EXHIBIT 2.1
EQUITY LINE OF CREDIT AGREEMENT
Between
Nastech Pharmaceutical Company Inc.
And
Castlebar Enterprises Limited
EQUITY LINE OF CREDIT AGREEMENT dated as of July 11, 2000 (the
"Agreement"), between Castlebar Enterprises Limited, a British Virgin Islands
corporation (the "Investor") and Nastech Pharmaceutical Company Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to 1,200,000
shares (the "Aggregate Purchase Price") of the Common Stock (as defined below);
and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Bid Price" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market on the date in
question.
Section 1.2 "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.4 "Commitment Amount" shall mean the dollar amount necessary
which the Investor has agreed to provide to the Company in order to purchase up
to 1,200,000 Put Shares pursuant to the terms and conditions of this Agreement.
Section 1.5 "Commitment Period" shall mean the period commencing on the
Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased 1,200,000 Put Shares pursuant to this
Agreement, (y) the date this Agreement is terminated pursuant to Section 2.3,
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(z) the date occurring thirty-six (36) months from the date of commencement of
the Commitment Period.
Section 1.6 "Common Stock" shall mean the Company's common stock, par
value $0.006 per share.
Section 1.7 "Condition Satisfaction Date" shall have the meaning set forth
in Section 7.2.
Section 1.8 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the sale by the Company
and resale by the Investor of the Registrable Securities as set forth in Section
7.2(f).
Section 1.9 "Escrow Agent" shall mean the escrow agent designated in the
Escrow Agreement.
Section 1.10 "Escrow Agreement" shall mean the escrow agreement in the
form attached hereto as Exhibit A.
Section 1.11 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.12 "Initial Closing" shall mean the closing as contemplated by
Article I of the Escrow Agreement.
Section 1.13 "Investment Amount" shall mean the dollar amount to be
invested by the Investor to purchase Put Shares with respect to any Put as
notified by the Company to the Investor in the Put Notice, all in accordance
with Section 2.2 hereof.
Section 1.14 "Material Adverse Effect" shall mean any effect on the
business, Bid Price, operations, properties or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Escrow Agreement in any material respect.
Section 1.15 "Maximum Put Amount" shall mean, as of the date of any Put
Notice, 4.5% of the weighted average price for the three (3) month period
immediately prior to the date of the Put Notice multiplied by the total trading
volume in respect of the Common Stock for the three (3) month period immediately
prior to the date of the Put Notice.
Section 1.16 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.17 "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
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Section 1.18 "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.19 "Principal Market" shall mean the NASDAQ National Market, the
NASDAQ SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock. Principal Market shall not include the OTC Bulletin Board
without the express written consent of the Investor.
Section 1.20 "Purchase Price" shall mean with respect to Put Shares,
eighty-six and one half percent (86.5%) (the "Purchase Price Percentage") of the
VWAP on each Trading Day during the Valuation Period related to a Put (or such
other date on which the Purchase Price is calculated in accordance with the
terms and conditions of this Agreement).
Section 1.21 "Put" shall mean each occasion the Company elects to exercise
its right to tender a Put Notice requiring the Investor to purchase shares of
the Company's Common Stock, subject to the terms of this Agreement.
Section 1.22 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to sell to the
Investor in the form attached hereto as Exhibit B.
Section 1.23 "Put Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to a Put that has occurred or may occur
in accordance with the terms and conditions of this Agreement.
Section 1.24 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until (i) all Put Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Put Shares and Warrant Shares
have been sold under circumstances under which all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Put Shares and Warrant Shares 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 (iv) such time as, in the opinion of counsel to the Company, all Put Shares
and Warrant Shares 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.
Section 1.25 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the sale and resale of
the Registrable Securities annexed hereto as Exhibit C.
Section 1.26 "Registration Statement" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC,
such as Form S-1 or SB-2, for which the Company then qualifies and which counsel
for the Company shall deem appropriate, and which form shall be available for
the resale by the Investor of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement, the Registration
Rights Agreement, and in accordance with the intended method of distribution of
such securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
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Section 1.27 "SEC" shall mean the Securities and Exchange Commission.
Section 1.28 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.29 "SEC Documents" shall mean the Company's latest Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.30 "Threshold Price" is the lowest VWAP at which the Company
will sell its Common Stock with respect to any Trading Day within a Valuation
Period determined in its sole and absolute discretion in any Put Notice.
