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EXHIBIT 1.1
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF JULY 21, 2000
BY AND BETWEEN
AXYS PHARMACEUTICALS, INC.
AND
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Table of Contents
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ARTICLE I Definitions..................................................................................1
Section 1.1 Definitions..................................................................................1
ARTICLE II Purchase and Sale of Common Stock............................................................3
Section 2.1 Purchase and Sale of Stock...................................................................3
Section 2.2 The Shares...................................................................................3
Section 2.3 Purchase Price and Closing...................................................................3
ARTICLE III Representations and Warranties...............................................................4
Section 3.1 Representation and Warranties of the Company.................................................4
Section 3.2 Representations and Warranties of the Purchaser.............................................11
ARTICLE IV Covenants...................................................................................12
Section 4.1 Securities..................................................................................12
Section 4.2 Registration and Listing....................................................................12
Section 4.3 Registration Statement......................................................................12
Section 4.4 Compliance with Laws........................................................................12
Section 4.5 Keeping of Records and Books of Account.....................................................13
Section 4.6 Reporting Requirements......................................................................13
Section 4.7 Non-public Information......................................................................13
Section 4.8 Effective Registration Statement............................................................13
Section 4.9 No Stop Orders..............................................................................13
Section 4.10 Amendments to the Registration Statement....................................................14
Section 4.11 Prospectus Delivery.........................................................................14
Section 4.12 Notice......................................................................................14
ARTICLE V Conditions to Closing, Draw Downs and Call Options..........................................15
Section 5.1 Conditions Precedent to the Obligation of the Company to Close this Agreement, Issue a Draw
Down Notice or Grant a Call Option and Sell the Shares......................................15
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close............................16
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down or Call Option
Grant and Purchase the Shares...............................................................16
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Table of Contents
(continued)
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ARTICLE VI Draw Down Terms; Call Option................................................................17
Section 6.1 Draw Down Terms.............................................................................17
Section 6.2 Purchaser's Call Option.....................................................................20
ARTICLE VII Termination.................................................................................20
Section 7.1 Termination by Mutual Consent...............................................................20
Section 7.2 Other Termination...........................................................................20
Section 7.3 Effect of Termination.......................................................................21
ARTICLE VIII Indemnification.............................................................................21
Section 8.1 General Indemnity...........................................................................21
Section 8.2 Indemnification Procedures..................................................................22
ARTICLE IX Miscellaneous...............................................................................23
Section 9.1 Fees and Expenses...........................................................................23
Section 9.2 Specific Enforcement, Consent to Jurisdiction...............................................23
Section 9.3 Entire Agreement; Amendment.................................................................24
Section 9.4 Notices.....................................................................................24
Section 9.5 Waivers.....................................................................................25
Section 9.6 Headings....................................................................................25
Section 9.7 Successors and Assigns......................................................................25
Section 9.8 Governing Law...............................................................................25
Section 9.9 Survival....................................................................................25
Section 9.10 Counterparts................................................................................26
Section 9.11 Publicity...................................................................................26
Section 9.12 Severability................................................................................26
Section 9.13 Further Assurances..........................................................................26
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
July 21, 2000 by and between Axys Pharmaceuticals, Inc., a Delaware corporation
(the "Company") and , a company organized under the laws
of the Commonwealth of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
(a) "Call Option" shall have the meaning assigned to such term in
Section 6.2(a) hereof.
(b) "Call Option Notice" shall have the meaning assigned to such term
in Section 6.2(a) hereof.
(c) "Commission" means the Securities and Exchange Commission.
(d) "Commission Documents" shall have the meaning assigned to such term
in Section 3.1(f) hereof.
(e) "Commission Filings" means the Company's Form 10-K for the fiscal
year ended December 31, 1999, Form 10-Q for the period ended March 31, 1999,
Forms 8-K filed on February 22, 2000 and May 15, 2000, Registration Statement on
Form S-3, No. 333-35826, and all other filings made by the Company after the
date hereof pursuant to the Securities Exchange Act of 1934.
(f) "Common Stock" shall have the meaning assigned to such term in
Section 2.1 hereof.
(g) "Draw Down" shall have the meaning assigned to such term in Section
6.1(a) hereof.
