EXHIBIT 1.1
Placement Agency Agreement
June 1, 2001
Petkevich & Partners, LLC
000 0xx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000-0000
Attention: J. Xxxxx Xxxxxxxxx
Ladies and Gentlemen:
Introductory. Incara Pharmaceuticals Corporation, a Delaware
corporation (the "Company"), currently proposes to issue and sell shares of its
Common Stock having an aggregate gross offering price of up to $10,000,000
pursuant to the Registration Statement defined below (the "Offering"). The
Offering is proposed on the basis of selling any or all of such shares, without
any minimum number of shares that must be sold. The price per share and other
terms of the Offering will be agreed upon between the Company and the purchasers
(the "Purchasers") who purchase the securities (the "Securities") offered and
sold in the Offering. Petkevich & Partners, LLC (the "Agent") proposes to act as
the Company's exclusive placement agent, on a reasonable best efforts basis, in
connection with the Offering.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a "shelf" registration statement on Form S-1 (File
No. 333-52286) pursuant to the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act"), and has filed
with the Commission on or about June 1, 2001, under the Securities Act a
Post-Effective Amendment No. 1 thereto. The prospectus, subject to completion,
included in such Post-Effective Amendment No. 1 and any subsequent prospectus
supplement, if any, which is marked subject to completion, used in connection
with the Offering, is called for purposes of this Agreement a "preliminary
prospectus." Such Post-Effective Amendment No. 1, as amended, including the
financial statements, exhibits and schedules thereto, in the form in which it
was declared effective by the Commission or otherwise deemed effective under the
Securities Act, including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A or Rule 462(c) under the Securities
Act, is called the "Registration Statement". Each prospectus supplement and
preliminary prospectus used by the Company or Agent to confirm sales of the
Securities is called the "Prospectus." If the Company files an abbreviated
registration statement to register additional securities relating to the
Offering pursuant to Rule 462(b) under the Securities Act (the "Rule 462(b)
Registration Statement"), then from and after the date and time of filing of the
Rule 462(b) Registration Statement, the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. All references in this Agreement
to the Registration Statement, the Rule 462(b) Registration Statement, a
preliminary prospectus, the Prospectus or any amendments or supplements to any
of the foregoing, shall include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("XXXXX").
The Company hereby confirms its agreements with the Agent as follows:
Section 1. Appointment and Compensation of Agent and Related Offering
Terms.
(a) Appointment. Subject to the terms and conditions of this Agreement,
upon the basis of the representations, warranties and agreements herein
contained, and effective upon the date hereof, the Company hereby appoints the
Agent as the Company's exclusive placement agent and financial adviser in
connection with the Offering. The Agent, on the basis of the covenants,
representations and warranties of the Company herein, accepts such appointment
on a reasonable best efforts basis. The Agent's
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reasonable best efforts to offer the Securities shall be limited to offers to
those persons whom the Agent reasonably believes to be qualified institutional
buyers as defined in Rule 144A under the Securities Act or other investors
meeting similar financial standards. The Agent shall not make offers to "retail
investors" or other persons who do not meet such financial standards. This
Agreement shall not constitute or imply any commitment by the Agent to purchase
any Securities or to assume any liability or otherwise assure that any or all of
the Securities will be sold. The Agent shall not have authority to bind the
Company. The Agent is authorized to retain other brokers or dealers who are
members of the National Association of Securities Dealers, Inc. (the "NASD") to
act as sub-agents on its behalf in connection with the Offering, and shall
provide notice to the Company of any such retention.
(b) Determination of Offering Price. The Company and the Purchasers
shall determine the price per share and related pricing terms of Securities sold
pursuant to the Offering. In connection with each sale of Securities in the
Offering, the Company shall prepare, timely file with the Commission and timely
deliver to each Purchaser, together with the preliminary prospectus, a
prospectus supplement setting forth the public offering price of the Securities
to be sold, discounts or commissions, amount of proceeds, number and type of
Securities sold, and other information required by the Securities Act. In
accordance with the approval of the Offering by the Company's stockholders on
March 27, 2001, the price per share to the public in the Offering shall not be
less than the closing sales price for the Company's Common Stock as reported on
the Nasdaq National Market on the day before the Closing.
(c) Commission. The Company shall pay to the Agent a commission
consisting of (1) a cash payment equal to seven percent (7%) of the gross
offering price paid to the Company at each Closing defined below for the
purchase of the Securities, plus (2) a five year warrant in the form attached
hereto as Exhibit A (the "Warrant") to purchase up to 80,000 shares of Common
Stock, in which (i) the exercise price per share shall be one hundred and
twenty-five (125%) of the gross price per share paid to the Company at each
Closing, and (ii) the number of shares specified in the Warrant shall be the
same proportion of 80,000 that the gross proceeds from the sale of the
Securities in the Offering bears to $10 million. Such cash payment and Warrant
are collectively referred to below as the "Commission".
(d) Closing. The Company shall notify the Agent at least forty-eight
(48) hours in advance of one or more closings (each a "Closing" and
collectively, the "Closing'") at which the Securities shall be sold and
delivered to Purchasers against payment therefor. The Company shall deliver the
cash portion of the Commission to the Agent not later than the day of each
Closing, in the form of a wire transfer of the cash portion of the Commission to
such account as may be specified by the Agent. The Company shall deliver to the
Agent a Warrant duly executed by the Company concurrently with each Closing,
based on the Securities sold in that Closing.
(e) Agent's Expenses. The Company agrees to pay the Agent a
non-accountable expense allowance equal to $30,000. The Company shall pay to the
Agent the foregoing expense allowance in full upon execution of this Agreement.
In addition to the foregoing, the Company agrees to pay to the Agent (i) upon
request by the Agent, the filing fees incident to, and the reasonable fees and
expenses of counsel for the Agent allocable to and in connection with, the NASD
review and approval of the Agent's participation in the offering and
distribution of the Securities, and (ii) upon request, all out-of-pocket costs
and expenses incident to the travel and accommodation of the Agent's employees
on such "roadshow" presentations to potential Purchasers to be reasonably agreed
upon by the Company and the Agent. Except as provided in this subparagraph, the
Company shall not be responsible for the payment of any other expenses of the
Agent in connection with the Offering. The Company shall pay all of the
Company's costs, fees and expenses related to the Offering as described pursuant
to Section 4 of this Agreement.
(f) Escrow. The Agent shall not hold, and shall not have any
responsibility for collection or delivery of, funds of the Purchasers or the
Securities purchased by or issued to the Purchasers. The Company shall cause
funds paid by the Purchasers to be deposited, no later than 12 noon of the next
business day after receipt by the Company, in an escrow with a bank pending the
Closing and satisfaction of the terms of purchase, if any, agreed upon between
the Company and the Purchasers. The Company shall instruct its transfer agent to
deliver the Securities purchased pursuant to the Closing directly to the
Purchasers or such accounts as the Purchasers may direct. In the event the
Closing shall
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not occur, the Company shall refund all escrowed funds in full to those persons
who paid such funds, without deduction therefrom. During the period of escrow,
such Purchasers will be deemed subscribers and not stockholders. The funds in
escrow will be held for the benefit of those subscribers until released to the
Company in accordance with the escrow agreement, and will not be subject to the
expenses of the Offering. Upon the Closing, the Company shall pay from the
escrow to the Agent all sums then due to the Agent under other provisions of
this Agreement. The Company shall have sole responsibility for the payment of
the fees and expenses of the escrow agent and any other obligations owing to the
escrow agent under the escrow agreement.
(g) Term. The engagement of the Agent hereunder shall continue in
effect until the earliest to occur of: (i) one hundred twenty (120) days after
the date of this Agreement, (ii) thirty (30) days after either the Company or
the Agent gives written notice of termination hereof to other, for any reason or
no reason, (iii) mutual agreement of the Company and the Agent, (iv) immediately
upon notice of termination by the Agent to the Company if the Agent then
reasonably believes that there has occurred any material adverse change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, or (v) sale of all
of the Securities contemplated hereby.
(h) Post-Termination Payments. If the Company terminates the Agent's
engagement hereunder prior to the end of the one hundred and twenty (120) day
term of Section 1(g)(i) above, the Company agrees to pay to the Agent the full
Commission defined above as measured against any public or private sales of
securities by the Company which sales occur within one hundred and twenty (120)
days after such termination to any investors who were introduced to the Company
by the Agent during such engagement, or contacted by the Agent during such
engagement and disclosed to the Company in writing. All payment obligations of
the Company to the Agent set forth in this Section 1 shall survive the delivery
of and payment for the Securities sold hereunder and any termination of the
Agent's engagement, this Agreement or the escrow agreement described above.
