EXHIBIT 4.1
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement") is made as of April 23,
2004 (the "Closing Date") by and between Ceptor Corporation, a Delaware
corporation (the "Company"), and the persons or entities listed as investors and
set forth on Schedule 1, annexed hereto (the "Holders"), and Xechem
International, Inc., a Delaware corporation (the "Parent").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Holders, and the
Holders wish to purchase from the Company $1,100,000.00 of the Company's eight
(8%) percent convertible Notes (the "Note") due October 22, 2004 (the "Maturity
Date") having the rights and privileges set forth in the Form of Note of the
Company substantially as set forth on Exhibit A annexed hereto; and
WHEREAS, as additional consideration for the purchase of the Note, Company
has agreed to issue to the Holders 366,667 shares (the "Investor Shares") of the
Common Stock, $0.00001 per share, par value, of the Company (the "Common
Stock"), which Investor Shares shall be distributed by the Selling Agent (as
hereinafter defined) to the Note Holders pro-rata in accordance with the value
of Notes purchased hereunder by each Note Holder; and
WHEREAS, in order to induce the Holders to purchase the Company's Note,
Parent agrees that in the event the Company defaults in the repayment of any
amount due and owing under the Note on the due date thereof, Holders may put the
Note to Parent for conversion in the total amount of such unpaid principal plus
interest outstanding on the Maturity Date, such put to be payable solely in
shares of the common stock, par value $0.00001 per share, of Parent (the
"Conversion Securities"), upon notice to Parent at a price per share equal to
the Conversion Price (as hereinafter defined).
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. The Funds. On the Closing Date, the Holders shall deliver to the
Company $1,100,000.00 in cash (the "Funds") by delivery of a certified check
payable to the Company or by wire transfer to the account of the Company.
Viewtrade Financial (the "Selling Agent") has served as selling agent with
respect to the offer and sale of the Notes. As compensation for the Selling
Agent's services hereunder, the Company shall pay to Selling Agent in cash a
selling commission ("Commission") upon each Closing, in an amount equal to ten
percent (10%) of the aggregate sales price of the Notes sold through the efforts
of Selling Agent or its authorized agent. The Company shall also pay the Selling
Agent at each Closing a non-accountable expense allowance of two (2%) percent of
the aggregate sales price of each Note sold by Company through the efforts of
Selling Agent or its authorized agent.
2. The Note. On the Closing Date, the Company shall execute and deliver to
the Holders a convertible promissory note, the form of which is annexed hereto
as Exhibit A (the "Note").
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Holders as follows:
(a) Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has
the requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted and as
proposed to be conducted.
(b) No Conflict. This Agreement does not: (i) conflict with any
provision of the Company's Certificate of Incorporation or Bylaws, both as
amended to date; or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company is a party (collectively,
"Company Agreements"); or (iii) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound
or affected.
(c) Authorization. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by all requisite
corporate action, and constitutes the valid and binding obligations of the
Company enforceable in accordance with its terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement
of creditors' rights.
(d) Capitalization. The authorized capital stock of the Company
consists of 1,000 shares of Common Stock held by Parent. Immediately
following the date hereof, Company shall amend its Certificate of
Incorporation and split its stock following which the Company shall have
authorized for issuance 50,000,000 shares of capital consisting of
40,000,000 of Common Stock, par value $0.00001 per share, and 10,000,000
Preferred Stock, of which 3,000,000 shall be issued and outstanding shares
of common stock held by Parent and 2,333,333 shall be shares of common
subject to a fully vested option in favor of the management group of the
Company to be exercised following the date hereof, with such restrictions,
and subject to such conditions on exercise and/or forfeiture or transfer,
as are determined by the Board of Directors of the Company. In addition,
the Company will following the date hereof, adopt an incentive plan for
employees and others under which there will be reserved for issuance
fifteen (15%) percent of the issued and outstanding fully-diluted common
stock of the Company to be issued from time to time. Company agrees not to
grant any options to Xxxxxxx Xxxxxxx from the aforesaid incentive plan for
a period of twelve (12) months from the date hereof.
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(e) Common Shares. The Investor Shares are, and the Conversion
Securities, when issued, will be, validly issued, fully-paid and
non-assessable, free and clear of any and all liens, claims and
encumbrances. The Conversion Securities will be reserved for issuance by
Parent, based upon a conversion price of $0.07 per share.
(f) No Undisclosed Liabilities. Except for a note due December 31,
2005 payable to Xxxxx Xxxxxxxx, Trustee in the original face amount of
$250,000 and a note due December 31, 2005 payable to Xxxxxx Xxxxxxx,
Trustee, in the original face amount of $125,000 (the current outstanding
balances of which are set forth in the books and records of the Company),
the Company has no material liabilities or obligations not disclosed to
Holders, other than those liabilities incurred in the ordinary course of
the Company's business since December 31, 2003.
(g) Brokers. Neither Holders, Company nor Parent has taken any
action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by the Company, Parent or
Holders relating to this Agreement or the transactions contemplated
hereby.
4. Representations and Warranties of the Holders. The Holders represent
and warrants to the Company as of the Closing Date and upon conversion of the
Note as follows (the Note and the securities issuable upon conversion of the
Note are collectively referred to as the "Securities"):
(a) All action on the part of the Holders for the authorization,
execution, delivery and performance by the Holders of this Agreement has
been taken, and this Agreement constitutes a valid and binding obligation
of the Holders, enforceable in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, or similar
laws relating to or affecting the enforcement of creditors' rights.
(b) The Holders are acquiring the Securities for investment for
their own account and not with a view to, or for resale in connection
with, any distribution. The Holders understand that the Securities to be
acquired have not been registered under the Securities Act of 1933, as
amended (the "Act"), by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things,
the bona fide nature of the investment intent as expressed herein.
(c) The Holders represent that except as otherwise disclosed to the
Company, in writing, prior to the Holders' execution of this Agreement,
the Holders are each an Accredited Investor, as defined in Rule 501
promulgated under the Act. The Holders also represent the Holders have not
been organized for the purpose of acquiring the Securities.
(d) The Holders are experienced in evaluating and investing in
securities of companies similarly situated to the Company, and acknowledge
that they are able to fend for themselves, can bear the economic risk of
an investment in the Securities, and have such knowledge and experience in
financial or business matters that they are capable of evaluating the
merits and risks of the investment in the Securities.
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(e) The Holders believe they have received all the information they
consider necessary or appropriate for deciding whether to purchase the
Securities. The Holders further represent that such Holders have had an
opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities and
the business, properties, prospects and financial condition of the
Company.
(f) The Holders acknowledge that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an
exemption from such registration is available. The Holders are aware of
the provisions of Rule 144 promulgated under the Act which permits limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, unless the Holders are an
affiliate of the Company, among other things, the availability of certain
current public information about the Company, the resale occurring not
less than one year after a party has purchased and paid for the securities
to be sold, the sale being through a "broker's transaction" or in
transactions directly with a "market maker," and the number of shares
being sold during any three-month period not exceeding specified
limitations.
(g) The Holders hereby represent that the Holders have satisfied
themselves as to the full observance of the laws of the Holders'
jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including: (i) the legal
requirements within the Holders' jurisdiction for the purchase of the
Securities; (ii) any foreign exchange restrictions applicable to such
purchase; (iii) any governmental or other consents that may need to be
obtained; and (iv) the income tax and other tax consequences, if any, that
may be relevant to the purchase, holding, redemption, conversion, sale, or
transfer of the Securities. The Holders' subscription and payment for, and
the Holders' continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws of the Holders'
jurisdiction. The Holders understand and agree that it (and not the
Company) shall be responsible for its own tax liability that may arise as
a result of this investment or the transactions contemplated by this
Agreement
5. Legends. All certificates representing any shares of the capital stock
of the Parent issuable upon conversion of the Note shall have endorsed thereon a
legend substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."
6. Filing of Registration Statement. Upon demand by Holders given
following issuance by Parent of any amount in excess of $250,000 of Conversion
Securities and declaration of a default with respect to the Note and failure to
cure the same within forty-eight hours, Parent shall prepare, and, as soon as
practicable (a) file a registration statement with respect to the resale by
Holders (or any transferee or assignee from Holders) of the Conversion
Securities and shall include therein such number of shares of Conversion
Securities as the Notes shall be convertible at the time of such registration
(the "Registrable Securities") (the "Registration Statement"). Parent agrees
that it shall file within thirty (30) days of demand and declaration of a
default with respect to the Note and failure to cure the same within forty-eight
hours, and shall use its best efforts to cause to be declared effective a
Registration Statement for all Registrable Securities by SEC no later than
one-hundred and eighty (180) days from filing date. In the event either of these
periods shall not be met, Parent shall pay a cash penalty of two (2%) percent
per month for each month that the Registration shall not be declared effective,
or filed. In the event the Registration Statement has not been declared
effective or filed within the periods set forth above, the Note Holders shall
have the option at any time to force repayment of all of the outstanding
principal and/or interest under the Note at a sum equal to 100% of the
outstanding principal and/or interest balance then due.