(h) "Draw Down Amount" means the actual amount of a Draw Down up to
$ , or such other amount mutually agreed upon by the Purchaser and the
Company, which shall be in addition to the Initial Purchase.
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(i) "Draw Down Discount Percentage" means (i) % if the Threshold
Price is equal to or greater than $ and less than $ ; (ii) % if the
Threshold Price is equal to or greater than $ and less than $ ; (iii)
% if the Threshold Price is equal to or greater than $ and less than
$ ; or (iv) % if the Threshold Price is equal to or greater than $ .
(j) "Draw Down Exercise Date" shall have the meaning assigned to such
term in Section 5.1 hereof.
(k) "Draw Down Notice" shall have the meaning assigned to such term in
Section 6.1(i) hereof.
(l) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive trading days following a Draw Down Notice, or such other period
mutually agreed upon by the Purchaser and the Company.
(m) "Effective Date" shall mean the date the Registration Statement of
the Company covering the Shares being subscribed for hereby is declared
effective.
(n) "Investment Period " shall have the meaning assigned to such term
in Section 7.1 hereof.
(o) "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, assets or financial condition of the Company
that is material and adverse to the Company and its subsidiaries, taken as a
whole and/or any condition, circumstance, or situation that would prohibit the
Company from entering into and performing any of its obligations under this
Agreement in any material respect.
(p) "Material Change in Ownership" shall mean that, as of any
particular measurement date, the officers and directors of the Company shall
beneficially own in the aggregate less than 1% of the outstanding Common Stock
of the Company, except that for purposes of making any such calculation, Common
Stock issued to the Purchaser pursuant to this Agreement shall not be included
in such calculation.
(q) "Prospectus" as used in this Agreement means the prospectus in the
form included in the Registration Statement, or, if the prospectus included in
the Registration Statement omits information in reliance on Rule 430A under the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), and such information
is included in a prospectus filed with the Commission pursuant to Rule 424(b)
under the Securities Act, the term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b).
(r) "Registration Statement" shall mean the registration statement on
Form S-3, Commission File Number 333-35826 under the Securities Act, filed with
the Securities and Exchange Commission for the registration of the Shares, as
such Registration Statement may be amended from time to time.
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(s) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(t) "Shares" shall mean the shares of Common Stock of the Company being
purchased hereunder including those shares of Common Stock issuable to the
Purchaser upon exercise of the Call Options.
(u) "Threshold Price" is the lowest VWAP at which the Company may set
in the Draw Down Notice to sell Shares during a Draw Down Pricing Period (not
taking into account the Draw Down Discount Percentage during such Draw Down
Pricing Period).
(v) "VWAP" shall mean the daily volume weighted average price (based on
a trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the Common Stock of
the Company on the NASDAQ National Market as reported by Bloomberg Financial LP
using the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK SECTION
2.1 Purchase and Sale of Stock. Subject to the terms and conditions of
this Agreement, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase from the Company up to $ of the Company's
common stock, $.001 par value per share (the "Common Stock"), consisting of (i)
an initial purchase of ___________ shares of Common Stock at a Threshold Price
of $ for an aggregate purchase price of $ (the "Initial Purchase")
and (ii) additional purchases of up to $ of Common Stock based on Draw
Downs in accordance with Section 6.1 hereof and Call Options of up to the Draw
Down Amount per Draw Down Pricing Period in accordance with Section 6.2 hereof
that the Company may grant to the Purchaser in the Company's sole discretion. In
no event shall the amount of Common Stock purchased by the Purchaser exceed
$ per Draw Down, not including any related Call Options, unless
otherwise mutually agreed upon by the Purchaser and the Company.
SECTION 2.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call
Options.