Section 2. Representations and Warranties of the Company. The Company
hereby represents, warrants and covenants to the Agent, as of the date hereof
and as the Closing, as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission. Each preliminary prospectus and the Prospectus
when filed complied in all material respects with the Securities Act and, if
filed by electronic transmission pursuant to XXXXX (except as may be permitted
by Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Agent for use in connection with the Offering. Each of the
Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Each preliminary
prospectus, as of its date, and the Prospectus, as amended or supplemented, as
of its date and at all subsequent times through the 30th day after the Closing,
did not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. There are
no contracts or other documents required to be described in the Prospectus or to
be filed as exhibits to the Registration Statement which have not been described
or filed as required.
(b) Offering Materials Furnished to Agent. The Company has delivered to
the Agent one complete conformed copy of the Registration Statement and of each
consent and certificate of experts filed as a part thereof, and conformed copies
of the Registration Statement (without exhibits) and
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preliminary prospectuses and the Prospectus, as amended or supplemented, in such
quantities and at such place as reasonably requested by the Agent.
(c) Distribution of Offering Material By the Company. In connection
with the Offering, the Company has not distributed and will not distribute,
prior to the end of the Offering, any offering material in connection with the
offering and sale of the Securities other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Agency Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Securities. The Securities to be sold in the
Offering have been duly authorized for issuance and sale pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement, will be validly issued, fully paid and nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity securities
included in the Offering, except for such rights as have been duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.
(h) Independent Accountants. PricewaterhouseCoopers LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission as a part of the Registration Statement and
included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act and the Securities Exchange Act of
1934 (the "Exchange Act").
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. The supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. Such financial statements and supporting
schedules have been prepared in conformity with generally accepted accounting
principles as applied in the United States applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Selected Financial Data,"
"Capitalization," and "Unaudited Pro Forma Consolidated Financial Information"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company and each of its
consolidated subsidiaries maintain a system of accounting controls sufficient to
provide reasonable assurances that (i) transactions
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are executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles as
applied in the United States and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the list of subsidiaries set forth or incorporated by reference in Exhibit 21.1
to the Registration Statement. For purposes of this Agreement, the term
"Subsidiaries" means all of the Company's subsidiaries other than CPEC, LLC.
(l) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its Subsidiaries has been duly organized
and is validly existing as a corporation or limited liability company, as the
case may be, in good standing under the laws of the jurisdiction in which it is
organized with full corporate power and authority to own its properties and
conduct its business as described in the prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(m) Capitalization of the Subsidiaries. All the outstanding shares of
capital stock of each Subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise set forth
in the Prospectus, all outstanding shares of capital stock of the Subsidiaries
are owned by the Company either directly or through wholly owned Subsidiaries
free and clear of any security interests, claims, liens or encumbrances.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making
Other Distributions. Except for Incara Development, Ltd., no Subsidiary of the
Company is currently prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on such
Subsidiary's capital stock, from repaying to the Company any loans or advances
to such Subsidiary from the Company or from transferring any of such
Subsidiary's property or assets to the Company or any other Subsidiary of the
Company, except as described in or contemplated by the Prospectus.
(o) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The shares of such capital stock conform in all material respects
to the description thereof contained in the Prospectus. All of the issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable and have been issued in compliance with federal and state
securities laws. None of the outstanding shares were issued in violation of any
preemptive rights, rights of first refusal or other similar rights to subscribe
for or purchase securities of the Company. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company or any of its
Subsidiaries other than those described in the Prospectus. The description of
the Company's stock option, stock bonus and other stock plans or arrangements,
and the options or other rights granted thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
(p) Stock Exchange Listing. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq
National Market. The Company has taken no action designed to, or likely to have
the effect of, terminating such registration under the Exchange Act or delisting
the Common Stock from the Nasdaq National Market, nor has the Company received
any notification that the Commission or the Nasdaq Stock Market is currently
contemplating terminating such registration or delisting. The Company has not
been notified by Nasdaq that it is not in compliance with any Nasdaq Stock
Market Marketplace Rules, including without limitation the audit committee
requirements to be certified to Nasdaq by June 14, 2001 and the qualitative and
quantitative
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"maintenance" standards thereunder. Neither the Offering nor any other
transactions entered into by the Company during the Offering will violate, or
constitute a basis for delisting from the Nasdaq National Market, under the
Nasdaq Stock Market Marketplace Rules.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Securities
by the Agent in the manner contemplated here and in the Prospectus, (ii) by the
NASD and (iii) for the sale of Securities, if applicable, to persons residing
outside the United States of America.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Securities nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
Subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of
its Subsidiaries, (ii) the terms of any license or collaboration agreement,
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which the Company or any of its Subsidiaries is a party or bound or to which its
or their property is subject or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any of its Subsidiaries
of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of its
Subsidiaries or any of its or their properties.
(s) No Defaults or Violations. Neither the Company nor any Subsidiary
is in violation or default of (i) any provision of its charter or by-laws, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such Subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. No action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its Subsidiaries or its or their property is
pending or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a Material Adverse Effect on the performance of
this Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to result in a Material Adverse
Effect.
(u) All Necessary Permits, Etc. The Company and each Subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies as are
material to the conduct their respective businesses, and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the revocation
or modification of, or non-compliance with, any such certificate, authorization
or permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its Subsidiaries has
good and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 2(i) above (or elsewhere in the
Prospectus, and subject to such capitalized leases as may be described or
referred to in the Prospectus), in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of such
property by the Company or such Subsidiary. The real property, improvements,
equipment and personal property held under lease by the Company or any
Subsidiary are held under valid and enforceable leases, with such exceptions as
are not material and do not materially interfere with the use
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made or proposed to be made of such real property, improvements, equipment or
personal property by the Company or such Subsidiary.
(w) Tax Law Compliance. The Company and its consolidated Subsidiaries
have filed all necessary federal, state and foreign income and franchise tax
returns or have properly requested extensions thereof and have paid all taxes
required to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them except as may be
being contested in good faith and by appropriate proceedings. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 2(i) above in respect of all federal, state
and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its consolidated Subsidiaries has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(x) Intellectual Property Rights. Each of the Company and its
Subsidiaries owns or possesses adequate rights to use all patents, patent rights
or licenses, inventions, collaborative research agreements, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus and any report filed by the Company under the Exchange Act; the
expiration of any owned or licensed patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with any rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights owned or licensed by the Company except as
described in the Registration Statement and Prospectus; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights owned or licensed by the Company which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, might result in a
Material Adverse Change. There is no pending or, to the knowledge of the
Company, threatened claim against the Company regarding any owned or licensed
patents, patent rights or licenses, inventions, collaborative research, trade
secrets, know-how, trademarks, service marks, trade names or copyrights. The
Company and its Subsidiaries do not in the conduct of their business as now or
proposed to be conducted as described in the Prospectus infringe or conflict
with any patent, trade secret or other right of any third party, or any
discovery, invention, product or process which is the subject of a patent
application filed by any third party, known to the Company or any of its
Subsidiaries or affiliates, which such infringement or conflict is reasonably
likely to result in a Material Adverse Change. There are no patents, patent
rights or licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights owned by any of the
officers, directors, or other affiliates of the Company or the Company's
Subsidiaries which are used in or reasonably necessary for use in the business
of the Company as now conducted or contemplated to be conducted by the Company.
Except as set forth in the Prospectus, the Company is not obligated to pay any
royalty, grant any license, or provide other consideration to any third party in
connection with its owned or licensed patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights which
individually or in the aggregate might result in a Material Adverse Change.
(y) Y2K. There are no "Year 2000" issues related to the Company, or any
of its Subsidiaries, that (i) are of a character required to be described or
referred to in the Registration Statement or Prospectus by the Securities Act
which have not been accurately described in the Registration Statement or
Prospectus or any Incorporated Document or (ii) might reasonably be expected to
result in any Material Adverse Change or that might materially affect their
properties, assets or rights.
(z) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Securities.
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(aa) Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and after receipt
of payment for the Securities will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(bb) Insurance. Each of the Company and its Subsidiaries, except for
Incara Development, Ltd., are insured by recognized, financially sound and
reputable institutions with policies in such amounts and with such deductibles
and covering such risks as are generally deemed adequate and customary for their
businesses including, but not limited to, policies covering real and personal
property owned or leased by the Company and its Subsidiaries against theft,
damage, destruction, general liability and Directors and Officers liability. The
Company has no reason to believe that it or any Subsidiary will not be able (i)
to renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
Subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(cc) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its Subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, that might be
expected to result in a Material Adverse Change.
(dd) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the
Securities.
(ee) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any Subsidiary or any other
person required to be described in the Prospectus which have not been described
as required under the Securities Act.
(ff) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its Subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any Subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(gg) Environmental Laws. (i) the Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company is not currently aware that it
will be required to make future material capital expenditures to comply with
Environmental Laws, and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss. 9601, et seq.), or otherwise designated as a contaminated site under
applicable state or local law.
(hh) Periodic Review of Costs of Environmental Compliance. There are no
material costs or liabilities associated with Environmental Laws that would be
required to be disclosed in the Prospectus under the Securities Act.