Section 1.31 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.32 "Valuation Event" shall mean an event in which the Company at
any time prior to the end of the Commitment Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)
above or (d) and (e) below, at a price per share less, or for other
consideration lower, than the Bid Price in effect immediately prior to such
issuance, or without consideration (other than pursuant to this Agreement);
(d) issues any warrants, options or other rights (other than
pursuant to the Company's employee benefit plan) to subscribe for or purchase
any Additional Capital Shares and the price per share for which Additional
Capital Shares may at any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Bid Price in effect immediately
prior to the issuance of the relevant warrants, options or other rights;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
subsections (a) through (e)); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Subsections (a)
through (f) hereof, inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a Material Adverse Effect upon
the rights of the Investor at the time of a Put.
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Section 1.33 "Valuation Period" shall mean the period of twenty-two (22)
Trading Days beginning on the date specified in the Put Notice; provided,
however, that if a Valuation Event occurs during a Valuation Period, a new
Valuation Period shall begin on the Trading Day immediately after the occurrence
of such Valuation Event and end on the twenty-second (22nd) Trading Day
thereafter.
Section 1.34 "VWAP" shall mean the daily volume weighted average price of
the Company's Common Stock on the Principal Market as reported by Bloomberg
Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm EST) using
the VAP function.
Section 1.35 "Warrants" shall include (i) the 33,000 Common Stock Purchase
Warrants in the form of Exhibit D hereto to be delivered to the Investor at the
Initial Closing (the "Initial Warrants"), (ii) 1,000 Common Stock Purchase
Warrants in the form of Exhibit D hereto to be delivered to the Investor for
each $100,000 of Put Shares purchased by the Investor at each applicable
Settlement Date (the "Put Warrants) and (iii) a warrant certificate to purchase
up to a number of shares of Common Stock equal to 25% of the number of shares of
Common Stock purchased by the Investor on such Settlement Date pursuant to this
Agreement in the form attached hereto as Exhibit E (each a "Short Term
Warrant"); provided, however, in no event shall the Company issue more than
66,000 Initial Warrants and Put Warrants, in the aggregate, in connection with
this Agreement to the Investor. "Warrant Shares" shall mean the shares of Common
Stock issuable upon exercise of the Warrants.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments. Subject to the satisfaction of the conditions set
forth herein (including, without limitation, the provisions of Article VII
hereof), the parties agree as follows:
(a) Put Right. At any time during the Commitment Period, subject to
the conditions set forth in Section 7.2, the Company, may, in its sole
discretion, issue and exercise a Put, which Put the Investor will be obligated
to accept; provided, however, that the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall be neither less
than $250,000 per Put nor more than the Maximum Put Amount, except that, the
Company's final Put may be less than $250,000 if the Commitment Amount is less
than $250,000. Only one Put shall be allowed in each Valuation Period.
(b) Settlement Date. The price per share paid by the Investor shall
be the Purchase Price on each separate Trading Day during the Valuation Period.
The number of shares of Common Stock purchased by the Investor with respect to
each Put shall be determined on a daily basis during each Valuation Period and
settled on, (i) as to the 1st to the 11th Trading Days after a Valuation Period
commences, on the 13th Trading Day after a Valuation Period commences, and (ii)
as to the 12th to the 22nd Trading Days after a Valuation Period commences, the
24th Trading Day after a Valuation Period. (each, a "Settlement Date"). In
connection with each Valuation Period, the Company may set a Threshold Price, if
any, in the Put Notice. If the VWAP on any Trading Day within the Valuation
Period is less than the Threshold Price, the Company shall not sell and the
Investor shall not be obligated to purchase the Put Shares otherwise to be
purchased for such Trading Day, except that, the Investor may elect to purchase
such Put Shares at a Purchase Price based on the Threshold Price instead of the
VWAP for such Trading Day. Prior to 6:15 pm EDT on each 11th and 22nd Trading
Day after a Valuation Period begins, the Investor shall instruct the Company as
to how many below Threshold Price days the Investor elects to purchase such
shares during the applicable portion of the Valuation Period.
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(c) Calculation of Shares. The number of Put Shares to be issued in
connection with each Put shall be equal to the sum of the quotients (for each
Trading Day within the Valuation Period) of (x) 1/22nd of the Investment Amount
and (y) the Purchase Price on each Trading Day within the Valuation Period,
subject to the following adjustments:
(i) If the VWAP on a given Trading Day during a Valuation period
is less than the Threshold Price, then the Put will be reduced
by 1/22nd and that day shall be withdrawn from the Valuation
Period, unless otherwise elected by the Investor to be
included pursuant to Section 2.1(b) above; and
(ii) If trading of the Common Stock on the Principal Market is
suspended for more than three (3) hours, in the aggregate, on
any Trading Day during the Valuation Period, then the Put
shall be reduced by 1/22nd and that day shall be withdrawn
from the Valuation Period, except that the Investor may elect
to purchase such shares at a Purchase Price based on the
Threshold Price, if any, instead of on the VWAP on such
Trading Day, and if the Company has not set a Threshold Price,
then the Purchase Price shall be based on the VWAP on such
Trading Day, and, in either case, the number of Put Shares
purchased by the Investor for such Trading Day shall be based
on such Purchase Price.
(d) Maximum Aggregate Amount of Puts. Anything in this Agreement to
the contrary notwithstanding, (i) at no time will the Company request a Put
which would result in the issuance of an aggregate number of shares of Common
Stock pursuant to this Agreement (including pursuant to the Warrants) which
exceeds 19.9% of the number of shares of Common Stock issued and outstanding on
any Closing Date without obtaining stockholder approval of such excess issuance,
and (ii) the Company may not make a Put to the extent that, after such purchase
by the Investor, the sum of the number of shares of Common Stock and Warrants
beneficially owned by the Investor and its affiliates would result in beneficial
ownership by the Investor and its affiliates of more than 9.9% of the then
outstanding shares of Common Stock. In determining whether any Put would result
in the Investor and its affiliates beneficially owning more than 9.9% of the
outstanding shares of Common Stock, the Company may rely on any information
provided by the Investor for the applicable Put pursuant to Section 5.3 hereof.
For purposes of the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities and Exchange
Act of 1934, as amended.
(e) Example Put. Annexed hereto as a schedule is an example of the
Put procedure and the stock purchases. Notwithstanding the example, in the event
of a conflict between the example and the terms of this Agreement, the terms of
this Agreement shall control.
(f) Warrants. On the Initial Closing, the Investor shall receive the
"Initial Warrant", and on each Settlement Date the Investor shall receive (i) a
Put Warrant and (ii) a Short Term Warrant. Subject to Section 7.2 hereof, the
Initial Warrant and the Put Warrant shall each have a term from its date of
issuance of three (3) years. Each Short Term Warrant shall have a term from its
date of issuance of one (1) Trading Day. The exercise price of the Initial
Warrant and the Put Warrant shall be 120% of the average Bid Price of the Common
Stock during the fifteen (15) Trading Days prior to the Initial Closing Date or
the Settlement Date, as applicable. The exercise price of each Short Term
Warrant shall be the weighted average of the Purchase Prices of the Common Stock
purchased on the applicable Settlement Date. Each Exercise of a Short Term
Warrant shall reduce the Commitment Amount by the number of shares of Common
Stock issued pursuant to such Short Term Warrant. The Common Stock underlying
the Warrants will be registered in the Registration Statement referred to in
Section 4.3 hereof.
Section 2.2 Mechanics.
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(a) Put Notice. The Company must inform the Investor that it is
exercising its right to make a Put by delivering a Put Notice, in the form of
Exhibit D hereto, via facsimile transmission (the "Put Notice"). No Put Notice
may be deemed delivered on a day that is not a Trading Day. The Put Notice shall
set forth the Investment Amount and the date on which the Valuation Period shall
begin, which date shall not be prior to the Trading Day on which the Put Notice
is delivered and receipt confirmed by the Investor. Notwithstanding anything to
the contrary contained herein, if the Valuation Period is to begin on the date
of the Put Notice, the Put Notice must be delivered to and receipt confirmed by
the Investor by 12:00 pm EDT on such date. The Company may set the Threshold
Price, if any, in such Put Notice. At no time shall the Investor be required to
purchase more than the scheduled Investment Amount for a given Valuation Period
so that if the Company chooses not to exercise the Maximum Put Amount in a given
Valuation Period, the Investor is not obligated to purchase more than the
Maximum Put Amount in a subsequent Valuation Period.
(b) Settlement. On or before each Settlement Date, the Put Shares
purchased by the Investor shall be delivered to The Depository Trust Company
("DTC") on the Investor's behalf and the Put Warrants and Short Term Warrants
shall be delivered to the Escrow Agent or to the Investor. Upon the Company
delivering whole shares of Common Stock to the Investor or its designees via
DWAC by 1:00 pm EST and the Company delivering the Put Warrants and Short Term
Warrants to the Escrow Agent or the Investor, the Investor shall wire transfer
immediately available funds to the Company's designated account on such day.
Upon the Company delivering whole shares of Common Stock to the Investor or its
designees via DWAC after 1:00 pm EST, the Investor shall wire transfer next day
available funds to the Company's designated account on such day. In the event
the Investor elects to use the Escrow Agent, the Put Shares shall be credited by
the Company to the DTC account designated by the Investor upon receipt by the
Escrow Agent of payment for the Put into the Escrow Agent's trust account as
provided in the Escrow Agreement. The Escrow Agent shall be directed to pay the
Purchase Price to the Company.
Section 2.3 Termination of Investment Obligation.
(a) The obligation of the Investor to purchase shares of Common
Stock shall terminate permanently (including with respect to each Settlement
Date that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of thirty (30) Trading Days during the Commitment Period, for any
reason other than deferrals or suspensions in accordance with the Registration
Rights Agreement as a result of corporate developments subsequent to the
Effective Date that would require such Registration Statement to be amended to
reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act or (ii) the Company shall at any time fail to
comply with the requirements of Section 6.2, 6.3 or 6.5.
(b) The Investor hereby agrees that its obligation to honor all Put
Notices during the Commitment Period are absolute and unconditional (except as
provided in Section 7.2), and that the Company shall have full recourse against
the Investor for the entire Investment Amount in all Put Notices during the
Commitment Period. In the event that the Investor fails to honor any Put Notice
within two (2) Trading Days of the Closing Date scheduled for such Put, the
Investor agrees that, in addition to all other remedies available at law or
equity, (i) the Company's obligation to sell Put Shares and to deliver Put
Warrants to the Investor shall terminate upon notice to the Investor of such
termination and (ii) except as to any of the Initial Warrants already exercised
by the Investor, the Investor shall return to the Company for cancellation a
pro-rata portion of the Initial Warrants, based upon the portion of the
Commitment Amount that has not been previously honored; provided, however, that
if less than 5% of the Commitment Amount has been previously honored, then the
Investor may keep 1,650 Initial Warrants in lieu of a minimum Put commitment by
the Company. Upon such termination, the Company shall
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maintain the Registration Statement in effect for such reasonable period, not to
exceed twenty (20) Trading Days, as the Investor may request in order to dispose
of any remaining Put Shares.
Section 2.4 Additional Shares. In the event that (a) within five (5)
Trading Days of any Closing Date, the Company gives notice to the Investor of an
impending "blackout period" in accordance with Section 3(f) of the Registration
Rights Agreement and (b) the Bid Price on the Trading Day immediately preceding
such "blackout period" (the "Old Bid Price") is greater than the Bid Price on
the first Trading Day following such "blackout period" (the "New Bid Price") the
Company shall issue, within five (5) Trading Days of such "blackout period" to
the Investor a number of additional shares (the "Blackout Shares") equal to the
difference between (y) the product of the number of Registrable Securities
purchased by the Investor on such most recent Closing Date and still held by the
Investor during such "blackout period" that are not otherwise freely tradable
during such "blackout period" and the Old Bid Price, divided by the New Bid
Price and (z) the number of Registrable Securities purchased by the Investor on
such most recent Closing Date and still held by the Investor during such
"blackout period" that are not otherwise freely tradable during such "blackout
period". If any such issuance would result in the issuance of a number of shares
which exceeds the number set forth in Section 2.1(c), then in lieu of such
issuance, the Company shall pay Investor an amount equal to the closing ask
price of the Blackout Shares on the first Trading Day following the end of the
blackout period in cash within five Trading Days.
Section 2.5 Liquidated Damages. The parties hereto expressly acknowledge
and agree that the Company's obligation to issue Registrable Securities under
Section 2.4 above and the forfeiture and recourse rights of the Company under
Section 2.3(b) above shall constitute liquidated damages and not penalties. The
parties further acknowledge that (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, (b) that the
Company is relying on the Put rights granted hereunder to meet its working
capital needs and has agreed to grant Warrants to the Investor on the express
condition that the Investor agree to honor all Put Notices during the Commitment
Period, (c) the remedies specified in such Sections bear a reasonable proportion
under the circumstances and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by (i) the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities or in connection with a "blackout period" under the Registration
Rights Agreement or (ii) the Company in connection with the Investor's failure
to honor a Put Notice, as appropriate, and (d) the parties are sophisticated
business parties and have been represented by legal and financial counsel and
negotiated this Agreement at arm's length.