SECTION 2.3 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser, agrees to purchase the Initial Purchase and that number of the
Shares to be issued in connection with each Draw Down and the exercise of each
Call Option. The closing of the Initial Purchase and the execution and delivery
of this Agreement shall take place at the offices of Xxxxxx Xxxxxx LLP, The
Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Closing") at
10:00 a.m., eastern time, on (i) July 21, 2000, or (ii) such other time and
place or on such date as the Purchaser and the Company may agree upon (the
"Closing Date"). Each party shall deliver all
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documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
As of the date hereof, the Company does not have any subsidiaries (as defined in
Section 3.1(g)) except as set forth in the Registration Statement and in the
Company's most recent Form 10-K, including the accompanying financial statements
(the "Form 10-K"), or in the Company's most recent Form 10-Q (the "Form 10-Q"),
or on Schedule 3.1(a) attached hereto. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and, except as contemplated by Section 4.4(b), no
further consent or authorization of the Company or its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered by
the Company. This Agreement constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of the date hereof are set forth in the
Registration Statement or in its latest Form 10-K. All of the outstanding shares
of the Company's Common Stock have been duly and validly authorized, and are
fully paid and non-assessable. Except as set forth in this Agreement or as set
forth in the Registration Statement, the Commission Documents or the Commission
Filings, as of the date hereof no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in this Agreement
or as set forth in the Registration Statement, the
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Commission Documents or the Commission Filings, as of the date hereof there are
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities
and as set forth in the Registration Statement, the Commission Documents or the
Commission Filings, as of the date hereof, the Company is not a party to any
agreement granting registration rights to any person with respect to any of its
equity or debt securities. Except as set forth in the Registration Statement,
the Commission Documents or the Commission Filings, the Company is not a party
to, and it has no knowledge of, any agreement restricting the voting or transfer
of any shares of the capital stock of the Company. Except as set forth in the
Registration Statement, the Commission Documents or the Commission Filings, the
offer and sale of all capital stock, convertible securities, rights, warrants,
or options of the Company issued prior to the Closing complied with all
applicable federal and state securities laws, and no stockholder has a right of
rescission or damages with respect thereto which would be reasonably expected
to have a Material Adverse Effect. The Company has furnished or made available
to the Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Charter"), and the Company's
Bylaws as in effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid for
and issued in accordance with the terms hereof and the Registration Statement
and Prospectus, the Shares shall be validly issued and outstanding, fully paid
and non-assessable, and the Purchaser shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares in accordance with the terms hereof
(other than the Registration Statement, Prospectus and any filings with the NASD
or any filings which may be required to be made by the Company with the
Commission, or the Nasdaq National Market subsequent to the Closing, and, any
registration statement which
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may be filed pursuant hereto); provided that, for purpose of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and except as disclosed
in the Registration Statement, the Commission Documents or the Commission
Filings, as of the date hereof the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "Commission Documents"). The Company has delivered or
made available to the Purchaser true and complete copies of the Commission
Documents filed with the Commission since December 31, 1999 and prior to the
Closing Date. The Company has not provided to the Purchaser any information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement. The Form
10-K for the year ended December 31, 1999 complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents, and the said Form 10-K did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached
hereto set forth each subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. Except as set forth in the Commission Documents or
the Commission Filings, none of such subsidiaries is a "significant subsidiary"
as defined in Regulation S-X.
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(h) No Material Adverse Change. Since March 31, 2000, the Company has
not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed on the Commission
Documents or Commission Filings, the Company has no liabilities, obligations,
claims or losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) that would be required to be
disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission Documents
or Commission Filings, other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since March 31, 2000 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.
(k) Indebtedness. The Commission Filings set forth as of March 31, 2000
all outstanding secured and unsecured Indebtedness of the Company, or for which
the Company has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP. The Company is not in default with
respect to any Indebtedness.
(l) Title to Assets. The Company has good and marketable title to all
of its real and personal property reflected in the Commission Documents, free of
any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the Commission Documents and the
Commission Filings or such that could not reasonably be expected to cause a
Material Adverse Effect. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or
thereto. Except as disclosed in the Commission Documents or Commission Filings,
there is no action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company, or any
of its properties or assets which, if adversely determined, is reasonably likely
to result in a Material Adverse Effect.
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(n) Compliance with Law. The business of the Company has been and is
presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except as set forth
in the Commission Documents or the Commission Filings or such that do not cause
a Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) Certain Fees. No brokers, finders or financial advisory fees or
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement.
(p) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company in
connection with the transactions contemplated by this Agreement taken as a whole
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(q) Operation of Business. The Company owns or possesses all patents,
trademarks, service marks, trade names, copyrights, licenses and authorizations
as set forth in the Commission Documents or the Commission Filings and all
rights with respect to the foregoing, which are reasonably necessary for the
conduct of its business as now conducted without any conflict with the rights of
others, except to the extent set forth in the Commission Documents or except as
would not be reasonably expected to result in a Material Adverse Effect.
(r) Environmental Compliance. Except as disclosed in the Commission
Filings, the Company has obtained all material approvals, authorization,
certificates, consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other person, that
are required under any Environmental Laws. "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate be reasonably expected to have a Material Adverse Effect, to the best
of the Company's knowledge, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company that violate or could reasonably be expected to violate
any Environmental Law after the Closing or that could reasonably be expected to
give rise to a Material Adverse Effect.
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(s) Material Agreements. Except as set forth in the Commission
Documents, the Company is not a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which is required to be filed with the Commission as an exhibit to the
Registration Statement (collectively, "Material Agreements"). The Company has in
all material respects performed all the obligations required to be performed to
date under the foregoing agreements, has received no notice of default and, to
the best of the Company's knowledge is not in default under any Material
Agreement now in effect, the result of which could reasonably be expected to
cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the Commission
Documents and Commission Filings, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (a) the Company, or any of
its customers (excluding agreements related to the purchase or lease of the
Company's products) or suppliers on the one hand, and (b) on the other hand, any
officer, employee, consultant or director of the Company, or any person who
would be covered by Item 404(a) of Regulation S-K or any corporation or other
entity controlled by such officer, employee, consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment
or supplement thereto, or filed pursuant to Rule 424 under
the Securities Act, complied when so filed in all material
respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or
suspending the use of any Prospectus.
(ii) The Company meets the requirements for the use of Form S-3
under the Securities Act. The Registration Statement in
the form in which it became effective and also in such
form as it may be when any post-effective amendment
thereto became effective and the Prospectus and any
supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Securities Act,
complied in all material respects except as to the filing
of certain exhibits with the provisions of the Securities
Act and did not at any such times contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in
the light of the circumstances under which they made) not
misleading, except that this representation and warranty
does not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance
upon and in conformity with information relating to the
Purchaser furnished to the Company in writing by or on
behalf of the Purchaser through you expressly for use
therein.
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(iii) The Company has not distributed and, prior to the
completion of the distribution of the Shares, will not
distribute any offering material in connection with the
offering and sale of the Shares other than the
Registration Statement, the Prospectus or other materials,
if any, permitted by the Securities Act.
(v) Employees. As of the date hereof, the Company has no collective
bargaining arrangements or agreements covering any of its employees. Except as
set forth in the Registration Statement, the Commission Documents and the
Commission Filings, as of the date hereof, the Company has no employment
contract, agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company. As of the date hereof,
except as set forth in the Registration Statement, the Commission Documents or
the Commission Filings, since December 31, 1999, no officer, consultant or key
employee of the Company whose termination, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares will be
used by the Company as set forth in the Registration Statement.
(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan by the Company would be reasonably
expected to have a Material Adverse Effect. The execution and delivery of this
Agreement and the issue and sale of the Shares will not involve any transaction
which is subject to the prohibitions of Section 406 of ERISA or in connection
with which a tax could be imposed pursuant to Section 4975 of the Internal
Revenue Code of 1986, as amended, provided that, if the Purchaser, or any person
or entity that owns a beneficial interest in the Purchaser, is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a "party in interest" (within the meaning of Section
3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 3.1(y), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or by any trade or business, whether or not
incorporated, which, together with the Company, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder.
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The Company further acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereunder and any advice given
by the Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereunder is merely incidental to
the Purchaser's purchase of the Shares.
SECTION 3.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or members is required. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
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(d) Information. The Purchaser and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. The Purchaser has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Shares. Purchaser understands that it (and not the Company) shall be responsible
for its own tax liabilities that may arise as a result of this investment or the
transactions contemplated by this Agreement.
(e) Selling Restrictions. The Purchaser has the right to sell shares of
the Company's Common Stock equal in number to the number of the Shares to be
purchased pursuant to this Agreement during the Draw Down Pricing Period. The
Purchaser covenants however, that prior to and during each Draw Down Pricing
Period, neither the Purchaser, nor any of its affiliates nor any entity managed
by the Purchaser will ever be is a net short position with respect to shares of
Common Stock of the Company in any account directly or indirectly managed by the
Purchaser or any affiliate of the Purchaser or any entity managed by the
Purchaser.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which covenants
are for the benefit of the Purchaser and its permitted assignees.