(ii) ERISA Compliance. The Company and its Subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the
8
Company, its Subsidiaries or their "ERISA Affiliates" (as defined below) are in
compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or a Subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such Subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its Subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its Subsidiaries or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfounded benefit liabilities" (as defined under ERISA). Neither
the Company, its Subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its Subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(jj) Tests and Studies. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
studies, tests and preclinical and clinical trials conducted by or on behalf of
the Company that are described in the Registration Statement and the Prospectus
were and, if still pending, are being conducted in accordance with experimental
protocols, procedures and controls pursuant to, where applicable, accepted
professional scientific standards, except where the failure to so conduct could
not reasonably be expected to have a Material Adverse Change; the descriptions
of the results of such studies, tests and trials contained in the Registration
Statement and the Prospectus are accurate and complete in all material respects;
and the Company has not received any notices or correspondence from the U.S.
Food and Drug Administration, the U.S. Department of Agriculture or any state,
local or foreign governmental body exercising comparable authority requiring the
termination, suspension or material modification of any studies, tests or
preclinical or clinical trials conducted by or on behalf of the Company which
termination, suspension or material modification could reasonably be expected to
have a Material Adverse Change. All statistical and market-related data included
in the Registration Statement, including without limitation references to
estimated numbers of patients suffering from listed diseases, are based on or
derived from sources which the Company believes to be reliable and of which the
Company has written evidence in its records.
Section 3. Additional Covenants of the Company. The Company further
covenants and agrees with the Agent as follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause its Common Stock to continue to be registered under Section 12
of the Exchange Act, (ii) use its best efforts to cause the Registration
Statement to become and remain effective under the Securities Act, and (iii) not
file any amendment to the Registration Statement or supplement to the Prospectus
of which the Agent shall not previously have been advised and furnished with a
copy or to which the Agent shall have reasonably objected in writing or which is
not in compliance with the Securities Act. If the Company elects to rely on Rule
462(b) under the Securities Act to register additional securities in connection
with the Offering, the Company shall file a Rule 462(b) Registration Statement
with the Commission in compliance with Rule 462(b) under the Securities Act
prior to the time confirmations are sent or given, as specified by Rule
462(b)(2) under the Securities Act, and shall pay the applicable fees in
accordance with Rule 111 under the Securities Act.
(b) Securities Act Compliance. The Company will advise the Agent
promptly (i) when any post-effective amendment to the Registration Statement
shall become required under the Securities Act and when any such post-effective
amendment thereto shall have become effective, (ii) of receipt of any comments
relating to the Offering from the Commission, (iii) of any request of the
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for that
9
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order preventing or suspending the use of the Prospectus and to obtain
as soon as possible the lifting thereof, if issued.
(c) Blue Sky Compliance. If not otherwise exempt therefrom, the Company
will use its best efforts to qualify the Securities for sale under the
securities laws of such jurisdictions (both national and foreign) as the Agent
may reasonably have designated in writing and will make such applications, file
such documents, and furnish such information as may be reasonably required for
that purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent. The Company will, from time to time, prepare and file such statements,
reports and other documents, as are or may be required to continue such
qualifications in effect for so long a period as the Agent may reasonably
request.
(d) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the Offering as contemplated in this Agreement and the
Prospectus. If during the period in which a prospectus is required by law to be
delivered in connection with the Offering, any event shall occur as a result of
which, in the judgment of the Company or in the reasonable opinion of the Agent
or counsel for the Agent, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission, and furnish at its own expense to the Agent and to dealers,
an appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Agent, without charge, as promptly as practicable
after the date hereof and ending on the date of termination of the Agent's
engagement hereunder (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto (including any documents
incorporated or deemed incorporated by reference therein) as the Agent may
request.
(f) Insurance. The Company shall maintain in full force and effect for
a period of at least three years after the date of this Agreement the Company's
existing or equivalent standard Directors and Officers liability insurance, to
the extent available on commercially reasonable terms, in the minimum amount of
$5 million. In addition, the Company shall use reasonable efforts to allocate $1
million of such coverage to the Agent for the purpose of providing coverage
relating to the Offering and shall pay the premium required for such allocation,
provided such premium does not exceed $5,000 annually.
(g) Notice of Subsequent Events. If at any time during engagement of
the Agent, any rumor, publication or event relating to or affecting the Company
shall occur as a result of which, in the Agent's reasonable opinion, the market
price of the Securities has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from the Agent advising the Company to the effect set forth above,
forthwith prepare, consult with the Agent concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to the Agent, responding to or commenting on such rumor, publication or event,
in addition to the Company's obligations under other provisions hereof to amend
the Registration Statement or supplement the Prospectus as required by the
Securities Act.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Securities sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall maintain, at its expense, a
registrar and transfer agent for the Securities.
10
(j) Nasdaq Listing. The Company shall timely list for quotation the
Common Stock sold pursuant to the Offering on the Nasdaq National Market and
timely comply with all notice and listing procedures in connection therewith.
(k) Exchange Act Obligations. During the Prospectus Delivery Period,
the Company shall file, on a timely basis, with the Commission all reports and
documents required to be filed under the Exchange Act together with all material
required to be included therein.
(l) Agreement Not to Offer or Sell Additional Securities. During the
engagement of the Agent hereunder, the Company will not offer, sell or contract
to sell, or otherwise dispose of or enter into any transaction which is designed
to, or could be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, its Common Stock or any securities
convertible into, or exchangeable for, Common Stock; provided, however, that the
Company may issue and sell any securities pursuant to (A) contracts, plans or
arrangements which have been described in the Prospectus or in the documents
filed by the Company pursuant to the Exchange Act, or (B) collaborative
arrangements in the ordinary course of the Company's business, provided that the
Company gives advance notice of such collaborative arrangements to the Agent and
the Company timely amends the Registration Statement or supplements the
Prospectus in respect thereof if and to the extent required by the Securities
Act, and otherwise complies with the Securities Act in respect thereof.
(m) Opinion of Counsel for the Company. The Company shall cause to be
delivered to the Agent on the Closing an opinion of Xxxxxx Xxxxxxx Xxxxx &
Xxxxxx, LLP, counsel for the Company, substantially in the form of Exhibit B
attached hereto, dated as of the Closing, addressed to the Agent and with signed
counterparts thereof for the Agent. Counsel rendering the opinion contained in
Exhibit B may rely as to questions of law not involving the laws of the United
States or the State of North Carolina and Delaware upon opinions of local
counsel, and as to questions of fact upon representations or certificates of
officers of the Company, and of government officials, in which case their
opinion is to state that they are so relying and that they have no knowledge of
any material misstatement or inaccuracy in any such opinion, representation or
certificate. Copies of any opinion, representation or certificate so relied upon
shall be delivered to the Agent.
(n) Corporate Proceedings. The Company shall undertake all filings,
corporate proceedings and other legal matters in connection with this Agreement,
the form of Registration Statement and the Prospectus, and the registration,
authorization, issue, sale and delivery of the Securities, as shall be
reasonably necessary or appropriate for purposes of compliance with the
Securities Act, Exchange Act, corporate and other applicable laws, and the rules
and regulations of the Nasdaq Stock Market and NASD, and the Company shall
furnish to the Agent or the Agent's counsel such papers and information as the
Agent may reasonably request to evidence the foregoing.
(o) No Material Adverse Change. During the Prospectus Delivery Period,
the Company shall promptly notify the Agent in the event there shall have
occurred any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
Subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus.
(p) Accountants' Comfort Letter. On the Closing, the Company shall
cause to be delivered to the Agent a letter from PricewaterhouseCoopers LLP,
addressed to the Agent, dated as of the Closing, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to the Agent concurrently
with the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than four (4) business days prior to the Closing
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing and (ii) setting
forth any revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the facts
11
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
Subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in the Agent's reasonable judgment,
is material and adverse and that makes it, in the Agent's reasonable judgment,
impracticable or inadvisable to proceed with the public offering of the
Securities as contemplated by the Prospectus. The Original Letter from
PricewaterhouseCoopers LLP shall be addressed to or for the use of the Agent in
form and substance satisfactory to the Agent and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of September 30, 2000 and
related consolidated statements of operations, shareholders' equity, and cash
flows for the twelve (12) months ended September 30, 2000, (iii) state that
PricewaterhouseCoopers LLP has performed the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of PricewaterhouseCoopers LLP as described
in SAS 71 on the financial statements for each of the quarters in the period
ended March 31, 2001 (the "Interim Financial Statements"), (iv) state that in
the course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Interim
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, and address other matters agreed upon by Pricewaterhouse Coopers LLP
and the Agent. In addition, the Agent shall have received a letter addressed to
the Company and made available to the Agent for the use of the Agent stating
that PricewaterhouseCoopers LLP's review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of September 30, 2000, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(q) Officers' Certificate. The Company shall deliver to the Agent as
of and at the Closing, a certificate of the Company, dated as of the Closing,
signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act, and in all material respects
conformed to the requirements of the Securities Act; the Registration
Statement and the Prospectus, and any amendments or supplements
thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and, since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any Material Adverse Change, (b) any transaction that is material
to the Company and its Subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business,
(c) any obligation, direct or contingent, that is material to the
Company and its Subsidiaries considered as one enterprise,
12
incurred by the Company or its Subsidiaries, except obligations
incurred in the ordinary course of business, (d) any change in the
capital stock or outstanding indebtedness of the Company or any of its
Subsidiaries that is not described or contemplated in the Prospectus
and is material to the Company and its Subsidiaries considered as one
enterprise, (e) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company or any of its Subsidiaries,
or (f) any loss or damage (whether or not insured) to the property of
the Company or any of its Subsidiaries which has been sustained or will
have been sustained which has a Material Adverse Effect.