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(a) Registration Procedures. The Registration Statement shall be
filed pursuant to the procedures set forth below:
(i) The Parent shall use its best efforts to cause the
Registration Statement to be filed and to become effective as soon
as possible after it is filed, and remain continuously effective,
until the earlier of (i) all of the Registrable Securities covered
by such Registration Statement have been sold in accordance with the
intended methods of disposition of the sellers set forth in such
Registration Statement and (ii) two hundred seventy (270) days after
such Registration Statement has been declared effective provided,
that if for any portion of such period the Registration Statement is
not effective, then such requirement for maintaining the
effectiveness of the Registration Statement shall be extended by the
length of such interruption(s), and the Parent shall prepare and
file with the SEC such amendments to such Registration Statement and
supplements to the prospectus contained therein as may be necessary
to keep such Registration Statement effective and such Registration
Statement and prospectus accurate and complete during such period.
In the event the Registration Statement has not been declared
effective or filed within the periods set forth above, Parent shall
have the option at any time to repay all of the outstanding
principal and or interest under the Note.
(ii) The Parent shall notify the sellers participating in such
registration, promptly after it shall receive notice thereof, of the
date and time when such Registration Statement and each
post-effective amendment thereto has become effective or a
supplement to any prospectus forming a part of such Registration
Statement has been filed;
(iii) The Parent shall furnish to the sellers participating in
such registration such reasonable number of copies of the
Registration Statement and prospectus and such other documents as
the sellers may reasonably request in order to facilitate the public
offering of the Registrable Securities;
(iv) The Parent shall use its best efforts to register or
qualify the Registrable Securities covered by such Registration
Statement under such state securities or blue sky laws of such
jurisdictions as the sellers participating in such registration may
reasonably request, provided, however, that the Parent shall not be
obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is
not so qualified or to subject itself to taxation in connection with
any such registration or qualification of such securities;
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(v) The Parent shall notify the sellers participating in such
registration promptly of any request by the SEC for the amending or
supplementing of such Registration Statement or prospectus or for
additional information;
(vi) The Parent shall prepare and file with the SEC, promptly
upon the request of any seller participating in such registration,
the Registration Statement and any amendments or supplements to such
Registration Statement or prospectus which, in the reasonable
opinion of counsel for the sellers is required under the Securities
Act or the rules and regulations thereunder in connection with the
distribution of the Registrable Securities by the sellers or to
otherwise comply with the requirements of the Securities Act and
such rules and regulations;
(vii) The Parent shall prepare and promptly file with the SEC
and promptly notify the sellers participating in such registration
of the filing of such amendments or supplements to such Registration
Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating
to the Registrable Securities is required to be delivered under the
Securities Act, any event has occurred as the result of which any
such prospectus or any other prospectus then in effect may include
an 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. The Parent shall make available
to the sellers and to the underwriters any such supplement or
amendment. The sellers participating in such registration agree
that, upon receipt of any notice from the Parent of the occurrence
of any event of the kind described in this Section 6(a)(vii), the
sellers will forthwith discontinue the offer and sale of Registrable
Securities pursuant to the Registration Statement covering such
Registrable Securities until receipt by the sellers and underwriters
of the copies of such supplemented or amended prospectus and, if so
directed by the Parent, the sellers will deliver to the Parent all
copies, other than permanent file copies then in the sellers'
possession, of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event the
Parent shall give such notice, the Parent shall extend the period
during which such Registration Statement shall be maintained
effective as provided in Section 6.2(a) hereof by the number of days
during the period from and including the date of the giving of such
notice to the date when the Company shall make available to the
sellers such supplemented or amended prospectus;
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(viii) The Parent shall advise the sellers participating in
such registration, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such Registration Statement or the
initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be
issued;
(ix) The Parent shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make
generally available to the Parent's security Holders' earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the end of
any twelve (12) month period (or ninety (90) days, if such a period
is a fiscal year) beginning with the first month of the Parent's
first fiscal quarter commencing after the effective date of the
Registration Statement;
(x) The Parent shall not file any amendment or supplement to
the Registration Statement or prospectus to which a majority in
interest of the sellers participating in such registration has
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least three business days
prior to the filing thereof unless the Parent shall have obtained an
opinion of counsel that such amendment is required under the
Securities Act or the rules or regulations adopted thereunder in
connection with the distribution of Registrable Securities by the
sellers.
(xi) The Parent may, at its option, register additional shares
of Parent common stock in the Registration Statement for sale by
other Holders of its Common Stock or include the Registrable
Securities in a registration in which shares of its Common Stock are
sold to an underwriter for reoffering to the public (an
"Underwritten Offering").
(b) Expenses of Registration.
(i) All expenses of the Parent incident to the Parent's
performance of or compliance with the provisions of this Section 6
shall be borne by the Parent including without limitation:
(ii) All registration and filing fees;
(iii) Fees and expenses of compliance with all securities or
blue sky laws (including fees and disbursements of counsel for the
Parent in connection with blue sky qualifications of the Registrable
Securities; provided, however, that the Parent shall not be required
to consent to general service of process in any such state);
(iv) Fees and disbursements of counsel for the Parent, and
their independent auditors.