SECTION 4.1 Securities. The Company shall notify the Commission and the
Nasdaq National Market, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares to the Purchaser or subsequent holders.
SECTION 4.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock and the
listing of the Shares purchased by Purchaser hereunder on the Nasdaq National
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the NASD or any relevant market
or system.
SECTION 4.3 Registration Statement. Before the Company shall issue a
Draw Down Notice, the Company shall have caused a sufficient number of shares of
Common Stock to be authorized and registered to cover the Shares to be issued in
connection with this Agreement.
SECTION 4.4 Compliance with Laws.
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(a) The Company shall comply with all applicable laws, rules,
regulations and orders, noncompliance with which would be reasonably expected to
have a Material Adverse Effect.
(b) The Company will not be obligated to issue and the Purchaser will
not be obligated to purchase any shares of the Company's Common Stock which
would result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued and outstanding shares of the
Company's Common Stock on the date hereof.
SECTION 4.5 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
SECTION 4.6 Reporting Requirements. Upon request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon as
available, and in any event within 47 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within 92 days after the end of each fiscal year of
the Company.
SECTION 4.7 Non-public Information. Neither the Company nor any of its
officers or agents shall disclose any material non-public information about the
Company to the Purchaser and neither the Purchaser nor any of its affiliates,
officers or agents will solicit any material non-public information from the
Company.
SECTION 4.8 Effective Registration Statement. If, at the time this
Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become effective as
soon as reasonably practicable and will advise the Purchaser promptly and, if
requested by the Purchaser, will confirm such advice in writing, when it
receives notice that the Registration Statement or such post-effective amendment
has become effective.
SECTION 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware
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of the happening of any event, which makes any statement of a material fact made
in the Registration Statement or the Prospectus (as then amended or
supplemented) untrue or which requires the making of any additions to or changes
in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Securities Act
or the regulations thereunder to be stated therein or necessary in order to make
the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Securities Act or any other law. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, the
Company will make commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible time.
SECTION 4.10 Amendments to the Registration Statement. The Company will
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus of which the Purchaser shall not previously have
been advised or to which the Purchaser shall reasonably object after being so
advised or (ii) so long as, in the reasonable opinion of counsel for the
Purchaser, a Prospectus is required to be delivered in connection with sales by
any Purchaser or dealer, file any information, documents or reports pursuant to
the Exchange Act without delivering a copy of such information, documents or
reports to the Purchaser, promptly following such filing.
SECTION 4.11 Prospectus Delivery. The Company shall file a prospectus
supplement to its Registration Statement on the first business day immediately
following the end of each Draw Down Pricing Period, and will deliver to the
Purchaser, without charge, in such quantities as reasonably requested by the
Purchaser, copies of each form of Prospectus and prospectus supplement on each
Settlement Date. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and, subject to the
provisions of Section 4.10 above, file with the Commission an appropriate
supplement or amendment thereto, and will expeditiously furnish to the Purchaser
a reasonable number of copies thereof.
SECTION 4.12 Notice. The Company shall immediately notify the Purchaser
that (i) a Material Adverse Effect or Material Change in Ownership has occurred
or (ii) the Company has entered into an Other Financing (as defined in Section
6.1(k)).
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ARTICLE V
CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS
SECTION 5.1 Conditions Precedent to the Obligation of the Company to
Close this Agreement, Issue a Draw Down Notice or Grant a Call Option and Sell
the Shares. The obligation hereunder of the Company to issue a Draw Down Notice
or grant a Call Option and sell the Shares to the Purchaser is subject to the
satisfaction or waiver, at or before the Initial Purchase and each Draw Down or
Call Option request (the "Draw Down Exercise Date"), of each of the conditions
set forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of each Draw Down Exercise
Date and each Settlement Date as though made at that time, except for
representations and warranties that are expressly made as of a particular date.
(b) Registration Statement. The Company shall have Shares registered
under the Registration Statement which are valued at an amount equal to or in
excess of the number of Shares issuable pursuant to such Draw Down Notice or
Call Option. The Registration Statement registering the Shares shall have been
declared effective by the Commission and shall have been amended or
supplemented, as required, to disclose the sale of the Shares prior to each
Settlement Date, as applicable.
(c) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to each Settlement Date.
