connection therewith.
4. The aggregate amount of outstanding shares of Series B Preferred Stock is
[____] after the requested wire transfer.
5. The Company will notify EIS in writing of any information or change in
circumstances that may arise between the date hereof and the date of the
funding requested in connection herewith if such shall make any of the
certifications herein to be untrue or misleading.
In Witness Whereof, the undersigned has executed this Officer's
Certificate on the [___] day of [_____________], 200[_].
________________________________
[___________________]
[___________________]
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _______ Rights
Date of Issuance: ___________, 200__
SAFESCIENCE, INC.
Rights Certificate
This certifies that __________________, or registered assigns, is the
registered owner of the number of Rights set forth above, which entitles the
owner thereof, subject to the terms, provisions and conditions set forth herein,
to acquire from SafeScience, Inc. (the "Corporation") at any time after the date
-----------
of issuance hereof [_____]shares of non-voting convertible preference shares (as
adjusted for any combinations or divisions or similar recapitalizations) of
SafeScience Newco, Ltd.., a Bermuda exempted limited liability company
("Newco"), held by the Corporation (or, if such preference shares have been
-----
converted by the Corporation pursuant to the terms thereof, the securities
issued upon such conversion) (the "Newco Preferred Shares") in exchange for
----------------------
tendering this certificate and all shares of the Corporation's Common Stock (as
defined in the Corporation's Certificate of Incorporation) issued upon
conversion of the Series A Preferred Stock (as adjusted for any combinations or
divisions or similar recapitalizations).
In order to exercise the Right, the holders shall provide written
notice thereof to the Corporation, setting forth (a) the fact that such holders
intend to exercise the Right, and (b) the proposed date for such exercise (the
"Exercise Date"), which shall be between 10 and 30 days after the date of such
-------------
notice, provided, however, that if the Corporation shall deliver the holders a
-------- -------
written request to delay the date for such exercise by no more than 45 days, the
Exercise Date will be as set forth in that request. On the Exercise Date, (y)
the holders shall tender their shares of Common Stock to the Corporation for
cancellation, and (z) the Corporation shall cause to be delivered to Elan
International Services, Ltd., acting on behalf of such holders, such shares of
Newco. The holders and the Corporation shall take all other necessary or
appropriate actions in connection with or to effect such closing.
This Right Certificate, upon surrender, may be exchanged for another
Right Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to
purchase a like aggregate number of Newco Preferred Shares as the Rights
evidenced by the Right Certificate or Right Certificates surrendered shall have
entitled such holder to purchase.
The Rights evidenced by this Certificate may be exercised in whole and
not in part.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Newco Preferred
Shares or of any other securities of Newco which may at any time be issuable on
the exercise hereof, nor shall anything contained herein be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of Newco or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or, to receive notice of meetings or other actions affecting
stockholders, or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised.
The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions hereof and in the taking of all such action as may be necessary or
appropriate in order to protect the exchange right of the holders of this Rights
Certificate against impairment.
If the Corporation is unable or shall fail to discharge its
obligations hereunder (an "Obligation"), such Obligation shall be discharged as
----------
soon as the Corporation is able to discharge such Obligation. If and so long as
such Obligation with respect to this Rights Certificate shall not be fully
discharged, the Corporation shall not directly or indirectly, redeem, purchase,
or otherwise acquire any classes or series of its preferred stock or common
stock ("Capital Stock") or discharge any mandatory or optional redemption,
-------------
sinking fund or other similar obligation in respect of any such Capital Stock.
Without limiting the foregoing, the holder of this Rights Certificate
shall be entitled to the benefits of that certain Securities Purchase Agreement,
dated as of June __, 2001, between SafeScience and Elan International Services,
Ltd., a Bermuda exempted limited liability company.
WITNESS the facsimile signature of the proper officer of the
Corporation.
SAFESCIENCE, INC.
By: ________________________________
Name:
Title:
