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DEBENTURE PURCHASE AGREEMENT,
between
Aphton Corporation
and
Aventis Pharmaceuticals Inc.,
dated as of December 19, 2002,
regarding
Series A Convertible Debenture
Due December 19, 2007
of
Aphton Corporation
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DEBENTURE PURCHASE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement"), dated as of December 19, 2002, by
between Aphton Corporation, a Delaware corporation (the "Company"), and Aventis
Pharmaceuticals Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise.
"Agreement" has the meaning ascribed to it in the forepart of this
Agreement.
"Balance Sheet" has the meaning ascribed to it in Section 3.9.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New Jersey, the State of New York or the
State of Florida are authorized or obligated to close.
"Closing" means the closing of the transactions contemplated by
Section 2.2.
"Closing Date" means December 19, 2002 or such other date on which the
Closing actually occurs.
"Common Stock" means Common Stock, par value $.001 per share, of the
Company.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Securities" means the Debenture and the Common Stock obtained
upon conversion of the Debenture.
"Confidential Information" shall mean, with respect to a party, any
financial, technical, business, marketing and other non-public information
concerning such party's business, which information is held by such party in
confidence and identified in writing or orally to the receiving party as
confidential or is of the type customarily understood to be confidential.
"Contract" means any agreement (including licenses with
non-governmental Persons), lease, evidence of Indebtedness, mortgage, indenture,
security agreement or other instrument or contract.
"Debenture" has the meaning ascribed to it in Section 2.1(b).
"Disposition" has the meaning ascribed to it in Section 4.5.
"Encumbrance" means any security interest, lien, pledge, claim,
charge, escrow, encumbrance, option, right of first offer, right of first
refusal, preemptive right, mortgage, indenture, security agreement or other
similar agreement, arrangement, contract, commitment, understanding or
obligation, whether or not relating in any way to credit or the borrowing of
money.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Exchange Reports" has the meaning ascribed to it in Section 3.8(a).
"Financial Statements" has the meaning ascribed to it in Section
3.8(b).
"GAAP" has the meaning ascribed to it in Section 3.8(b).
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Indebtedness" means (a) all indebtedness of the Company, including
the principal of, and premium, if any, and interest (including interest accruing
after the filing of a petition initiating any proceeding under any state,
federal or foreign bankruptcy laws, whether or not allowable as a claim in such
proceeding) on, all indebtedness, whether outstanding currently or hereafter
created (i) for borrowed money, (ii) for money borrowed by others and
guaranteed, directly or indirectly, by the Company, (iii) for money borrowed by
others for which the Company provides security, (iv) constituting purchase money
indebtedness the payment of which the Company is directly or contingently
liable, (v) constituting reimbursement obligations under bank letters of credit,
(vi) under interest rate and currency swaps, caps, floors, collars or similar
agreements or arrangements intended to protect the Company against fluctuations
in interest or currency exchange rates, (vii) under any lease of any real or
personal property, which obligations are capitalized on the Company's books in
accordance with generally accepted accounting principles, or (viii) under any
other arrangement under which obligations are recorded as indebtedness on the
Company's books in accordance with generally accepted accounting principles, and
(b) any modifications, refundings, deferrals, renewals or extensions of any such
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Indebtedness, or securities, note or other evidences of indebtedness issued in
exchange for such Indebtedness.
"Law" or "Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Losses" has the meaning ascribed to it in Section 5.5(a).
"Material Adverse Effect" means a material adverse effect on the
business, results of operations, prospects or financial position of a Person and
such Person's Subsidiaries, taken as a whole.
"Other Registrable Securities" has the meaning ascribed to it in
Section 6.1(d).
"Permitted Encumbrances" has the meaning ascribed to it in Section
3.11.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchaser's Affiliates" has the meaning ascribed to it in Section
4.3(h).
"Purchaser's Counsel" has the meaning ascribed to it in Section 6.3.
"Registrable Securities" means shares of Common Stock issued or
issuable to the Purchaser upon conversion of the Debenture.
"Registration Demand" has the meaning ascribed to it in Section
6.1(a).
"Representatives" has the meaning ascribed to it in Section 5.6(a).