(r) Compliance with Prospectus Delivery Requirements. The Company shall
timely deliver the Prospectus to each Purchaser of Securities in the Offering.
(s) Additional Documents. Reasonably promptly after each request
therefor and on or before the Closing, the Company shall deliver to the Agent
such information and documents as the Agent may have reasonably requested to
enable the Agent to complete such due diligence as the Agent shall deem
appropriate or to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements, herein
contained.
(t) Lock-Up Agreements. Promptly after the date hereof, the Company
shall use its best efforts to cause its directors, executive officers and
individuals who beneficially hold more than 5% of the Company's outstanding
Common Stock described in the Prospectus to execute and deliver to the Agent the
form of Lock-Up Agreement attached hereto as Exhibit C.
Section 4. Payment of Company Expenses. The Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Securities (including all printing and engraving costs),
(ii) all fees and expenses of the registrar and transfer agent of the Common
Stock, (iii) all necessary issue, transfer and other stamp taxes in connection
with the issuance and sale of the Securities and the warrant issued to the
Agent, (iv) all fees and expenses of the Company's counsel, independent public
or certified public accountants and other advisors, (v) all costs and expenses
incurred in connection with the preparation by the Company and by the Company's
counsel, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Agent in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Securities for offer
and sale under the state securities or blue sky laws or the provincial
securities laws of Canada or any other country, and, if requested by the Agent,
preparing and printing a "Blue Sky Survey", an "International Blue Sky Survey"
or other memorandum, and any supplements thereto, advising the Agent of such
qualifications, registrations and exemptions, (vii) the fees and expenses
associated with including the Securities on the Nasdaq National Market, (viii)
all other fees, costs and expenses referred to in Item 13 of Part II of the
Registration Statement, and (ix) all costs and expenses incident to the travel
and accommodation of the Company's employees on such "roadshow" presentations to
potential Purchasers to be reasonably agreed upon by the Company and the Agent.
Section 5. Indemnification and Contribution.
(a) Indemnification of the Agent. The Company agrees to indemnify and
hold harmless the Agent, the Agent's officers, employees and agents, and each
person, if any, who controls the Agent within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Agent or such other person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
13
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A under the Securities Act, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any untrue statement or
alleged untrue statement of any material fact contained in any audio or visual
materials provided by the Company or based upon written information furnished by
or on behalf of the Company including, without limitation, slides, videos, films
or tape recordings, furnished by the Company in connection with the marketing of
the Securities; or (vi) any act or omission or alleged act or omission of the
Agent in connection with or relating to the Securities or the Offering and which
is included in, part of or referred to in loss, claim, damage, liability or
action arising out of or based upon any matter covered in clauses (i) through
and including (v) above (except that no such indemnity shall be available under
this clause (vi) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss or other matter resulted directly
from any acts or omissions of the Agent which constituted bad faith or willful
misconduct of the Agent); and provided, however, that the foregoing indemnity
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising our of or based upon any untrue statement
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information about the Agent included under "Plan
of Distribution" in the Registration Statement, preliminary prospectus or
Prospectus and furnished to the Company by the Agent expressly for use in such
sections thereof. The indemnity agreement set forth in this Section 5(a) shall
be in addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. The
Agent agrees to indemnify and hold harmless the Company, each of its directors,
each of its officers who signed the Registration Statement and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer or controlling
person may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Agent), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or arises
out of or is based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
-------------------------- ----------------------
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any preliminary prospectus, the
Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information about the Agent included under "Plan of
Distribution" in the Registration Statement, preliminary prospectus or
Prospectus and furnished to the Company by the Agent expressly for use in such
sections thereof; and to reimburse the Company, or any such director, officer or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The indemnity agreement set forth in this
Section 5(b) shall be in addition to any liabilities that the Agent may
otherwise have.
(c) Information Provided by the Agent. The Company and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, hereby acknowledges that the only information that the Agent has
furnished to the Company expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth solely in the paragraph within "Plan of
Distribution" in the Prospectus which begins with the sentence "Petkevich &
Partners, LLC was organized and registered as a broker-dealer
14
and became a member of the NASD in December 2000. "; and the Agent confirms that
such statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 5 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise under the
indemnity agreement contained in this Section 5 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 5 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 5(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 60 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
Section 5(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party
15
shall contribute to the aggregate amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect the relative benefits
received by such party on the one hand and the Agent on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the such party on the one hand
and the Agent on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Agent on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Agent agree that it would not be just and equitable
if contributions pursuant to this Section 5(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 5(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 5(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (f), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 5 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than forty-five
(45) days of invoice to the indemnifying party.
(h) Survival. The Company's payment obligations under Section 1 hereof,
the indemnity and contribution agreements contained in this Section 5 and the
covenants, representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of the Agent or any person controlling
the Agent, the Company, its directors or officers or any persons controlling the
Company, (ii) acceptance of any Securities and payment therefor hereunder, and
(iii) any termination of this Agreement. A successor to the Agent, or to the
Company, its directors or officers, or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 5.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 5, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 5 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
Section 6. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or any person controlling the Company, of its
officers, and of the Agent set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Agent or the Company or any of its or their partners, officers or
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Securities sold hereunder and any termination of
this Agreement.
16
Section 7. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Agent:
Petkevich & Partners, LLC
000 0xx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: J. Xxxxx Xxxxxxxxx
If to the Company:
Incara Pharmaceuticals Corporation
79 X. X. Xxxxxxxxx Drive, 4401 Research Commons, Suite 200
Post Office Box 00000
Xxxxxxxx Xxxxxxxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 8. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, and to the benefit of the employees,
officers and directors and controlling persons referred to in Section 5, and to
their respective successors, and no other person will have any right or
obligation hereunder.
Section 9. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
Section 10. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of California applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the federal
courts of the United States of America located in the City and County of San
Francisco or the courts of the State of California in each case located in the
City and County of San Francisco (collectively, the "Specified Courts"), and
each party irrevocably submits to the personal jurisdiction (except for
proceedings instituted in regard to the enforcement of a judgment of any such
court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of
such courts in any such suit, action or proceeding. Service of any process,
summons, notice or document by mail to such party's address set forth above
shall be effective service of process for any suit, action or other proceeding
brought in any such court. The Company and the Agent each waives any right to
trial by jury in any action, claim, suit or proceeding arising under or in
connection with this Agreement. The parties irrevocably and unconditionally
waive any objection to the laying of venue of any suit, action or other
proceeding in the Specified Courts and irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such suit, action or
other proceeding brought in any such court has been brought in an inconvenient
forum. Each party not located in the United States irrevocably appoints CT
Corporation System, which currently maintains a San Francisco office at 00
Xxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
17
Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
Section 11. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
Section headings herein are for the convenience of the parties only and shall
not affect the construction or interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
18
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
INCARA PHARMACEUTICALS CORPORATION
By: _______________________________________________
Xxxxxxx X. Xxxxxx
Chairman, President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted by the Agent
as of the date first above written.
PETKEVICH & PARTNERS, LLC
By: ________________________________________
J. Xxxxx Xxxxxxxxx
19
Exhibit A
Form of Warrant to Be Issued to the Agent
WARRANT
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SUCH SHARES ARE SOLD PURSUANT
TO RULE 144 OF SUCH ACT.
No. ______ Warrant to Purchase _______ Shares of Common Stock
(subject to adjustment)
WARRANT TO PURCHASE COMMON STOCK
of
INCARA PHARMACEUTICALS CORPORATION
This certifies that, for value received, Petkevich & Partners, LLC, or
registered assigns (the "Holder") is entitled, subject to the terms set forth
below, to purchase from Incara Pharmaceuticals Corporation (the "Company"), a
Delaware corporation, shares of the Common Stock of the Company at any time or
from time to time after ________, 2001, the date on which this Warrant is issued
(the "Warrant Issue Date"), upon surrender of this Warrant, at the principal
office of the Company referred to below, with the notice of exercise form
attached hereto duly executed, and simultaneous payment therefor in lawful money
of the United States or otherwise as hereinafter provided, at the Exercise Price
as set forth in Section 3 below. The number, character and Exercise Price of
such shares of Common Stock are subject to determination and adjustment as
provided below. The term "Common Stock" shall mean the Company's presently
authorized Common Stock, par value $.001 per share, and any stock into or for
which such Common Stock may hereafter be converted or exchanged. The term
"Warrant" as used herein shall include this Warrant, which may be one of a
series of warrants issued for Common Stock, and any warrants delivered in
substitution or exchange therefor as provided herein. The term "Warrant Shares"
as used herein means the shares purchasable upon exercise of this Warrant. The
terms "Agent", "Closing," "Purchasers" and "Offering" as used herein shall have
the meanings given to them in that certain Placement Agency Agreement, dated May
__, 2001, by and between the Holder and the Company.
1. Term of Warrant. Subject to the terms and conditions set forth
---------------
herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific Standard
Time, on ________, 2006 (the "Term").
1.
2. Number of Shares. The number of shares for which this Warrant may
----------------
be exercised shall be _________ which number is equal to the same proportion of
80,000 that the gross proceeds from the sale of the shares sold in the Offering
bears to $10 million. The Company shall deliver to the Holder a duly executed
Warrant by the Company concurrently with each Closing based on the number of
shares sold in that Closing.
3. Exercise Price. The exercise price at which the Holder may
--------------
exercise this Warrant is equal to $________ per Warrant Share (the "Exercise
Price"), representing one hundred and twenty-five percent (125%) of the gross
price per share paid to the Company in the Offering (provided that if there is
more than one Closing under the Offering, such gross price per share shall be
the weighted average gross price per share sold in the Offering). The Exercise
Price shall be adjusted from time to time pursuant to Section 12 hereof.
4. Exercise of Warrant.
-------------------
(a) The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, at any time, or from time to
time, during the term hereof as described in Section 1 above, by the surrender
of this Warrant and the Notice of Exercise annexed hereto duly completed and
executed on behalf of the Holder, at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), upon
payment of the purchase price of the shares to be purchased (i) in cash or by
check acceptable to the Company, (ii) by exercising the right to credit the
Exercise Price against the fair market value of the Common Stock at the time of
exercise (the "Net Exercise Right") pursuant to Section 4(b), or (iii) a
combination of (i) and (ii).
(b) The Holder may elect to convert this Warrant in whole
or in part as provided herein and to receive shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such election on the
form of Notice of Exercise annexed hereto duly executed by such Holder or such
Holder's duly authorized attorney, in which event the Company shall issue to
such Holder a number of Warrant Shares computed using the following formula:
X = [(A - B) divided by A] multiplied by Y
Where X = The number of Warrant Shares to be issued to the Holder.
Y = The number of Warrant Shares purchasable under the amount of the
Warrant being exchanged (as adjusted to the date of such calculation).
A = The fair market value of one Warrant Share (at the date of such
calculation).
B = The Exercise Price (as adjusted to the date of such calculation).
2.
For purposes of this Section 1(a), the fair market value of a Warrant Share on a
particular date (the "Determination Date") shall mean (i) if the Common Stock is
traded on a national securities exchange or quoted on the National Association
of Securities Dealers, Inc. automated quotation system ("Nasdaq") National
Market System or Small Cap Market, the last sale price of the shares of Common
Stock as reported by Nasdaq for the Determination Date; (ii) if the Common
Stock is not traded on a national securities exchange or on Nasdaq but is traded
in the over-the-counter or "bulletin board" market, then the closing price for a
share of Common Stock reported for the Determination Date; and (iii) if the
Common Stock is not publicly traded, then such value shall be the amount per
share of Common Stock determined in good faith by the Company's Board of
Directors upon a review of relevant factors.
(c) This Warrant shall be deemed to have been exercised as
of the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of record of
such shares as of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons entitled
to receive the same a certificate or certificates for the number of shares
issuable upon such exercise. In the event that this Warrant is exercised in
part, the Company at its expense will execute and deliver a new Warrant of like
tenor exercisable for the number of shares for which this Warrant may then be
exercised.
5. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of loss, theft, or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
7. Rights of Stockholders. This Warrant shall not entitle its holder
----------------------
to any of the rights of a stockholder of the Company. Nothing in the Warrant
creates any duty or obligation of the Holder to exercise this Warrant.
3.
8. Transfer of Warrant.
-------------------
(a) Warrant Register. The Company will maintain a register
----------------
(the "Warrant Register") containing the names and addresses of the Holder or
Holders. Any Holder of this Warrant or any portion thereof may change his
address as shown on the Warrant Register by written notice to the Company
requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be delivered or given by mail to such
Holder as shown on the Warrant Register and at the address shown on the Warrant
Register. Until this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(b) Warrant Agent. The Company may, by written notice to
-------------
the Holder, appoint an agent for the purpose of maintaining the Warrant Register
referred to in Section 8(a) above, issuing the Common Stock or other securities
then issuable upon the exercise of this Warrant, exchanging this Warrant,
replacing this Warrant, or any or all of the foregoing. Thereafter, any such
registration, issuance, exchange, or replacement, as the case may be, shall be
made at the office of such agent.
(c) Transferability and Nonnegotiability of Warrant. This
-----------------------------------------------
Warrant may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company. Notwithstanding the foregoing, no
registration or legal opinions shall be required in connection with a transfer
of this Warrant or the Warrant Shares by the Holder to (i) a member of such
limited liability company or a retired member or to the estate of any such
member or retired member, or (ii) a transfer to an officer or employee of the
Holder as permitted by NASD rules, provided that the transferee in each case
agrees in writing to be subject to the terms of this Section 8, or (ii) a
transfer made in accordance with Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"). Subject to the provisions of this Warrant with
respect to compliance with the Securities Act, title to this Warrant may be
transferred by endorsement (by the Holder executing the Assignment Form annexed
hereto) and delivery in the same manner as a negotiable instrument transferable
by endorsement and delivery.
(d) Exchange of Warrant Upon a Transfer. On surrender of
-----------------------------------
this Warrant for exchange, properly endorsed on the Assignment Form and subject
to the provisions of this Warrant with respect to compliance with the Securities
Act and with the limitations on assignments and transfers and contained in this
Section 8, the Company at its expense shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, for the number of shares issuable upon exercise thereof.
4.
(e) Compliance with Securities Laws.
-------------------------------
(i) The Holder of this Warrant, by acceptance
hereof, acknowledges that this Warrant and the Warrant Shares are being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell, or otherwise
dispose of this Warrant or any shares of Common Stock to be issued upon exercise
hereof except under circumstances that will not result in a violation of the
registration or qualification requirements of the Securities Act or any state
securities laws.
(ii) This Warrant and all shares of Common Stock
issued upon exercise hereof shall be stamped or imprinted with a legend in
substantially the form set forth at the top of the first page hereof. Any such
legend on Warrant Shares shall be removed at the request of the Holder at such
time as the same are eligible for resale under Rule 144(k) under the Securities
Act.
9. Reservation of Stock. The Company covenants that during the Term
--------------------
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon exercise of the Warrant. The Company further covenants that all Warrant
Shares that may be issued upon the exercise of rights represented by this
Warrant and payment of the Exercise Price, all as set forth herein, will be free
from all taxes, liens, and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the exercise of this Warrant.
10. Notices.
-------
(a) In the event of any taking by the Company of a record
of its stockholders for the purpose of determining stockholders who are entitled
to receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with any
proposed merger or consolidation of the Company with or into any other
corporation, or any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed liquidation, dissolution or
winding up of the Company, the Company shall mail a notice to Holder, at least
fifteen (15) days prior to the date specified therein, the date on which any
such record is to be taken for the purpose of such dividend, distribution, right
or other event, and the amount and character of such dividend, distribution,
right or other event.
(b) All such notices, advices and communications shall be
deemed to have been received (i) in the case of personal delivery, on the date
of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing.
5.
11. Adjustments. The Exercise Price and the number of shares
-----------
purchasable hereunder are subject to adjustment from time to time as follows:
11.1 Merger, Sale of Assets, Etc.
----------------------------
(a) If at any time, while this Warrant, or any portion thereof,
is outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or (iii) a sale or transfer of the
Company's properties and assets as, or substantially as, an entirety to any
other person, then, as a part of such reorganization, merger, consolidation,
sale or transfer, lawful provision shall be made so that the holder of this
Warrant shall thereafter be entitled to receive upon exercise of this Warrant,
during the period specified herein and upon payment of the Exercise Price then
in effect, the number of shares of stock or other securities or property of the
Company or the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer to which a holder of the shares deliverable upon
exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 11. The
foregoing provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation which are at the time receivable upon the
exercise of this Warrant. If the per share consideration payable to the holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
11.2 Reclassification, etc. If the Company at any time while this
----------------------
Warrant, or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
6.