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Nothing in this Section 6 shall be deemed to require the Parent to pay or
bear any expenses of any seller's attorneys or accountants or any other personal
expenses or any underwriting discounts relating to the Registrable Securities,
selling commissions or similar fees attributable pro rata to the Registrable
Securities if such registration results in an Underwritten Offering of all or
any portion of the Registrable Securities.
(c) Sellers' Agreements.
(i) The sellers participating in such registration shall
promptly provide all information concerning such sellers and/or the
Seller required to be included in the Registration Statement which
is requested by the Parent.
(ii) In the event any of the Registrable Securities are
included in an underwritten offering, each seller participating in
such registration agrees to enter into with the managing underwriter
of such offering, and perform its obligations under: (i) an
underwriting agreement, in usual and customary form; and (ii) a
lock-up agreement similar in form and substance to lock-up
agreements executed by other executive officers and directors of the
Parent.
Notwithstanding anything to the contrary in Section 6(b), at any time
after the Registration Statement has been declared effective, the Parent may
delay the disclosure of material, non-public information concerning the Parent
the disclosure of which at the time is not, in the good faith opinion of the
Board of Directors of the Parent and its counsel, in the best interest of the
Parent and, in the opinion of counsel to the Parent, otherwise required (a
"Grace Period"); provided, that the Parent shall promptly (i) notify the sellers
participating in such registration in writing of the existence of material,
non-public information giving rise to a Grace Period and the date on which the
Grace Period will begin, and (ii) notify the sellers in writing of the date on
which the Grace Period ends; and, provided further, that during any consecutive
three hundred and sixty-five (365) day period, there shall be only three Grace
Periods, any such Grace Period not to exceed seventy-five (75) consecutive days
in the aggregate and all Grace Periods combined not to exceed one-hundred and
eighty (180) days in the aggregate (an "Allowable Grace Period"). For purposes
of determining the length of a Grace Period above, the Grace Period shall begin
on and include the date the sellers receive the notice referred to in clause (i)
above and shall end on and include the date the sellers receive the notice
referred to in clause (ii) above. Upon expiration of the Allowable Grace Period,
the Parent shall again be bound by the first sentence of Section 6.2(g) with
respect to the information giving rise thereto.
(d) Exception to Filing of Registration Statement.
Notwithstanding the provisions of this Section 6, the Parent shall
have no further obligation to file any Registration Statement
hereunder or maintain the effectiveness of any Registration
Statement filed with respect to any seller in the event all of the
Registrable Securities owned by such Seller: (i) have been
distributed to the public pursuant to Rule 144 (or any similar
provisions then in force) under the Securities Act: or (ii) are
otherwise freely transferable without restriction under the
Securities Act.
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7. General Provisions.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS
BY THE LAWS OF THE STATE OF DELAWARE AS SUCH LAWS ARE APPLIED TO
AGREEMENTS BETWEEN DELAWARE RESIDENTS ENTERED INTO AND TO BE PERFORMED
ENTIRELY WITHIN DELAWARE.
(b) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing by mail, facsimile or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
If to the Company:
Ceptor Corporation
000 Xxxxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 (fax)
Att: Xxxxxxx Xxxxxxx, Chief Executive Officer,
With a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (fax)
Att: Xxxxxx X. Xxxxxx, Esq.
If to the Parent:
Xechem International, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx X, Xxxxx 000
Xxx Xxxxxxxxx, Xxx Xxxxxx 00000-0000
Att: Xxxxxx X. Xxxxxx, Chief Executive Officer
000-000-0000 (fax)
With a copy to:
Xxxxxxx & Xxxxxxxx Ltd.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Att: Xxxxx Xxxxxxxxx, Esq.
000-000-0000 (fax)
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If to the Holders :
To such names and addresses as shall be set forth on
Exhibit A hereto With a copy to:
Blank Rome LLP
Xxxxx X. Xxxxxxx, Esq.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Att: Xxxxx X. Xxxxxxx, Esq.
000-000-0000 (fax)
(c) Entire Agreement. Except as otherwise provided herein,
this Agreement, the Note and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
(d) Amendment. This Agreement may only be amended, waived,
discharged or terminated by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
(e) Successors and Assigns. Except as otherwise expressly
provided in this Agreement or the Note, the provisions of this
Agreement and the Note shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators
of the parties hereto.
(f) Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
(g) Titles and Subtitles. The titles of the Sections of this
Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(h) Expenses. The Company and the Holders shall each bear
their own expenses incurred with respect to this transaction.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of
which together shall be deemed to constitute one instrument.
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IN WITNESS WHEREOF, the parties have caused this agreement to be executed
by its officers thereunto duly authorized.
"Company"
CEPTOR CORPORATION.
By:
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Chief Executive Officer
XECHEM INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
"Holders"
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
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SCHEDULE 1
INVESTORS
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EXHIBIT A
FORM OF PROMISSORY NOTE
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