MODIFICATION AND AMENDMENT AGREEMENT
THIS
MODIFICATION AND AMENDMENT AGREEMENT (“Agreement”) is made effective this 5th
day of April, 2007 (the “Effective Date”), by and among Xxxxx Pharmaceutical,
Inc., a Delaware corporation (the “Company”), Ever Leader Holdings Limited, a
company incorporated under the laws of Hong Kong SAR ("Ever Leader") and the
investors listed on the Schedule of Buyers attached hereto (individually, a
"Buyer" and collectively, the "Buyers").
RECITALS
WHEREAS,
the
Company, formerly known as Applied Spectrum Technologies, Inc., Ever Leader
KI
Equity Partners III, LLC and each of the stockholders of Ever Leader, entered
into an Exchange Agreement, dated as of September 7, 2006 pursuant to which
Ever
Leader became a wholly-owned subsidiary of the Company (the "Acquisition")
at
the close of the Acquisition on November 15,
2006;
WHEREAS,
the
Company, Ever Leader Holdings Limited, a company incorporated under the laws
of
Hong Kong SAR ("Ever Leader"), and the Buyers entered into a Securities Purchase
Agreement dated November 15, 2006 (the "Securities Purchase Agreement"),
pursuant to which the Buyers purchase Units of the Company’s securities for a
total of $12,000,000 consisting of (i) 25,961,760 shares of Xxxxx common stock,
par value $0.001 per share (the "Common
Stock"),
and
(ii) warrants (the "Warrants")
which
will be exercisable to purchase up to 25,961,760 shares of Common Stock in
accordance with the terms of the Warrants; and
WHEREAS,
in
connection with the Securities Purchase Agreement, the Company entered into
a
Registration Rights Agreement with the Buyers (“Registration
Rights Agreement"),
wherein Xxxxx agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute, and applicable state securities laws;
WHEREAS,
in
connection with the Securities Purchase Agreement, the Company entered into
a
Make Good Agreement ("Make
Good Agreement")
by and
among the Company, Ever Leader, Xx. Xxxxxx Xxx and Ms. Xxx Xx, Moveup
Investments Limited and Computershare Trust Company, Inc. in order to place
the
Escrow Shares (as defined in the Make Good Escrow Agreement) into an escrow
for
the benefit of the Buyers in the event that Xxxxx fails to satisfy certain
performance thresholds as specified in the Make Good Agreement (collectively,
the Securities Purchase Agreement, Warrants, Registration Rights Agreement,
and
Make Good Agreement are known as the “Transaction Documents”);
WHEREAS,
the
Company, Ever Leader, and the Buyers desire to enter into this Agreement
amending the Transaction Documents to allow for certain issuances of the
Company’s securities, including additional purchases of the Company’s equity
securities by the Buyers pursuant to the Investment Agreement between the
Company and certain Buyers dated April __, 2007 (the “Investment Agreement”);
issuances required under the Equity Transfer Agreements entered into with
certain shareholders of Shenzhen Sibiono Gene Tech Co., Ltd, effective April
__,
2007 (“Equity Transfer Agreements”); and issuances of options pursuant to an
approved Qualified Employment Stock Option Plan.
1
NOW
THEREFORE,
for
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties identified below hereby agree as follows:
1. The
Securities Purchase Agreement is hereby amended and modified as
follows:
(a) The
parties wish to exclude subsequent purchases of the Company’s equity securities
by Buyers pursuant to the Investment Agreement; issuances of securities required
under the Equity Transfer Agreements; and issuances of options pursuant to
an
approved Qualified Employment Stock Option Plan from what constitutes a Dilutive
Issuance. Accordingly, Section 4(j) of the Securities Purchase Agreement is
hereby amended by adding a new sentence at the end of said Section 4(j) which
shall read as follows:
“This
Section 4(j) shall not apply to additional purchases of the Company’s equity
securities by certain Buyers, pursuant to the Investment Agreement between
the
Company and such Buyers dated April 5, 2007 (the “Investment Agreement”);
issuances of securities required under the Equity Transfer Agreements entered
into with certain shareholders of Shenzhen Sibiono Gene Tech Co., Ltd, effective
April 1, 2007 (“Equity Transfer Agreements”); and issuances of options pursuant
to an approved Qualified Employment Stock Option Plan, nor shall such issuances
be included in the definition of a Dilutive Issuance.”