(d) No Injunction. No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Suspension, Etc. Trading in the Company's Common Stock shall not
have been suspended by the Commission or the Nasdaq National Market (except for
any suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to such Draw Down Exercise Date and
applicable Settlement Date), and, at any time prior to each Draw Down Exercise
Date, trading in securities generally as reported on the Nasdaq National Market
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by the Nasdaq National
Market.
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the
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transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
SECTION 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement and to
acquire and pay for the Initial Purchase is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(b) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(c) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(d) Registration Statement. The Company shall have Shares registered
under the Registration Statement which are valued at an amount equal to or in
excess of the Initial Purchase. The Registration Statement registering the
Shares shall have been declared effective by the Commission.
(e) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of Exhibit A hereto, and such other certificates and documents as the
Purchaser or its counsel shall reasonably require incident to the Closing.
SECTION 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Call Option Grant and Purchase the Shares. The obligation
hereunder of the Purchaser to consummate the Initial Purchase or to accept a
Draw Down or Call Option grant and to acquire and pay for the Shares on the
Settlement Date is subject to the satisfaction or waiver, at or before each Draw
Down Exercise Date and each Settlement Date, as applicable or the consummation
of the Initial Purchase, as the case may be, of each of the conditions set forth
below. The conditions are for the Purchaser's sole benefit and may be waived by
the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects
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as of the date when made and as of the Draw Down Exercise Date and Settlement
Date, as applicable, as though made at that time, except for representations and
warranties that speak as of a particular date.
(b) Registration Statement. The Company shall have Shares registered
under the Registration Statement which are valued at an amount equal to or in
excess of the number of Shares issuable pursuant to such Draw Down Notice or
Call Option. The Registration Statement registering the Shares shall have been
declared effective by the Commission and shall have been amended or
supplemented, as required, to disclose the sale of the Shares prior to the
Closing Date or each Settlement Date, as applicable.
(c) No Suspension. Trading in the Company's Common Stock shall not have
been suspended by the Commission or the Nasdaq National Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down Exercise Date), and, at
any time prior to such Draw Down Exercise Date, trading in securities generally
as reported by the Nasdaq National Market shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by the Nasdaq National Market.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit B.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(g) Material Adverse Effect; Material Change in Ownership. No Material
Adverse Effect or Material Change in Ownership shall have occurred.
ARTICLE VI
DRAW DOWN TERMS; CALL OPTION
SECTION 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
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(a) The Company, may, in its sole discretion, issue a Draw Down Notice
with respect to a draw down (a "Draw Down") during each Draw Down Pricing Period
of up to (i) $ if the Threshold Price is equal to or greater than $
but less than $ ; (ii) $ if the Threshold Price is equal to or
greater than $ but less than $ ; (iii) $ if the Threshold Price
is equal to or greater than $ but less than $ ; or (iv) $ if
the Threshold Price is equal to or greater than $ ; provided, that the
Company may, in its sole discretion, issue a Draw Down Notice with respect to
any Draw Down Amount at any Threshold Price or any Draw Down Discount Percentage
pursuant to terms mutually agreed upon by the Purchaser and the Company, which
Draw Down the Purchaser will be obligated to accept. Prior to issuing any Draw
Down Notice, the Company shall have Shares registered under the Registration
Statement which are valued at an amount equal to or in excess of the Draw Down
Amount.
(b) The number of Shares to be issued in connection with each Draw Down
shall be equal to the sum of the quotients (for each trading day of the Draw
Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of
(x) 1/20th (or such other fraction based on the length of the Draw Down Pricing
Period) of the Draw Down Amount divided by (y) the applicable Draw Down Discount
Percentage multiplied by the VWAP of the Common Stock for such trading day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) consecutive trading days (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days between Draw
Downs (including after consummation of the Initial Purchase), unless otherwise
mutually agreed upon between the Purchaser and the Company.
(f) There shall be a maximum of twelve (12) monthly Draw Downs during
the term of this Agreement.
(g) Each Draw Down will expire on the last trading day of each Draw
Down Pricing Period.