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning ascribed to it in Section 3.8(a).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
"Subsidiary" means, as applied to any Person, any Person in which such
Person, directly or indirectly through Subsidiaries or otherwise, beneficially
owns more than 50% of either the equity interest in, or the voting control of,
such Person, whether or not existing on the date hereof.
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"Transfer" means, directly or indirectly, any sale, transfer,
assignment, hypothecation, pledge or other disposition of any Company Securities
or any interests therein.
"Transition Report" has the meaning ascribed to it in Section 3.8(a).
ARTICLE II
SALE AND PURCHASE OF DEBENTURE; CLOSING
2.1 Sale and Purchase of Debenture.
(a) Subject to the terms and conditions hereof and in reliance upon
the representations and warranties of the Purchaser and the Company contained
herein or made pursuant hereto, the Company agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Company, on the Closing Date, the
Debenture in the aggregate principal amount of $3,000,000.00. The aggregate
principal purchase price to be paid to the Company by the Purchaser for the
Debenture is $3,000,000.00.
(b) As used herein, "Debenture" means the Company's Series A
Convertible Debenture Due December 19, 2007 issued pursuant to this Agreement,
together with all debentures issued in exchange therefor or replacement thereof.
The Debenture will be substantially in the form of the Debenture set forth as
Exhibit A hereto. The Debenture will be convertible into shares of Common Stock
at the conversion price and in the manner determined under the terms of the
Debenture.
2.2 The Closing.
(a) Subject to the terms and conditions hereof, the closing (the
"Closing") of the purchase and sale of the Debenture to be purchased by the
Purchaser will take place at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 101
Park Avenue, New York, New York, or at such other place as the Company and the
Purchaser shall mutually agree, at 10:00 A.M., New York City time, on the
Closing Date.
(b) Subject to the terms and conditions hereof, on the Closing Date
(i) the Company will deliver to the Purchaser (A) the Debenture payable to the
Purchaser, and dated the Closing Date, in the aggregate principal amount of
$3,000,000.00, (B) the opinion of White & Case LLP, counsel to the Company,
dated the Closing Date, addressed to the Purchaser substantially in the form
attached hereto as Exhibit B, and (C) a certificate, dated the Closing Date and
executed by the secretary or assistant secretary of the Company, as to the
certificate of incorporation and bylaws of the Company, resolutions authorizing
the transactions contemplated hereby and the incumbency of any officer executing
documents on behalf of the Company; and (ii) the Purchaser will deliver to the
Company, by wire transfer to an account designated by the Company, an amount
equal to the purchase price for the Debenture in federal or other immediately
available funds.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in each state or jurisdiction where
the nature of its business or the ownership of property make such qualification
necessary, except where the failure of the Company to be so qualified would not
have a Material Adverse Effect on the Company.
3.2 Authority. The Company has full power and authority to execute and
deliver this Agreement and the Debenture, to perform its obligations hereunder
and under the Debenture and to consummate the transactions contemplated hereby
and thereby (including, for the sake of clarity, the issuance of the Common
Stock upon conversion of the Debenture) subject to the necessary shareholder
approvals as required by the Nasdaq National Market or such other domestic
securities exchange or quotation system upon which shares of the Common Stock
may be listed. The execution, delivery and performance by the Company of this
Agreement and the Debenture and the consummation by it of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action by its Board of Directors, and no other action is necessary to
authorize the execution, delivery and performance of this Agreement and the
Debenture and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the Debenture have been, duly and validly
executed and delivered by the Company and this Agreement and the Debenture
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
3.3 No Conflicts. The execution and delivery by the Company of this
Agreement and the Debenture, the performance by the Company of its obligations
under this Agreement and the Debenture and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with, or
constitute a default under, or result in the acceleration or termination of, any
Contract to which the Company or any of its Subsidiaries is a party, the result
of which could have a Material Adverse Effect on the Company or impair or
restrict its power to perform its obligations hereunder or under the Debenture,
(ii) result in a violation of or default under the Company's Certificate of
Incorporation or Bylaws, or any order, judgment or decree of any court or
Governmental or Regulatory Authority having jurisdiction over the Company or any
of its assets or properties, the result of which could have a Material Adverse
Effect on the Company or impair or restrict its power to perform its obligations
hereunder and under the Debenture, or (iii) result in, or require, the creation
or imposition of any Encumbrance upon any of the assets or properties of the
Company or any of its Subsidiaries, the result of which could have a Material
Adverse Effect on the Company or impair or restrict its power to perform its
obligations hereunder and under the Debenture.