(b) The
parties further wish to include shares of Common Stock issued and issuable
to
certain Buyers pursuant to the Investment Agreement, not including any such
shares issued pursuant to warrants granted under the Investment Agreement,
in
determining the Buyers’ respective pro rata portions (referred to as “Basic
Amount”) of any Offered Securities to which they will have the right to
subscribe and purchase pursuant to Section 4(n)(i) of the Securities Purchase
Agreement. Accordingly, Section 4(n)(i)(1) is hereby amended and replaced with
the following section:
“(1) The
Company shall deliver to each Buyer an irrevocable written notice
(the "Offer
Notice")
of any
proposed or intended issuance or sale or exchange (the "Offer")
of the
securities being offered (the "Offered
Securities")
in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Buyers the Offered Securities, allocated among such Buyers
(a) based on such Buyer's pro rata portion of the
sum of (1)
the
number of Common Shares purchased hereunder plus
(2) the number of Common Shares issued and issuable to certain Buyers in
connection with the Investment Agreement (other than Warrant Shares, as defined
therein)
(the
"Basic
Amount"),
and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should
the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
Amount"),
which
process shall be repeated until the Buyers shall have an opportunity to
subscribe for any remaining Undersubscription Amount.”
2
(c) The
parties further wish to exclude subsequent purchases of the Company’s equity
securities by certain Buyers pursuant to the Investment Agreement; issuances
of
securities required under the Equity Transfer Agreements; and issuances of
options pursuant to an approved Qualified Employment Stock Option Plan from
the
restrictions on Additional Issuance of Securities set forth in Section 4(n)
of
the Securities Purchase Agreement. Accordingly, Section 4(n)(iv) is hereby
amended and replaced with the following section:
“(iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(n) shall
not apply in connection with the issuance of any Excluded Securities (as defined
in the Warrants), nor shall such restrictions apply to any subsequent purchases
of the Company’s equity securities by certain Buyers pursuant to the Investment
Agreement; issuances of securities required under the Equity Transfer
Agreements; and issuances of options pursuant to an approved Qualified
Employment Stock Option Plan.”
(d) The
parties further wish to amend Section 4(r) of the Securities Purchase Agreement
to negate the requirement that the Company provide financial statements for
the
year ending December 31, 2004 audited by Xxxxxxxxx & Company, LP, and to
specify that the financial statements for the year ending December 31, 2005
be
audited by Xxxxxxxx and Company Certified Public Accountants, P.C. Accordingly,
Section 4(r) is hereby amended and replaced with the following
section:
“(r) Audited
Financial Statements.
On or
prior to the date which is sixty (60) days after the Closing Date (the
"Audited
Financial Statement Delivery Deadline"),
the
Company shall deliver to the Buyers its financial statements for the year ending
December 31, 2005, audited by Xxxxxxxx and Company Certified Public Accountants,
P.C., prepared in accordance with generally accepted accounting principles,
consistently applied, during each year involved (except as may be otherwise
indicated in such financial statements or the notes thereto) and fairly
presenting in all material respects the financial position of the Company as
of
the dates thereof and the results of its operations and cash flows for each
such
year then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).”
2. The
Warrants issued in connection with the Transaction Documents on November 15,
2006 are hereby amended and modified as follows:
(a) The
parties wish to exclude subsequent purchases of the Company’s equity securities
by certain Buyers pursuant to the Investment Agreement; issuances of securities
required under the Equity Transfer Agreements; and issuances of options pursuant
to an approved Bonafide Employment Stock Option Plan from what constitutes
a
Dilutive Issuance under the Warrants. Accordingly, Section 2(a) of the Warrants
is hereby amended by adding a new subsection Section 2(a)(vi) which shall read
as follows:
3
“(vi)
This Section 2(a) shall not apply to additional purchases of the Company’s
equity securities by certain Buyers pursuant to the Investment Agreement between
the Company and such Buyers dated April __, 2007 (the “Investment Agreement”);
issuances of securities required under the Equity Transfer Agreements entered
into with certain shareholders of Shenzhen Sibiono Gene Tech Co., Ltd, effective
April 1, 2007 (“Equity Transfer Agreements”); and issuances of options pursuant
to an approved Qualified Employment Stock Option Plan, nor shall such issuances
be included in the definition of a Dilutive Issuance.”
3. The
Registration Rights Agreement is hereby amended and modified as
follows:
(a) The
parties wish to allow subsequent purchases of the Company’s equity securities by
certain Buyers pursuant to the Investment Agreement, including any such shares
issued pursuant to warrants granted under the Investment Agreement, to be
included in the Initial Registration Statement and any Additional Registration
Statements, as defined in the Registration Rights Agreement. Accordingly, the
last sentence of Section 2(c) of the Registration Rights Agreement is hereby
amended and replaced as follows:
“In
no
event shall the Company include any securities other than Registrable Securities
on any Registration Statement without the prior written consent of the Required
Holders except for (1) up to 2,597,424 shares of Common Stock issuable by the
Company upon exercise of warrants issued by the Company to the Placement Agent
(as defined in the Securities Purchase Agreement) on the Closing Date and (2)
additional purchases of the Company’s equity securities by certain Buyers
pursuant to the Investment Agreement between the Company and such Buyers dated
April __, 2007 (the “Investment Agreement”).”