ARTICLE III
Representations and Warranties of Investor
Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to protect
its
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own interests in connection with this transaction and is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4 Not an Affiliate. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a corporation duly
organized, validly existing, and in good standing under the laws of the British
Virgin Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party; or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received and
reviewed all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
Investor. The Company is subject to the periodic reporting requirements of the
Exchange Act, and Investor has reviewed copies of any such reports that has
deemed to be pertinent to its investment in the Common Stock.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial
capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
Section 3.10 Underwriter Liability. Investor understands that it is the
position of the SEC that the Investor is an underwriter within the meaning of
Section 2(11) of the Securities Act and that the Investor will be identified as
an underwriter of the Put Shares in the Registration Statement.
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ARTICLE IV
Representations and Warranties of the Company
The Company represents and Warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1 Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement and the Warrants have been
duly executed and delivered by the Company and at the Initial Closing shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the issuance of the Put Shares and for the exercise of the
Warrants.
Section 4.3 Capitalization. As of June 20, 2000, the authorized capital
stock of the Company consists of 25,000,000 shares of Common Stock, $0.006 par
value per share, of which 6,283,110 shares are issued and outstanding, 100,000
shares of preferred stock, $0.01 par value per share, of which none are issued
or outstanding. Except for (i) outstanding options and warrants as set forth in
the SEC Documents and (ii) as set forth in the Disclosure Schedule, there are no
outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities. All
of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and has complied in all
material respects with all reporting requirements of the Exchange Act, and the
Company has complied in all material respects with all requirements for the
continued listing or quotation of its Common Stock, and such Common Stock is
currently listed or quoted on, the Principal Market. As of the date hereof, the
Principal Market is the Nasdaq National Market and the Company has not received
any notice regarding, and to its knowledge there is no threat, of the
termination or discontinuance of the eligibility of the Common Stock for such
listing.
10
Section 4.5 SEC Documents. The Company has made available to the Investor
true and complete copies of the SEC Documents. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6 Valid Issuances. When issued and paid for in accordance with
the terms hereof or of the Warrants, the Put Shares and the Warrant Shares will
be duly and validly issued, fully paid, and non-assessable. Neither the sales of
the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrants or the Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put
Shares, the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material default under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
11
obligations under this Agreement or issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the initial Closing, any registration statement that may
be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.8 No Material Adverse Change. Since March 31, 1999 no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since March 31, 1999,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.10 Litigation and Other Proceedings. Except as disclosed in the
SEC Documents, there are no lawsuits or proceedings pending or, to the knowledge
of the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.11 No Misleading or Untrue Communication. The Company and, to
the knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Put Shares or the Warrants in connection
with the transaction contemplated by this Agreement, other than the Investor and
Jesup & Xxxxxx Securities Corporation, have not made, at any time, any oral
communication in connection with the offer or sale of the same which contained
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
Section 4.12 Material Non-Public Information. The Company has not
disclosed to the Investor any material non-public information that (i) if
disclosed publicly, would reasonably be expected to have a material effect on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed.
Section 4.13 Insurance. The Company and each subsidiary maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 4.14 Tax Matters. The Company and each subsidiary has filed all
Tax Returns which it is required to file under applicable laws; all such Tax
Returns are true and accurate in all material respects and have been prepared in
compliance with all applicable laws in all material respects; the Company has
paid all Taxes due and owing by it or any subsidiary (whether or not such Taxes
are
12
required to be shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authorities all Taxes which it is required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
parties; and since December 31, 1999, the charges, accruals and reserves for
Taxes with respect to the Company (including any provisions for deferred income
taxes) reflected on the books of the Company are adequate to cover any Tax
liabilities of the Company if its current tax year were treated as ending on the
date hereof.
To the knowledge of the Company, no claim has been made by a taxing
authority in a jurisdiction where the Company does not file tax returns that the
Company or any subsidiary is or may be subject to taxation by that jurisdiction.