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3.4 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with the transactions contemplated by this Agreement
on the basis of any act or statement made or alleged to have been made by the
Company or any of its Affiliates.
3.5 Exemption from Registration. Assuming the accuracy on the date
hereof and on the Closing Date of the representations and warranties of the
Purchaser set forth in Section 4.3 below, the issuance and the sale of the
Debenture to the Purchaser hereunder are, and the issuance of the Common Stock
upon conversion of the Debenture will be, exempt from the registration
requirements of the Securities Act.
3.6 Litigation. There are no actions, suits, proceedings or
investigations pending, or to the knowledge of the Company, threatened, against
or affecting the Company or any of its Subsidiaries. The Company is not in
default with respect to any order, writ, injunction, judgment, decree or rule of
any Governmental or Regulatory Authority.
3.7 No Defaults. No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or the
Debenture or the performance by the Company of its obligations hereunder or
thereunder or the consummation of the transactions contemplated herein or
therein, constitute an Event of Default (as such term is defined in the
Debenture). Neither the Company nor any of its Subsidiaries is in default, and
no event has occurred and no condition exists which constitutes, or which with
the passage of time or the giving of notice or both would constitute, a default
in the payment of any material Indebtedness.
3.8 SEC Reports and Financial Statements.
(a) The Company has filed all forms, reports and documents required to
be filed by it pursuant to Section 13 or Section 15(d) of the Exchange Act
within the last 12 months (the "Exchange Reports") on a timely basis or has
received a valid extension of time for filing. The Company has made available to
the Purchaser the Company's Report on Form 10-K for the eleven month period
ended December 31, 2001, and all amendments thereto (the "Transition Report",
and together with the Exchange Reports, the "SEC Reports"). The SEC Reports
complied as to form in all material respects with the rules and regulations of
the SEC under the Exchange Act on the date of filing and as of such date (or if
amended or superseded by a filing prior to the date of this Agreement, on the
date of such filing) did not contain any untrue statement of a 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.
(b) Each of the financial statements (including, in each case, any
related notes thereto) (the "Financial Statements") contained in the SEC Reports
(i) was prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved (except
as may be expressly described in the notes thereto) and (ii) fairly presents in
all material respects the financial position of the Company as at the respective
dates thereof and the results of its operations and cash flows for the periods
indicated.
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3.9 Events Subsequent to the Date of the Last Financial Statement.
Since the date of the last audited Financial Statements, except as contemplated
by this Agreement or as reflected on the balance sheet contained in the
Transition Report (the "Balance Sheet"), neither the Company nor any of its
Subsidiaries has (i) sold, assigned, transferred or granted any license with
respect to any patent, trademark, trade name, service xxxx, copyright, trade
secret or other intangible asset licensed to or owned by the Company or any of
its Subsidiaries, (ii) suffered any loss of property that had a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole or waived any right
of substantial value to the Company or any of its Subsidiaries, or (iii) entered
into any commitment, obligation, understanding or other arrangement, contingent
or otherwise, to effect, directly or indirectly, any of the foregoing. Except as
set forth in the Company's Form 10-Q for the Quarter ended September 30, 2002,
since December 31, 2001, no events have occurred which individually or
collectively have had or could reasonably be expected to have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole.
3.10 Absence of Undisclosed Liabilities. Since December 31, 2001,
neither the Company nor any of its Subsidiaries has had any loss contingency (as
defined in Statement of Financial Accounting Standards No. 5), whether matured
or unmatured, fixed or contingent, that has had or could reasonably by expected
to have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole.
3.11 Title to Assets, Properties and Rights. Each of the Company and
its Subsidiaries has good and marketable title (or a valid leasehold interest)
to all of the assets (whether real, personal or mixed) necessary for the conduct
of its business substantially as now conducted, free and clear of all
Encumbrances, except for (i) liens for current taxes, assessments and other
governmental charges not yet due and payable for which reserves have been
established as required by GAAP; (ii) easements, covenants, conditions and
restrictions (whether or not of record) as to which no material violation or
encroachment exists or, if such violation or encroachment exists, as to which
the cure of such violation or encroachment would not materially interfere with
the conduct of the Company's business; (iii) any zoning or other governmentally
established restrictions or encumbrances; (iv) workers or unemployment
compensation liens arising in the ordinary course of business; or (v)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts which are not delinquent. (The
matters set forth in the foregoing clauses (i) through (v) being referred to
herein as the "Permitted Encumbrances"). Such assets are in such operating
condition and repair as is suitable for the uses for which they are used in the
Company's or its Subsidiaries' business, as applicable, are not subject to any
condition which materially interferes with the use thereof by the Company or any
of its Subsidiaries, as applicable, and constitute all assets, properties,
interests in properties and rights necessary to permit the Company and its
Subsidiaries to carry on business after the Closing substantially as conducted
by them prior thereto.
3.12 Patents, Trademarks, Copyrights and Licenses. Each of the Company
and its Subsidiaries owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses therefor necessary for the conduct
of its business substantially as now conducted. Neither the Company nor and of
its Subsidiaries has interfered with, infringed upon or misappropriated any
intellectual property rights of any Person or committed any acts of unfair
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competition with respect to the operation of its business, and has not received
from any Person any notice, charge, complaint, claim or assertion thereof, and
no such claim is impliedly threatened by an offer to license from another Person
under a claim of use. No activity, service or procedure currently conducted by
the Company or any of its Subsidiaries violates in any material respect any
Contract of the Company or any of its Subsidiaries, on the one hand, and any
third Person, on the other hand, relating to any intellectual property rights.
3.13 Governmental Consents. Each of the Company and its Subsidiaries
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business substantially as now
conducted and to own or lease and operate the assets and properties necessary
for the conduct by the Company of its business substantially as now conducted
except for such failures that could not reasonably be expected to have either
individually or in the aggregate a Material Adverse Effect on the Company and
its Subsidiaries taken as a whole.
3.14 No Consent or Approval Required. No consent, approval or
authorization of, or declaration to or filing with, any Person is required by
the Company for the valid authorization, execution and delivery by the Company
of this Agreement or the Debenture or its consummation of the transactions
contemplated hereby and thereby other than filings, if any, pursuant to
applicable state securities laws.
3.15 Compliance with Laws. Except as set forth in Section 3.15 of the
Disclosure Schedule, each of the Company and its Subsidiaries has duly complied
with, and the assets and properties, business operations and leaseholds used in
connection with its business are in compliance with, the provisions of all laws
applicable to the Company and its Subsidiaries, their respective assets and
properties or their respective conduct of businesses and there have been no
citations, notices or orders of noncompliance issued to the Company, under any
such law, rule or regulation, except for such noncompliance which could not
reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
3.16 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, of which 24,201,639 shares are
outstanding on the date hereof. All of the outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
non-assessable. The Company is not a party to any agreement granting
registration rights to any person with respect to any shares of its capital
stock. The Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of its capital stock.
3.17 Subsidiaries. The Company's only Subsidiary is Aphton (BVI)
Corporation. Aphton (BVI) Corporation is a corporation duly organized, validly
existing and in good standing under the Laws of the British Virgin Islands.
Aphton (BVI) Corporation is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each state or jurisdiction where
the nature of its business or the ownership of property make such
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qualification necessary, except where the failure of Aphton (BVI) Corporation to
be so qualified would not have a Material Adverse Effect on Aphton (BVI)
Corporation.
3.18 Labor Relations. The employees of the Company are not subject to
any collective bargaining agreement. There are no material grievances, disputes
or controversies with any union or any other organization of the Company's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as
follows:
4.1 Organization; Power and Authority. It is duly organized, validly
existing and in good standing under the laws of the state of Delaware, and has
full power and authority to execute and deliver this Agreement and to perform
its obligations hereunder and under the Debenture and to consummate the
transactions contemplated hereby. The execution and delivery by the Purchaser of
this Agreement and the performance by the Purchaser of its obligations
hereunder, have been duly and validly authorized by the Purchaser. This
Agreement has been duly and validly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser enforceable
against it in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general principles of equity.