(b) The
Buyers hereby waive any and all rights to Registration Delay Payments resulting
from the Filing Failure whether currently due and owing or hereinafter accrued
pursuant to Section 2(g) of the Registration Rights Agreement, except for the
February Registration Delay Payment in the amount of $120,000 to be distributed
pro rata according to each Buyers initial investment amount.
(c) The
parties wish to extend the date that the Company is required to have the Initial
Registration Statement declared effective to August 15, 2007. Registration
Delay
Payments shall only accrue after August 15, 2007. Accordingly, Section 1(n)
of
the Registration Rights Agreement is hereby amended and replaced as
follows:
“(n) “Initial
Effectiveness Deadline”
means
August 15, 2007.”
4. The
Make
Good Agreement is hereby amended and modified as follows:
(a) The
parties wish to negate the requirement that the Company provide financial
statements for the year ending December 31, 2004 audited by Xxxxxxxxx &
Company, to specify that the financial statements for the year ending December
31, 2005 be audited by Xxxxxxxx and Company Certified Public Accountants, P.C.,
and to exclude the financial statements for the year ending December 31, 2004
from the calculation of any and all performance thresholds included in the
Make
Good Agreement. Accordingly, Recital G of the Make Good Agreement is hereby
amended and replaced with the following section:
4
“G. On
or
prior to sixty (60) days from the Closing Date of the Securities Purchase
Agreement, as defined therein, (the "Audited
Financial Statement Delivery Deadline"),
the
Company is required under the Securities Purchase Agreement to deliver to the
Buyers its financial statements for the year ending December 31, 2005, audited
by Xxxxxxxx and Company Certified Public Accountants, P.C. (the "New
Audit Financial Statements"),
prepared in accordance with generally accepted accounting principles,
consistently applied, during each year involved (except as may be otherwise
indicated in such financial statements or the notes thereto) and fairly
presenting in all material respects the financial position of the Company as
of
the dates thereof and the results of its operations and cash flows for each
such
year then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).”
(b) Additionally,
Section 2(d)(i) of the Make Good Agreement is hereby amended and replaced with
the following section:
“(i) Applied
Spectrum shall provide the Investor Agent and the Investors with the New Audited
Financial Statements on or before the Audited Financial Statement Delivery
Deadline. Concurrently with the release of the New Audited Financial Statements
to the Investor Agent and the Investors, (I) the Company shall provide to the
Investor Agent and the Investors a written certification as to the amount of
(u)
Revenue (as defined and calculated under US GAAP) of the Company and its
Subsidiaries for the period ended December 31, 2005, as set forth in the New
Audit Financial Statements (such Revenue for each such period, the "New
Audited Revenue"),
(v)
Cash Flow from Operations (as defined and calculated under US GAAP) of the
Company and its Subsidiaries for the period ended December 31, 2005, as set
forth in the New Audit Financial Statements (such Cash Flow from Operations
for
each such period, the "New
Audited Cash Flow from Operations"),
(w)
Revenue of the Company and its Subsidiaries for the period ended December 31,
2005 as set forth in the financial statements of the Company audited by Xxxx
& Company LLP delivered to the Investor Agent and the Investors on or prior
to the Closing Date (such Revenue for each such period, the "Old
Audited Revenue"),
(x)
Cash Flow from Operations of the Company and its Subsidiaries for the period
ended December 31, 2005 as set forth in the financial statements of the Company
audited by Xxxx & Company LLP delivered to the Investor Agent and the
Investors on or prior to the Closing Date (such Cash Flow from Operations for
each such period, the "Old
Audited Cash Flow from Operations"),
(y)
whether (A) the New Audited Revenue is 10% less than the Old Audited Revenue
for
such corresponding period (the "New
Audited Revenue Threshold")
or (B)
the New Audited Cash Flow from Operations is 10% less than the Old Audited
Cash
Flow from Operations for such corresponding period (the "New
Audited Cash Flow from Operations Threshold")
(collectively, the "New
Financial Statement Thresholds")
and
(z) whether the New Financial Statement Thresholds have been met and (II) the
Company shall make such New Financial Statements and certification publicly
available (as part of an Annual Report on Form 10-KSB or on a Current Report
on
Form 8-K, or otherwise).”
(c) The
parties further wish to include shares of Common Stock issued and issuable
to
certain Buyers pursuant to the Investment Agreement, not including any such
shares issued pursuant to warrants granted under the Investment Agreement,
in
determining the Buyers’ respective pro rata portions (referred to as “Pro Rata
Basis”) of the Escrow Shares pursuant to the terms of the Make Good Agreement.