11.3 Split, Subdivision or Combination of Shares. If the Company at
-------------------------------------------
any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination. Upon each such adjustment of the Exercise Price, the
number of Warrant Shares purchasable hereunder shall be proportionately
increased in the case of a split or subdivision or proportionately decreased in
the case of a combination.
11.4 Adjustments for Dividends in Stock or Other Securities or
---------------------------------------------------------
Property. If while this Warrant, or any portion hereof, remains outstanding and
--------
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company which such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 11.
11.5 Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such holder, furnish or cause to be
furnished to such holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.
(a) No Impairment. The Company will not, by any voluntary
-------------
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 11
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holders of this Warrant against impairment.
12. Registration Rights.
-------------------
(a) Securities. As used in this Section 12, the term
----------
"Securities" means the Common Stock issuable upon exercise of this Warrant.
7.
(b) Registration Rights With Respect to the Securities.
--------------------------------------------------
(i) The Company agrees that it will prepare and
file with the Securities and Exchange Commission (the "Commission"), within one
hundred eighty (180 days) after the last Closing of the Offering which involves
Purchasers introduced to the Company by the Holder (the "Final Agent Closing"),
one (1) registration statement (on Form S-3, or other appropriate form of
registration statement under the Securities Act (the "Registration Statement")),
together with such state law qualifications and other compliance with applicable
law, at the sole expense of the Company, in respect of Holder, so as to permit a
public offering and resale of the Securities under the Securities Act by Holder.
The Company shall use its best efforts to cause the Registration Statement to
become effective as promptly as possible after the filing thereof and within
five (5) days after Commission clearance.
(ii) The Company will maintain the Registration
Statement or post-effective amendment filed under this Section 12 hereof
effective under the Securities Act until the earlier of (i) the date that none
of the Securities are or may become issued and outstanding, (ii) the date that
all of the Securities have been sold pursuant to the Registration Statement,
(iii) the date the holders thereof receive an opinion of counsel to the Company,
which counsel shall be reasonably acceptable to Holder, that the Securities may
be sold under the provisions of Rule 144 without limitation as to volume, (iv)
the date all Securities have been otherwise transferred to persons who may trade
such shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such Securities
not bearing a restrictive legend, or (v) the date all Securities may be sold
without any time, volume or manner limitations pursuant to Rule 144(k) or any
similar provision then in effect under the Securities Act in the opinion of
counsel to the Company, which counsel shall be reasonably acceptable to Holder.
If, under Commission rules or policies of the Commission staff, any of the
Securities for any reason cannot be included in the Registration Statement
initially filed by the Company and must be included in a separate registration
statement, the Company shall file all such additional registration statements as
may be needed to permit Holder to offer and resell to the public all of the
Securities, and the term "Registration Statement" shall for purposes of this
Agreement be deemed to include all such additional registration statements.
(iii) All fees, disbursements and out-of-pocket
expenses and costs incurred by the Company in connection with the preparation
and filing of the Registration Statement under this Section 12 and in complying
with applicable federal and state securities laws (including, without
limitation, all attorneys' and accountants' fees of the Company), shall be borne
by the Company. Holder shall bear the cost of underwriting and/or brokerage
discounts, fees and commissions, if any, applicable to the Securities being
registered and the fees and expenses of its counsel. Holder and its counsel
shall have a reasonable period, of not less than five (5) business days for the
Registration Statement initially to be filed hereunder and for each amendment or
subsequently filed Registration Statement, to review the proposed Registration
Statement or any amendment thereto, prior to filing with the Commission, and the
Company shall provide Holder with copies of any comment letters received from
the Commission and each written response thereto with respect thereto within two
(2) business days of receipt or sending thereof. The Company shall make
reasonably available for inspection by Holder, any underwriter participating in
any disposition pursuant to the Registration Statement,
8.
and any attorney, accountant or other agent retained by such Holder or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by such Holder or any such underwriter, attorney, accountant or agent
in connection with the Registration Statement, in each case, as is customary for
similar due diligence examinations; provided, however, that all records,
-------- -------
information and documents that are designated in writing by the Company, in good
faith, as confidential, proprietary or containing any material non-public
information shall be kept confidential by such Holder and any such underwriter,
attorney, accountant or agent (pursuant to an appropriate confidentiality
agreement in the case of any such Holder or agent), unless such disclosure is
made pursuant to judicial process in a court proceeding (after first giving the
Company an opportunity promptly to seek a protective order or otherwise limit
the scope of the information sought to be disclosed) or is required by law, or
such records, information or documents become available to the public generally;
and provided further that, if the foregoing inspection and information gathering
-------- -------
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of Holder and the other parties entitled thereto by one firm of
counsel designated by and on behalf of the majority in interest of Holder and
other parties. To the extent necessary, the Company shall qualify any of the
Securities for sale in such states as such Holder reasonably designates.
However, the Company shall not be required to qualify in any state which will
require an escrow relating to the Company and/or the sellers of Securities, or
which will require the Company to qualify to do business in such state or
require the Company to file therein any general consent to service of process.
The Company at its expense will supply Holder with copies of the Registration
Statement and the prospectus included therein and other related documents in
such quantities as may be reasonably requested by Holder.
(iv) If the Company delivers to Holder a
certificate signed by the Company's President and Chief Executive Officer and
Chief Financial Officer to the effect that (i) the Company is aware of nonpublic
information concerning the Company that has not been disclosed in the
Registration Statement either by incorporation of filings made in compliance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or by
information included directly in the Registration Statement, and (ii) in the
good faith judgment of the Company, the disclosure of such information in the
Registration Statement may have a material adverse effect on the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of the Company (a "Material Adverse Effect"), then, Holder agrees not to effect
any sales of Securities pursuant to the Registration Statement until such time
as Holder (a) is advised in writing by the Company that the use of the
applicable prospectus contained in such Registration Statement may be resumed,
(b) has received copies of a supplemental or amended prospectus, if applicable,
and (c) has received copies of any additional or supplemental filings, if any,
which are incorporated or deemed to be incorporated by reference in such
prospectus.
9.
(c) Holder's Obligations.
--------------------
(i) Cooperation with the Company. Reasonably
----------------------------
promptly after specific written requests therefor by the Company, Holder will,
to the extent required to be disclosed in the Registration Statement under
published regulations and rules of the Commission, furnish to the Company the
proposed manner of sale of the Securities and publicly available information
about Holder.
(ii) No Underwriter Status. Holder shall not
---------------------
be named as an underwriter in the Registration Statement, unless and to the
extent so required by specific rule or regulation of the Commission or written
comment received from the Commission staff in connection with a review of the
Registration Statement which the staff has not withdrawn after the Company has
provided Holder a reasonable opportunity to request, through the Company's
counsel, that such requirement not be imposed.
(iii) "Market Stand-Off" Agreement. Holder hereby
----------------------------
agrees that it shall not sell or otherwise transfer or dispose of this Warrant
or any Warrant Shares to the extent that, and during any period that, the
Warrant or Warrant Shares are subject to restriction on transfer pursuant to the
applicable rules of the National Association of Securities Dealers, Inc. (the
"NASD"), except as otherwise permitted in such NASD rules.
(d) Registration Procedures. In addition to the
-----------------------
requirements of Section 12(b), the Company shall (except as otherwise expressly
provided in this Agreement), as expeditiously as possible, subject to Holder's
compliance with Section 12(c)(i):
(i) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such registration
statement whenever Holder of such Securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act) and take all lawful action such
that each of (A) the Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, not misleading and (B) the Prospectus forming part of
the Registration Statement, and any amendment or supplement thereto, does not at
any time during the Registration Period include 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 light of the circumstances under
which they were made, not misleading.
(ii) prior to the filing with the Commission of
any Registration Statement (including any amendments thereto) and the
distribution or delivery of any prospectus (including any supplements thereto),
provide draft copies thereof to Holder and reflect in such documents all such
comments as Holder (and its counsel) reasonably may propose and furnish to
Holder such numbers of copies of a prospectus including a preliminary prospectus
or any amendment or supplement to any prospectus, as applicable, in conformity
with the requirements
10.
of the Act, and such other documents, as Holder may reasonably request in order
to facilitate the public sale or other disposition of the securities owned by
Holder.
(iii) to the extent necessary, register and qualify the Securities
covered by the Registration Statement under applicable state securities laws,
and do any and all other acts and things which may be reasonably necessary or
advisable to enable Holder to consummate the public sale or other disposition in
such jurisdictions within the United States of America of the securities owned
by such Holder, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified or to file therein any general consent to service
of process.
(iv) subject to the provisions of Section 12(b)(iv) hereof, notify
Holder at any time when a prospectus relating thereto covered by the
Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment or Exchange Act filing deemed
incorporated in the Registration Statement under applicable provisions of this
Section 12 as quickly as commercially possible.