There are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the Company or
any subsidiary; no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other review
has been received by the Company or any subsidiary from any foreign, federal,
state or local taxing authority. There are no material unresolved questions or
claims concerning the Company's Tax liability. The Company (A) has not executed
or entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; and (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481(a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
For purposes of this Section 4.14:
"IRS" means the United States Internal Revenue Service.
Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum,
estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.15 Property. Neither the Company nor any of its subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property
13
owned by it, free and clear of all liens, encumbrances and defects except such
as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company; and to the Company's knowledge any real property and buildings held
under lease by the Company as tenant are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and intended to be made of such property and buildings by the
Company.
Section 4.16 Intellectual Property. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") material to the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no adverse
claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.17 Internal Controls and Procedures. The Company maintains books
and records and internal accounting controls which provide reasonable assurance
that (i) all transactions to which the Company or any subsidiary is a party or
by which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.18 Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.19 No Misrepresentation. The representations and warranties of
the Company contained in this Agreement, any schedule, annex or exhibit hereto
and any agreement, instrument or certificate furnished by the Company to the
Investor pursuant to this Agreement, do 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, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
Covenants of the Investor
Investor covenants with the Company that:
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws,
14
rules and regulations and rules and regulations of the Principal Market on which
the Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Investor agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Put Shares from the Investor.
Section 5.2 No Short Sales. The Investor and its affiliates shall not
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) during the Commitment Period.
Section 5.3 Notice of Beneficial Ownership. At the request of the Company,
upon delivering a Put Notice to the Investor, the Investor shall inform the
Company of the current number of shares of Common Stock and Warrants
beneficially owned by the Investor and its affiliates.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company hereby agrees to maintain
the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event no later than the Effective Date) to list the Put
Shares and the Warrant Shares. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Principal Market, it will
include in such application the Put Shares and the Warrant Shares and will take
such other action as is necessary or desirable in the opinion of the Investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company will take all action to continue the listing and
trading of its Common Stock on a Principal Market (including, without
limitation, maintaining sufficient net tangible assets) and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market and shall provide the Investor with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within one Trading Day of the Company's
receipt thereof.
Section 6.3 Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Act.
Section 6.4 Legends. The certificates evidencing the Common Stock to be
sold to the Investor shall contain any restrictive legends required by
applicable law.
Section 6.5 Corporate Existence. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.6 Additional SEC Documents. During the Commitment Period, the
Company will deliver to the Investor, as and when the originals thereof are
submitted to the SEC for filing, copies of all SEC Documents so furnished or
submitted to the SEC, or else notify the Investor that such documents are
available on the XXXXX system.
15
Section 6.7 Notice of Certain Events Affecting Registration; Suspension of
Right to Make a Put. The Company will immediately notify the Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that requires the making of any changes
in the Registration Statement, related prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the related prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate; and the Company will promptly make available to the
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to the Investor any Put Notice (a) during the continuation of
any of such supervision or stop order or (b) until any required Registration
Statement or prospectus amendment has been declared effective.
Section 6.8 Expectations Regarding Put Notices. Within ten (10) days after
the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices. The failure by the Company
to comply with this provision can be cured by the Company's notifying the
Investor, in writing, at any time as to its reasonable expectations with respect
to the current calendar quarter.
Section 6.9 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Investor such shares of stock
and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.10 Limitation on Future Financing. The Company agrees that it
will not enter into any sale of its securities for cash at a discount to its
then-current Bid Price during the Commitment Period except for any sales (i)
pursuant to any presently existing or any successor employee benefit plan which
plan has been or may be approved by the Company's stockholders, (ii) pursuant to
any compensatory plan for a full-time employee or key consultant, (iii) pursuant
to any underwritten public offering (including any equity line of credit), (iv)
in connection with a strategic partnership or other business transaction, the
principal purpose of which is not simply to raise money, (v) in connection with
any private offering of no more than 300,000 shares of Common Stock or
securities convertible into 300,000 shares of Common Stock, in the aggregate,
with registration rights, or (vi) in connection with any bridge financing
arrangement which includes, as consideration for the lender to enter into such
arrangement, either the issuance of no more than 300,000 shares of Common Stock
(or securities convertible into 300,000 shares
16
of Common Stock) or an option to purchase no more than 300,000 shares of Common
Stock (or securities convertible into 300,000 shares of Common Stock).