(h) If the VWAP on a given trading day is less than the Threshold
Price, then the total amount of the Draw Down for the relevant Draw Down Pricing
Period will be reduced by 1/20th (or such other fraction based on the length of
the Draw Down Pricing Period). Notwithstanding anything in the foregoing to the
contrary, for each trading day during the Draw Down Pricing Period that the VWAP
is less than the Threshold Price, the Purchaser may elect in its sole discretion
to purchase Shares at the Threshold Price at the end of such Draw Down Pricing
Period and the total amount of the Draw Down shall not be reduced by 1/20th
pursuant to the foregoing sentence. At no time shall the Threshold Price be set
below $6.00, unless mutually
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agreed upon by the Company and the Purchaser. If trading in the Company's Common
Stock is suspended for any reason for more than three (3) hours in any trading
day, at the Purchaser's option, the price of the Common Stock shall be deemed to
be below the Threshold Price for that trading day and the Draw Down for the
relevant Draw Down Pricing Period shall be reduced by 1/20 th (or such other
fraction based on the length of the Draw Down Pricing Period).
(i) The Company must inform the Purchaser via facsimile transmission as
to the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first trading day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit C. In addition to
the Draw Down Amount, the Company shall set the Threshold Price with each Draw
Down Notice and shall designate the first trading day of the Draw Down Pricing
Period.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the account designated by the Company by wire
transfer of immediately available funds provided that the Shares are received no
later than 1:00 p.m., eastern time, or next day available funds if the Shares
are received thereafter.
(k) If during any Draw Down Pricing Period, the Company shall enter
into any other equity financing agreement (the "Other Financing") the primary
purpose of which is to raise financing for the Company, the Purchaser may in its
sole discretion (i) purchase the Draw Down Amount of shares of Common Stock
and/or exercise Call Options granted during such Draw down Pricing Period at the
price at which the Company issued shares of Common Stock in the Other Financing
during such Draw Down Pricing Period, (ii) purchase the Draw Down Amount of
shares of Common Stock and/or exercise Call Options granted during such Draw
Down Pricing Period at the applicable Draw Down Discount Percentage times the
VWAP for such Draw Down Pricing Period, or (iii) elect not to purchase any
Shares during such Draw Down Pricing Period. The Purchaser shall notify the
Company of its election on the business day preceding the Settlement Date.
(l) If on the Settlement Date, the Company fails to deliver the Shares
to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay, in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (l) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such
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shares of Common Stock and piggyback registration rights if the Company files a
separate registration statement.
SECTION 6.2 Purchaser's Call Option.
(a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options to purchase shares of the Company's Common Stock in an amount up to the
applicable Draw Down Amount (a "Call Option"). For each trading day during a
Draw Down Pricing Period, the Purchaser may exercise a Call Option by providing
notice to the Company of the exercise of its Call Option (the "Call Option
Notice"), substantially in the form attached hereto as Exhibit D. The total
amount of all Call Options exercised by the Purchaser shall not exceed
$ in the aggregate.
(b) The number of shares of Common Stock to be issued in connection
with each Call Option shall equal the quotient of (i) the amount of the Call
Option exercised and (ii) the product of the applicable Draw Down Discount
Percentage and the greater of (A) the VWAP for the Common Stock on the day the
Purchaser issues its Call Option Notice and (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to this
Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to the
Company no later than 8:00 p.m. (eastern time) on the day such Call Option is
exercised. If the Purchaser does not exercise a Call Option by 8:00 p.m.
(eastern time) on the last day of the applicable Draw Down Pricing Period, the
Purchaser's Call Options with respect to that Draw Down Pricing Period shall
terminate.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination by Mutual Consent. The term of this Agreement
shall be the earlier of (i) fifteen (15) months from the date of execution of
this Agreement (the "Investment Period") and (ii) the date that all of the
Shares registered under the Registration Statement have been issued and sold.
This Agreement may be terminated at any time by mutual consent of the parties.