(v) as promptly as practicable after becoming aware of such event,
notify Holder who holds Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the
Commission or any state authority of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension.
(vi) cooperate with Holder to facilitate the timely preparation and
delivery of certificates for the Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Securities to be in
such denominations or amounts, as the case may be, as Holder reasonably may
request and registered in such names as Holder may request; and, within three
(3) business days after a Registration Statement which includes Securities is
declared effective by the Commission, deliver and cause legal counsel selected
by the Company to deliver to the transfer agent for the Securities (with copies
to Holder whose Securities are included in such Registration Statement) an
appropriate instruction and, to the extent necessary, an opinion of such
counsel.
(vii) take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by Holder of the Securities in
accordance with the intended methods therefor provided in the prospectus which
are customary for issuers to perform under the circumstances.
(viii) in the event of an underwritten offering elected by Holder,
promptly include or incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the managers
reasonably agree should be included therein and to which the Company does not
reasonably object and make all required filings of
11.
such Prospectus supplement or post-effective amendment as soon as practicable
after it is notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment; and enter into and perform
its obligations as the Company under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
(ix) cause all Securities registered pursuant hereunder to be listed
timely on each securities exchange or quotation system on which similar
securities issued by the Company are then listed.
(x) use its best efforts to furnish, at the request of Holder, on
the date that such Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 12, if such securities
are being sold through underwriters (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to Holder and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to Holder.
(xi) maintain a transfer agent and CUSIP number for its Common
Stock.
(e) Rank. The Company shall not be precluded from granting registration
----
rights to other persons, provided that no such grant shall interfere with or
purport to delay or subordinate any of Holder's rights under this Agreement.
(f) Indemnification.
---------------
(i) The Company agrees to indemnify, defend and hold harmless
Holder, and any underwriter (as defined in the Securities Act) for Holder, and
each person, if any, who controls Holder or underwriter within the meaning of
the Securities Act or Exchange Act ("Selling Person") against any losses,
claims, damages or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which the
Selling Person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, or any
related preliminary prospectus, final prospectus or amendment or
12.
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out of or are
based upon any violation or alleged violation by the Company of the Securities
Act, Exchange Act any state securities law, or any rules or regulations of
governmental agencies promulgated thereunder; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, preliminary prospectus, final prospectus or amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Selling Person, specifically for use in the
preparation thereof. This Section 12(f) shall not inure to the benefit of any
Selling Person with respect to any person asserting such loss, claim, damage or
liability who purchased the Securities which are the subject thereof if, and to
the extent such loss or other claim arises from the fact or alleged fact that,
the Selling Person failed to send or give (in violation of the Securities Act or
the rules and regulations promulgated thereunder) a copy of the prospectus
contained in such Registration Statement to such person at or prior to time
required under the Securities Act, where the Selling Person was obligated to do
so under the Securities Act or the rules and regulations promulgated thereunder.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(ii) Each Selling Person agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the Securities Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all reasonable costs of defense
and investigation and all reasonable attorneys' fees) to which the Company or
any such officer, director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, or any related preliminary prospectus, final
prospectus or amendment or supplement thereto, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, preliminary prospectus, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by such Selling Person, specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Selling Person may otherwise have. Notwithstanding anything to the contrary
herein, the Selling Person shall not be liable under this Section 12(f) for any
amount in excess of the net proceeds to such Selling Person as a result of the
sale of Securities pursuant to the Registration Statement.
(iii) Promptly after receipt by an indemnified party under this
Section 12 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 12, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to any indemnified
party except to the extent of actual prejudice demonstrated by the indemnifying
party. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 12 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party
13.
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is the Selling
Person, the fees and expenses of such counsel shall be at the expense of the
indemnifying party if (i) the employment of such counsel has been specifically
authorized in writing by the indemnifying party, or (ii) the named parties to
any such action (including any impleaded parties) include both the Selling
Person and the indemnifying party and the Selling Person shall have been advised
by such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Selling Person (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
Selling Person, it being understood, however, that the indemnifying party shall,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for the Selling Person, which firm
shall be designated in writing by the Selling Person). No settlement of any
action against an indemnified party shall be made without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld.
All fees and expenses of the indemnified party (including reasonable
costs of defense and investigation in a manner not inconsistent with this
Section and all reasonable attorneys' fees and expenses) shall be paid to the
indemnified party, as incurred, within ten (10) business days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the indemnifying party may require such indemnified
party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such indemnified party is not entitled to
indemnification hereunder).
(g) Contribution. In order to provide for just and equitable
------------
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 12(f) hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 12(f) hereof
provide for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any indemnified party, then the
Company and the applicable Selling Person shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees), in either such case (after contribution from others) on the basis of
relative fault as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the applicable Selling Person on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Selling
Person agree that it would not be just and equitable if contribution pursuant to
this Section 12(g) were determined by pro rata allocation or by any other method
of
14.
allocation which does not take account of the equitable considerations referred
to in this Section 12(g). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 12 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 12, in no event shall (i)
Holder be required to undertake liability to any person under this Section 12
for any amounts in excess of the dollar amount of the net proceeds to be
received by such Holder from the sale of such Holder's Securities (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
any Registration Statement under which such Securities are to be registered
under the Securities Act and (ii) any underwriter be required to undertake
liability to any person hereunder for any amounts in excess of the aggregate
discount, commission or other compensation payable to such underwriter with
respect to the Securities underwritten by it and distributed pursuant to the
Registration Statement.
(h) Listing. Upon filing of the Registration Statement, the Company
-------
shall promptly secure the listing of the Securities upon The Nasdaq National
Market or such other national securities exchange or automated quotation system,
if any, upon which shares of Common Stock are then listed (subject to official
notice of issuance). So long as Holder owns any of the Securities, the Company
shall use its best efforts to maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Common Shares, and shall comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers and such
exchanges, as applicable.
13. Amendments.
----------
(a) This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the same is sought.
(b) No waivers of or exceptions to any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
14. Miscellaneous.
-------------
14.1 Notices. Any notice, request or other document required or
-------
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
Holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
15.
14.2 Binding Effect on Successor. This Warrant shall be binding upon
---------------------------
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder hereof.
14.3 Descriptive Headings and Governing Law. The descriptive headings
--------------------------------------
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware.
[Signature Page Follows]
16.
IN WITNESS WHEREOF, Incara Pharmaceuticals Corporation has caused this
Warrant to be executed by its officers thereunto duly authorized.
Dated: _________, 2001
INCARA PHARMACEUTICALS CORPORATION
By: _____________________________
Xxxxxxx Xxxxxx
Chairman, President and Chief
Executive Officer
AGREED AND ACCEPTED:
PETKEVICH & PARTNERS LLC
By: ____________________________
J. Xxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
NOTICE OF EXERCISE
To: Incara Pharmaceuticals Corporation
(i) The undersigned hereby elects to purchase _______ shares of Common
Stock of Incara Pharmaceuticals Corporation, pursuant to the terms of the
attached Warrant, and
______ tenders herewith payment of the purchase price of such shares
in full.
______ exercises Holder's Net Exercise Right.
(ii) In exercising this Warrant, the undersigned hereby
confirms and acknowledges that the shares of Common Stock to be issued upon
exercise hereof are being acquired solely for the account of the undersigned and
not as a nominee for any other party, and for investment, and that the
undersigned will not offer, sell, or otherwise dispose of any such shares of
Common Stock except under circumstances that will not result in a violation of
the registration or qualification requirements of the Securities Act of 1933, as
amended, or any state securities laws.
(iii) Please issue a certificate or certificates
representing said shares of Common Stock in the name of the undersigned or in
such other name as is specified below:
______________________________
[Name]
______________________________
[Name]
(iv) Please issue a new Warrant for the unexercised portion
of the attached Warrant in the name of the undersigned or in such other name as
is specified below:
______________________________
[Name]
______________________________
________________ ______________________________
[Date] [Signature]
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
-------------------------- ----------------------- ---------------------
and does hereby irrevocably constitute and appoint ____________________ Attorney
to make such transfer on the books of _____________ maintained for the purpose,
with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the shares of stock to be issued
upon exercise hereof are being acquired for investment and that the Assignee
will not offer, sell or otherwise dispose of this Warrant or any shares of stock
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the registration or qualification requirements of the
Securities Act of 1933, as amended, or any state securities laws. Further, the
Assignee has acknowledged that upon exercise of this Warrant, the Assignee
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the shares of stock so purchased are being acquired for
investment and not with a view toward distribution or resale.