5
Accordingly,
Section 2(c)(i) is hereby amended and replaced with the following
section:
“(i) Investors
holding at least 100 shares of Common Stock as of April 10, 2008 (the
"Eligible
Investors")
shall
be entitled to receive allocations of the Released Escrow Shares on a Pro Rata
Basis. For the purpose of this Agreement, "Pro
Rata Basis"
means
such portion of the Released Escrow Shares equal to the product of (i) the
number of Released Escrow Shares (as calculated in accordance with Section
2(b)
above) and (ii) the quotient of (x) the number of shares of Common Stock
acquired by such Eligible Investor in the Offering or
by
certain Investors, pursuant to the Investment Agreement between the Company
and
such Investors dated April __, 2007 (the “Investment
Agreement”)
and (y)
the
sum of (1) the
number of shares of Common Stock acquired by all Investors in the Offering
and
(2) the
number of Common Shares issued and issuable to certain Investors in connection
with the Investment Agreement (other than Warrant Shares, as defined
therein).
Any
distribution of Released Escrow Shares hereunder shall also include a
distribution to such Investor of any dividends or other distributions in the
Escrow, which were issued or otherwise obtained or deposited with respect to
such Released Escrow Shares distributed to such Investor hereunder.
Additionally,
Section 2(d)(ii) is hereby amended and replaced with the following
section:
“(ii) If
either
the New Audited Revenue Threshold or the New Audited Cash Flow from Operations
Threshold has not
been
met as determined in accordance with Section 2(d)(i) above, then Applied
Spectrum and the Investor Agent shall promptly provide a joint written
instruction to the Escrow Agent (the "New
Financial Statement Investor Joint Instructions")
to
deliver as promptly as practicable (such date, the "New
Financial Statement Release Date")
to
each Investor such number of Escrow Shares equal to the product of (x) the
New
Financial Statement Escrow Shares (as defined below) and (y) the quotient of
(A)
the number of shares of Common Stock acquired by such Investor in the Offering
or
by
certain Investors pursuant to the Investment Agreement
and (B)
the
sum of (1) the
number of shares of Common Stock acquired by all Investors in the
Offering
and
(2) the
number of Common Shares issued and issuable to certain Buyers in connection
with
the Investment Agreement (other than Warrant Shares, as defined
therein)..
For
purposes of this Agreement, "New
Financial Statement Escrow Shares")
means
such number of Escrow Shares equal to the product of (x) one million and (y)
the
greater of the number of percentage points in excess of 10% in which (A) the
Old
Audited Revenues exceeds the New Audited Revenues and (B) the Old Audited Cash
Flow from Operations exceeds the New Cash Flow From Operations; provided, that
such number of New Financial Statement Escrow Shares shall be capped at the
total number of Escrow Shares deposited with the Escrow Agent in accordance
with
Section 1(a).
5. Conflict.
When the
terms and provisions contained in the Transaction Documents in any way conflict
with the terms and provisions contained in this Agreement, the terms and
provisions herein contained shall prevail.
6. Except
as
amended and modified by this Agreement, all of the terms, representations,
warranties, covenants, indemnifications, agreements and all other provisions
of
the Transaction Documents shall continue to remain in full force and
effect.
6
7. Capitalized
terms and phrases used in this Agreement without definition shall have the
respective meanings set forth in the Securities Purchase Agreement, unless
otherwise specified.
8. Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
9. Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
10. Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
11. Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
12. Effectiveness
Upon Majority Approval.
This
Agreement will become effective at the time that it is joined into by the
Company and the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable under the Securities Purchase
Agreement, and the amendments and modifications made hereunder shall be binding
on all Buyers and holders of Securities as applicable.
[Signature
Page Follows]
7
IN
WITNESS WHEREOF,
each
Buyer, Ever Leader and the Company have caused their respective signature page
to this Modification and Amendment Agreement to be duly executed as of the
date
first written above.
|
|
COMPANY: | |
|
XXXXX PHARMACEUTICAL, INC.
|
||
|
|
By:
|
|
|
Name:
Xxxxxx Xxx
Title:
President
|
||
|
|
||
|
|
EVER
LEADER:
|
|
|
EVER
LEADER HOLDINGS LIMITED
|
||
|
|
By:
|
|
|
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
|
||
8
IN
WITNESS WHEREOF,
each
Buyer, Ever Leader, and the Company have caused their respective signature
page
to this Modification and Amendment Agreement to be duly executed as of the
date
first written above.
|
|
BUYERS:
|
|
|
|
|
|
|
|
||
|
|
Print
Name of Investor(s)
|
|
|
|
|
|
|
|
By
|
|
|
Name:
|
||
|
|
|
|
9