4.2 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby will not conflict with, or constitute a default under, or result in the
acceleration or termination of, any Contract to which the Purchaser is a party,
or result in a violation of or default under the Purchaser's organizational
documents or any order, judgment or decree of any court or Governmental or
Regulatory Authority having jurisdiction over the Purchaser or any of its
properties and, no consent, authorization or order of, or filing or registration
with, any Governmental or Regulatory Authority is required by the Purchaser for
the execution, delivery and performance of this Agreement.
4.3 Investor Representations.
(a) The Purchaser is an "accredited investor" within the meaning of
Rule 501(a) (1), (2), (3) or (7) under the Securities Act.
(b) The Purchaser understands that the Debenture and the Registrable
Securities have not been registered under the Securities Act and are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based upon the representations of the Purchaser contained herein.
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(c) The Purchaser knows of no public solicitation or advertisement of
an offer in connection with the proposed issuance and sale of the Debenture or
the Registrable Securities.
(d) The Purchaser is acquiring the Debenture and the Registrable
Securities, if any, for its own account for investment and not as a nominee and
not with a view to the distribution thereof. The Purchaser understands that it
must bear the economic risk of this investment indefinitely and that the Company
has no present intention of registering the Debenture or the Registrable
Securities. The Purchaser further understands that there is no assurance that
any exemption from the Securities Act will be available or, if available, that
such exemption will allow the Purchaser to dispose of or otherwise transfer any
or all of the Debenture or the Registrable Securities under the circumstances,
in the amounts or at the times the Purchaser might propose.
(e) By reason of its business or financial experience, or that of its
professional advisor, the Purchaser has the capacity to protect its own
interests in connection with the purchase of the Debenture and the Registrable
Securities hereunder and has the ability to bear the economic risk (including
the risk of total loss) of its investment.
(f) The Purchaser acknowledges that it is aware of Rule 144
promulgated under the Securities Act, which permits limited public resales of
securities acquired in a non-public offering, subject to the satisfaction of
certain conditions. The Purchaser understands that under Rule 144, except as
otherwise provided by section (k) of that Rule, the conditions include, among
other things: the availability of certain current public information about the
issuer, the resale occurring not less than one year after the party has
purchased and paid for the securities to be sold and limitations on the amount
of securities to be sold and the manner of sale. The Purchaser acknowledges and
understands that notwithstanding the Company's current reporting obligations
under the Exchange Act, the Company may not be satisfying the current public
information requirement of Rule 144 at the time it wishes to sell the Debenture
or the Registrable Securities received on conversion thereof, and that, in such
event, it may be precluded from selling such stock under such Rule, even if the
one year minimum holding period of such Rule has been satisfied.
(g) The Purchaser acknowledges that in the event all of the
requirements of Rule 144 are not met, registration under the Securities Act or
an exemption from registration will be required for any disposition of the
Debenture or the Registrable Securities. The Purchaser understands that although
Rule 144 is not exclusive, the SEC has expressed its opinion that persons
proposing to sell restricted securities received in a private offering other
than in a registered offering or pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales and that such persons and the brokers who participate
in the transactions do so at their own risk.
(h) All voting securities of the Company that the Purchaser, together
with its ultimate parent entity and all entities controlled by the same ultimate
parent as the Purchaser (such entities, including the Purchaser, hereinafter
collectively referred to as the "Purchaser's Affiliates") will hold, directly or
indirectly, as of the Closing Date, will be held solely for the purpose of
investment such that these securities will be held by the Purchaser's Affiliates
with no intention on the part of any of them to participate in the formulation,
determination or direction of the basic business decisions of the Company.
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(i) The Purchaser understands and acknowledges that (i) the
Registrable Securities if and when issued will be issued to it without
registration under the Securities Act and is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and the Purchaser hereby consents to such
reliance.
(j) The Purchaser has been given access to all information regarding
the Company and the business, condition and operations of the Company that the
Purchaser has requested in order to evaluate its investment in the Debenture and
the Common Stock. The Purchaser has been given the opportunity to ask questions
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Debenture and other matters
pertaining to the Purchaser's investment in the Debenture. In evaluating the
suitability of the purchase of the Debenture hereunder, the Purchaser has not
relied upon any representations or other information (whether oral or written)
other than as set forth in the SEC Reports or as contained herein.