DATED: _____________________
_______________________________
Signature of Holder
_______________________________
(Witness)
Exhibit B
Matters to be Covered in the Opinion of Company Counsel
(i) The Company and each of the Subsidiaries (as defined in the
Agreement to which this exhibit is attached) has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation;
(ii) The Company and each Subsidiary has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus;
(iii) The Company and each Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. To such counsel's knowledge,
the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than [list
subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the captions
"Capitalization" and "Description of Capital Stock" as of the dates
stated therein, the issued and outstanding shares of capital stock of
the Company outstanding prior to the issuance of the Securities have
been duly and validly issued and are fully paid and nonassessable, and,
to such counsel's knowledge, have not been issued in violation of or
subject to any preemptive right arising under the certificate of
incorporation or Delaware General Corporation Law, co-sale right, right
of first refusal or other similar right, other than any registration
rights described in Opinion (xix) hereof;
(v) All issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and, to such counsel's knowledge,
have not been issued in violation of or subject to any preemptive right
arising under the certificate of incorporation or Delaware General
Corporation Law, co-sale right, right of first refusal or other similar
right, other than any registration rights described in Opinion (xix)
hereof and, to such counsel's knowledge, are owned by the Company free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest;
(vi) The Securities to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon issuance
and delivery against payment therefor in accordance with the terms
hereof, will be duly and validly issued and fully paid and
nonassessable, and will not have been issued in violation of or subject
to any preemptive right, co-sale right, right of first refusal or other
similar right, other than any registration rights described in Opinion
(xix) hereof.
(vii) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Securities to be
issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by the Agent, is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles (whether
relief is sought in a proceeding at law or in equity);
1
(ix) The Registration Statement as amended prior to the Closing
has become effective on ________, 2001, under the Securities Act, the
Prospectus has been filed with the Commission pursuant to Rule
424(b)(_) under the Securities Act on ________, 2001, and, to such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Securities Act;
(x) To the best of such counsel's knowledge, the Company has
filed all the material required to be filed, and has filed all reports
required to be filed, pursuant to the Exchange Act for a period of at
least 15 calendar months immediately preceding the date of such
opinion;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom
as to which such counsel need express no opinion), as of the effective
date of the Registration Statement, complied as to form in all material
respects with the requirements of the Securities Act;
(xii) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel
and is a fair summary of such matters and conclusions; and the forms of
certificates evidencing the Securities comply with Delaware law;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes
discussed under the heading "Description of Capital Stock" are accurate
and fairly present the information required to be presented by the
Securities Act;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company or any of its
Subsidiaries is a party of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed
as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions
of, or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, agreement or contract which has been filed as
an exhibit to any filings by the Company with the Commission and to
which the Company or any of its Subsidiaries is a party or by which its
properties are bound, or any applicable statute, rule or regulation
known to such counsel or, to such counsel's knowledge, any order, writ
or decree of any court, government or governmental agency or body
having jurisdiction over the Company or any of its Subsidiaries, or
over any of their properties or operations;
(xvi) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body
having jurisdiction over the Company or any of its Subsidiaries, or
over any of their properties or operations is necessary in connection
with the consummation by the Company of the transactions herein
contemplated, except (i) such as have been obtained under the
Securities Act, (ii) such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the
distribution of the Securities, (iii) such as may be required by the
NASD and (iv) such as may be required under the federal or provincial
laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its Subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act or by
the
2
Exchange Act or the applicable rules and regulations of the Commission
thereunder, other than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor any of its
Subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental
agency or body having jurisdiction over the Company or any of its
Subsidiaries, or over any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of securities of the
Company have registration rights with respect to securities of the
Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights
known to such counsel to registration of such securities, because of
the filing of the Registration Statement by the Company, have, with
respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement
or have included securities in the Registration Statement pursuant to
the exercise of and in full satisfaction of such rights.
(xx) The Company is not and, after giving effect to the offering
and the sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(xxi) To such counsel's knowledge, the issuance of the Securities
pursuant to the Offering does not and will not result in any (i)
adjustment of the conversion or exercise rate or price of any
securities convertible into or exercisable for Common Stock, or (ii)
otherwise result in any holders of the Company's capital stock,
options, debt or other securities becoming entitled to any increased or
accelerated vesting, preferences, privileges, distributions, payments
or other rights or benefits under any agreement or instrument known to
such counsel to which the Company or any of its Subsidiaries is a party
or by which its properties are bound, or under the Company's charter or
bylaws.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company and the Agent and the Agent's Counsel, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing, the Registration Statement and any
amendment or supplement thereto, when such documents became effective or were
filed with the Commission (other than the financial statements including
supporting schedules and other financial and statistical information derived
therefrom, as to which such counsel need express no comment) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or at the Closing, the Registration Statement, the Prospectus and any amendment
or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Such counsel shall also state the Company is eligible to
file a registration statement on Form S-1 and use the Prospectus in the manner
contemplated herein for purposes of the Offering.
3
Exhibit C
Form of Lockup Agreement
DIRECTOR, EXECUTIVE OFFICER AND 5% STOCKHOLDER LOCK-UP AGREEMENT
INCARA PHARAMACEUTICALS CORPORATION
_______________, 2001
Petkevich & Partners, LLC
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Re: INCARA PHARAMACEUTICALS CORPORATION
LOCK-UP AGREEMENT
Ladies and Gentlemen:
The undersigned understands that you (the "Agent") propose to enter into a
Placement Agency Agreement (the "Agency Agreement") with INCARA PHARAMACEUTICALS
CORPORATION, a Delaware corporation (the "Company"), providing for the public
offering (the "Public Offering") on a best efforts basis of certain shares of
the Common Stock of the Company (the "Common Stock") to be issued and sold by
the Company. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Agency Agreement.
In consideration of the Agent's services to the Company, and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the undersigned hereby agrees that, without the prior written
consent of the Agent, the undersigned will not, for a period commencing on the
date of this letter and ending on the earlier of (i) ninety (90) days after the
date of the last sale of shares of Common Stock pursuant to the Public Offering
or (ii) December 30, 2001: (A) directly or indirectly, offer, pledge, announce
the intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities of the Company which are substantially similar to the
Common Stock, including but not limited to any securities convertible into or
exercisable or exchangeable for, or that represent the right to receive, Common
Stock or any such substantially similar securities or (B) enter into any swap,
option, future, forward or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Common Stock or any such
substantially similar securities, whether any such transaction described in
clause (A) or (B) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise.
The foregoing restriction is expressly agreed to preclude the undersigned from
engaging in any hedging or other transaction which is designed to or which
reasonably could be expected to lead to or result in a sale or disposition of
the undersigned's Common Stock even if such Common Stock would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to any of the undersigned's Common Stock or with respect to any
security that includes, relates to, or derives any significant part of its value
from such Common Stock.
If the Agency Agreement does not become effective and executed by the parties
thereto on or before June 30, 2001, or if the Agency Agreement is terminated
prior to any sale of shares in the Public Offering, or if the Company shall fail
to complete any sales of shares in the Public Offering prior to September 30,
2001, or if the Company shall earlier terminate the Public Offering without
selling any shares of Common Stock pursuant thereto, the undersigned shall
automatically be released from all obligations of this Lock-Up Agreement.
C-1
Notwithstanding the foregoing, the undersigned may transfer the undersigned's
Common Stock (i) as a BONA FIDE gift or gifts, provided that the donee or donees
thereof agree to be bound in writing by the restrictions set forth herein, or
(ii) to any trust for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned, provided that the trustee of the trust
agrees to be bound in writing by the restrictions set forth herein, and provided
further that any such transfer shall not involve a disposition for value, or
(iii) in the case of individual officers of the Company, solely for purposes of
sales of such number of shares as may be necessary from time to time to fund
federal, state and local income taxes on issuances of restricted stock to such
individual officers under the Company's restricted stock plan for such
individuals. For purposes of this Lock-Up Agreement, "immediate family" shall
mean any relationship by blood, marriage or adoption, not more remote than first
cousin. The undersigned now has, and, except as contemplated above, for the
duration of this Lock-Up Agreement will have, good and marketable title to the
undersigned's Common Stock.
In addition, without the prior written consent of the Agent, the undersigned
shall not, during the Lock-Up Period, exercise "registration rights" or
otherwise make any demand for or exercise any right with respect to, the
registration with the Securities and Exchange Commission of any Common Stock or
any security convertible into or exercisable or exchangeable for Common Stock.
In furtherance of the foregoing, the Company, and any duly appointed transfer
agent for the registration or transfer of the securities described herein, are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Agreement.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this Lock-Up Agreement. All authority herein
conferred or agreed to be conferred and any obligations of the undersigned shall
be binding upon the successors, assigns, heirs or personal representatives of
the undersigned.
The undersigned understands that the Agent is entering into the Agency Agreement
and proceeding with the Public Offering in reliance upon this Lock-Up Agreement.
This Lock-Up Agreement shall be governed by and construed in accordance with the
laws of the State California, without regard to the conflicts of laws principles
thereof.
Very truly yours,
____________________________________
Print Name:
Accepted as of the date first set forth above:
Petkevich & Partners, LLC.
By: _______________________________
Name:
Title:
C-2