SECTION 7.2 Other Termination. The Company shall inform the Purchaser,
and the Purchaser shall have the right to terminate this Agreement within the
subsequent thirty (30) days (the "Event Period"), if (x) the Company enters into
any equity financing agreement without the prior written consent of the
Purchaser which provides for (i) the issuance of Common Stock or securities
convertible, exercisable or exchangeable into Common Stock at a
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discount to the then current market price of the Common Stock, (ii) a mechanism
for the reset of the purchase price of the Common Stock to below the then
current market price of the Common Stock, or (iii) the issuance of Common Stock
with warrants, such that the average purchase price of the Common Stock issued
and the shares of Common Stock issuable upon exercise of the warrants would be
less than the per share price of Common Stock of the then current market price
of the Common Stock, provided, however, that the Company may issue shares of its
Common Stock in connection with (i) the Company's stock option or stock purchase
plans, (ii) currently outstanding options or warrants, (iii) the acquisition of
products licenses or other assets and (iv) strategic partnerships or joint
ventures (the primary purpose of which is not to raise equity) or (y) an event
resulting in a Material Adverse Effect or Material Change in Ownership has
occurred. The Purchaser may terminate this Agreement upon one (1) day's notice
during the Event Period.
SECTION 7.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.9.
Nothing in this Section 7.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and hold
harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorney's fees) to which the Purchaser and each person, if any, who controls
the Purchaser may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained, or incorporated by reference, in
the Registration Statement relating to Common Stock being sold to the Purchaser
(including the any prospectus supplement filed in connection with the
transactions contemplated hereunder (the "Prospectus Supplement") which are a
part of it), or any amendment or supplement to it, or (ii) the omission or
alleged omission to state in that Registration Statement or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
The Company will reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by or the controlling
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person in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding, except that the Company will not be
liable to the extent a claim or action which results in a loss, claim, damage,
liability or expense arises out of, or is based upon, an untrue statement,
alleged untrue statement, omission or alleged omission, included in any
Prospectus or Prospectus Supplement or any amendment or supplement to the
Prospectus or Prospectus Supplement in reliance upon, and in conformity with,
written information furnished by the Purchaser to the Company for inclusion in
the Prospectus or Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Company and each director, officer and person, if
any, who controls the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus or Prospectus Supplement or any amendment or supplement to it or (ii)
the omission or alleged omission to state in any Prospectus or Prospectus
Supplement or any amendment or supplement to it a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, the untrue statement, alleged untrue
statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by the Purchaser to the Company
for inclusion in the Prospectus or Prospectus Supplement or an amendment or
supplement to it, and the Purchaser will reimburse the Company and each such
director, officer or controlling person promptly upon demand for any legal or
other costs or expenses reasonably incurred by the Company or the other person
in investigating, defending against, or preparing to defend against any such
claim, action, suit or proceeding.
SECTION 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party will pay the reasonable fees and
expenses of no more than one separate counsel for all the indemnified parties.
Each indemnified party, as a condition to receiving indemnification as provided
in Paragraph (a) or (b) or Section
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8.1, will cooperate in all reasonable respects with the indemnifying party in
the defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent. No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Fees and Expenses. The Company shall pay all reasonable
fees and expenses related to the transactions contemplated by this Agreement;
provided, that the Company shall pay, at the Closing, all reasonable fees and
expenses, inclusive of disbursements and out-of-pocket expenses, incurred by one
legal counsel of the Purchaser of up to $50,000 in connection with the
preparation, negotiation, execution and delivery of this Agreement. In addition,
the Company shall pay all reasonable fees and expenses incurred by the Purchaser
in connection with any amendments, modifications or waivers of this Agreement or
incurred in connection with the enforcement of this Agreement, including,
without limitation, all reasonable fees and expenses of one legal counsel of
Purchaser. The Company shall pay all stamp or other similar taxes and duties
levied in connection with issuance of the Shares pursuant hereto.
SECTION 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
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(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of Delaware for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
SECTION 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
SECTION 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Axys Pharmaceuticals, Inc.
000 Xxxxxxx Xxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
With copies to: Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Tel. No: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Purchaser:
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With copies to:
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
SECTION 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
SECTION 9.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
SECTION 9.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, which consent
will not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
SECTION 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
SECTION 9.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination or expiration of this
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Agreement, and the agreements and covenants set forth in Article VIII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
SECTION 9.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
SECTION 9.11 Publicity. The Company shall not issue any press release
or otherwise make any public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchaser. In the event the
Company is required by law, based upon an opinion of the Company's counsel, that
the Company must issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transaction contemplated
hereby, the Company shall consult with the Purchaser on the form and substance
of such press release.
SECTION 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
SECTION 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
AXYS PHARMACEUTICALS, INC.
By:
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Name:
Title:
By:
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Name:
Title:
31
EXHIBITS INTENTIONALLY OMITTED