ARTICLE VII
Conditions to Delivery of Puts
and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
the Put Shares to the Investor incident to each Settlement Date is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing, including payment of the
Investment Amount to the Escrow Agent, and Investor shall provide an officer's
certificate to the Company to such effect.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a
Put Notice and the Obligation of the Investor to Purchase Put Shares. The right
of the Company to deliver a Put Notice and the obligation of Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on both (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Closing Certificate. All representations and warranties of the
Company contained herein shall remain true and correct in all material respects
as of the Closing Date as though made as of such date and the Company shall have
delivered into escrow an Officer's Certificate signed by its Chief Executive
Officer or Chief Financial Officer certifying that all of the Company's
representations and warranties herein remain true and correct in all material
respects as of the Closing Date and that the Company has in all material
respects performed all covenants and satisfied all conditions to be performed or
satisfied by the Company prior to such Closing;
(b) Blue Sky. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Common Stock
to the Investor and shall have made reasonable efforts to obtain permits and
qualifications in such states as the Investor reasonably designates in order for
the Investor to make offers and sales in such states;
(c) Delivery of Put Shares. Delivery into escrow or to DTC of the
Put Shares;
(d) Opinion of Counsel. Receipt by the Investor of an opinion of
counsel to the Company, in the form of Exhibit F hereto; and
(e) Transfer Agent. Delivery to the Company's transfer agent of
instructions to such transfer agent in form and substance reasonably
satisfactory to the Investor.
17
(f) Registration of the Common Stock with the SEC. The Registration
Statement shall have previously become effective and shall remain effective and
available for making resales of the Put Shares and Warrant Shares by the
Investor on each Condition Satisfaction Date and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or intends to issue
a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
the Registration Statement or related prospectus shall exist.
(g) Authority. The Company will satisfy all laws and regulations
pertaining to the sale and issuance of the Put Shares.
(h) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Registration Rights Agreement and
the Escrow Agreement to be performed, satisfied or complied with by the Company
at or prior to each Condition Satisfaction Date.
(i) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(j) Adverse Changes. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(k) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock (including, without limitation, the Put Shares) is
not suspended by the SEC or the Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening to
delist the Common Stock from the Principal Market.
(l) No Knowledge. The Company has no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is reasonably likely to occur
within the thirty (30) Trading Days following the Trading Day on which such
Notice is deemed delivered).
(n) Other. On each Condition Satisfaction Date, the Investor shall
have received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2.
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ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD, Nasdaq or other filing, all SEC
Documents and other filings with the SEC, and all other publicly available
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably requested
by the Investor or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor, provided that nothing herein shall
require the Company to disclose non-public information to the Investor or its
advisers or representations.
(b) The Company will, as hereinabove provided, immediately notify
the advisors and representatives of the Investor and, if any, underwriters, of
any event or the existence of any circumstance (without any obligation to
disclose the specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of the Company
specifically or generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein in light of the circumstances in which they were
made, not misleading. Nothing contained in this Section 8.2 shall be construed
to mean that such persons or entities may not obtain non-public information in
the course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
Transfer Agent Instructions
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Section 9.1 Transfer Agent Instructions. Upon each Closing, the Company
will issue to the transfer agent for its Common Stock (and to any substitute or
replacement transfer agent for its Common Stock upon the Company's appointment
of any such substitute or replacement transfer agent) instructions to deliver
the Put Shares without restrictive legends to the Escrow Agent.
Section 9.2 No Legend or Stock Transfer Restrictions. No legend shall be
placed on the share certificates representing the Put Shares and no instructions
or "stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto.
Section 9.3 Investor's Compliance. Nothing in this Article shall affect in
any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Put Shares.
ARTICLE X
Choice of Law/Consent to Jurisdication
Section 10.1 (a) Governing Law/Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement or any Exhibit attached hereto shall be submitted to arbitration
under the American Arbitration Association (the "AAA") in New York City, New
York, and shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter referred to as
the "Board of Arbitration") selected as according to the rules governing the
AAA. The Board of Arbitration shall meet on consecutive business days in New
York City, New York, and shall reach and render a decision in writing (concurred
in by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. The parties agree that any decision made by the
Board of Arbitration (either prior to or after the expiration of such thirty
(30) calendar day period) shall be final, binding and conclusive on the parties
to the dispute, and entitled to be enforced to the fullest extent permitted by
law and to be entered in any court of competent jurisdiction. The prevailing
party shall be awarded its costs, including attorneys' fees, from the
non-prevailing party as part of the arbitration award. Notwithstanding the
foregoing, any party shall have the right to seek injunctive relief from any
court of competent jurisdiction in any case where such relief is available. The
prevailing party in such injunctive action shall be awarded its costs, including
attorney's fees, from the non-prevailing party.
(b) The Investor irrevocably and unconditionally submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York City in
any legal action or proceeding for injunctive or other equitable relief and in
any action or proceeding seeking enforcement of any decision or award rendered
pursuant to Section 10.1(a) above. The Investor further consents that any such
action or proceeding may be brought in such court and irrevocably and
unconditionally waives any objection it may now or hereafter have to the venue
of any such action or proceeding in such court or that such action or proceeding
was brought in an inconvenient court or that such court does not have any
jurisdiction over it,
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and agrees not to plead or claim the same. The Investor also hereby waives, with
respect to itself and its revenues and assets (irrespective of their use or
intended use) all immunity (to the extent that it may at any time exist, whether
on the grounds of sovereignty or otherwise) from (i) any suit, (ii) jurisdiction
of any court, (iii) relief by way of injunction, order for specific performance
or for recovery of property, (iv) attachment of its assets (whether before or
after judgment) and (v) execution or enforcement of any judgment to which it or
its revenues or assets might otherwise be entitled, any such immunity being
hereby irrevocably waived, and the Investor irrevocably agrees that it and its
assets are, and shall be, subject to such legal action or proceeding in respect
of their obligations under this Agreement. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(c) The Investor irrevocably appoints Xxxxxxx Xxxxxx & Green, P.C.
as its agent for service of process to receive on its behalf service of process
in any proceeding relating to a dispute under this Agreement. The Investor
irrevocably consents to service of process given to Xxxxxxx Xxxxxx & Green, P.C.
in any manner permitted under applicable law. Nothing herein shall affect the
right to effect service of process in any other manner permitted by law.
ARTICLE XI
Assignment
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person except by operation of law. Notwithstanding the foregoing, upon the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed in the case of an assignment to an affiliate of the Investor, the
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to make the representations and warranties contained in Article III,
who agrees to be bound hereby, and who demonstrates to the Company's reasonable
satisfaction the financial ability to fund the obligations of the Investor so
assigned.
ARTICLE XII
Notices
Section 12.1 Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, or facsimile, addressed as set
forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
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If to Nastech Pharmaceutical Company Inc.: 00 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx, Xxxxxxxx & Kotel, P.C.
00 Xxxx 00xx Xxxxxx, Xxxxx 00
Xxx Xxxx, Xxx Xxxx 00000
Attn: L. Xxxxx Xxxxxxxx, Jr. Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
if to the Investor: c/o Dr. Xx. Xxxxxxxx & Partner
Xxxxxxxxxxxx 00
XX-0000 Xxxxx, Xxxxxxxxxxxxx
Attention: Xxxx Xxxxxxx
Facsimile: 000-000-000-0000
with a copy to and for Service of Process: Xxxxxxx Xxxxxx & Green, P.C.
(shall not constitute notice) 000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XIII
Miscellaneous
Section 13.1 Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 Entire Agreement. This Agreement, the Exhibits hereto, which
include, but are not limited to the Escrow Agreement, the Registration Rights
Agreement and the Warrants, set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
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Section 13.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 13.7 Fees and Expenses. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Investors' counsel in the amount of $20,000.
Section 13.8 Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party other than
Jesup & Xxxxxx Securities Corporation whose fee shall be paid by the Company.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.9 Publicity. The parties acknowledge that this Agreement will
be required to be filed as an Exhibit to the Registration Statement. The Company
agrees that it will not issue any press release or other public announcement of
the transactions contemplated by this Agreement without the prior consent of the
Investor, which shall not be unreasonably withheld nor delayed by more than two
(2) Trading Days from its receipt of such proposed release; provided, however,
that if the Company is advised by its outside counsel that it is required by law
or the applicable rules of any Principal Market to issue any such press release
or public announcement, then, it may do so without the prior consent of the
Investor, although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent,
unless required in the circumstances described in the proviso in the immediately
preceding sentence.
Section 13.10 Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Equity Line of
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of this 11th day of July, 2000.
NASTECH PHARMACEUTICAL COMPANY INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------------
Name:
Title:
CASTLEBAR ENTERPRISES LIMITED
By: /s/ Xxxx Xxxxxxx
-----------------------------------------
Xxxx Xxxxxxx, Authorized Signatory
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