(k) The Purchaser understands that the Debenture (and any Common Stock
into which the Debenture may be converted) will bear the following legend (and a
stop-transfer order may be placed against transfer of the certificates for the
Registrable Securities):
"THIS DEBENTURE AND ANY SHARES ISSUABLE UPON THE EXERCISE OF THIS
DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND SUCH
SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT AS PERMITTED BY THE PROVISIONS OF
REGULATION S UNDER THE ACT OR PURSUANT TO REGISTRATION UNDER THE ACT OR
AN AVAILABLE EXEMPTION FROM REGISTRATION. THE TRANSFER OF THIS
DEBENTURE AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF ARE
RESTRICTED AS DESCRIBED IN SECTION 7 HEREOF AND AS OTHERWISE DESCRIBED
HEREIN."
4.4 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by the Purchaser.
4.5 Restrictions on Sale. The Purchaser will not, prior to the date on
which a registration statement referred to in Article VI hereof is first
declared effective by the SEC, if then prohibited by law or regulation, sell,
offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any
right with respect to (collectively, a "Disposition"), the Registrable
Securities, nor will the Purchaser engage in any hedging or other transaction
which is designed or could reasonably be expected to lead to or result in a
Disposition of the Registrable Securities by the Purchaser or any person or
entity. Such prohibited hedging or other transaction would include, without
limitation, effecting any short sale or having in effect a short position
(whether such short sale or position is
11
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to the Registrable Securities or with respect to any
security (other than a broad-based market basket or index) that includes or
derives any significant part of its value from the Registrable Securities.
ARTICLE V
CERTAIN COVENANTS
The Company covenants and agrees with the Purchaser that, for so long
as the Debenture remains outstanding:
5.1 Access to Company Information. The Company will (a) promptly
provide, or cause to be promptly provided, all material information with respect
to the ongoing viability of the Company (including, but not limited to,
financial and business plans) as may be reasonably requested by the Purchaser,
but no more than once per calendar quarter; provided, that the Purchaser shall
not be entitled to undertake or have undertaken on its behalf a financial audit
of the Company and (b) permit representatives of the Purchaser, from time to
time, to discuss with the officers of the Company such information contemplated
by clause (a) above.
5.2 Maintenance of Books and Records; Financial Statements; Report;
Etc. The Company will keep adequate records and books of account with respect to
its business activities in which proper entries are made in accordance with GAAP
reflecting all of its financial transactions. Furnish to the Purchaser promptly
after the sending or filing thereof, as the case may be, copies of any proxy
statements, financial statements or reports which the Company has made available
to its shareholders and copies of any regular, periodic and special reports or
registration statements which the Company files with the SEC or any Governmental
or Regulatory Authority which may be substituted therefor, or any national
securities exchange.
5.3 Insurance. The Company will at all times maintain with financially
sound and reputable insurers insurance with respect to its assets and properties
and businesses against loss or damage of the kind customarily insured against by
companies engaged in the same or similar businesses and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such companies.
5.4 Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless the
Purchaser and its Affiliates, and their respective directors and officers, and
the successors and assigns of all of the foregoing persons, from and against any
and all liabilities, judgments, claims, settlements, losses, damages, reasonable
fees (including attorneys' and other experts' fees and disbursements), liens,
taxes, penalties, obligations and expenses (collectively, "Losses") incurred or
suffered by any such Person arising from, by reason of or in connection with any
breach of any representation, warranty or covenant of the Company contained in
this Agreement; provided, however, that:
12
(i) the Company shall have no obligation to indemnify the
Purchaser hereunder with respect to breaches of representations
and warranties unless and until the aggregate amount of Losses
arising as a result of the breach of representations and
warranties shall exceed $100,000 and then the Company shall be
liable for the entire amount of Losses;
(ii) the Company shall have no obligation to indemnify the
Purchaser hereunder for Losses arising as a result of the breach
of representations and warranties in excess of $3,000,000; and
(iii) the Company's obligation under this Section 5.4 with respect
to representations and warranties shall terminate on the third
anniversary of the Closing Date (except with respect to claims
made prior to such date).
(b) The Purchaser hereby agrees to indemnify and hold harmless the Company and
its Affiliates, and their respective directors and officers, and the successors
and assigns of all of the foregoing persons, from and against any and all Losses
incurred or suffered by any such Person arising from, by reason of or in
connection with any breach of any representation, warranty or covenant of the
Purchaser contained in this Agreement; provided, however, that:
(i) the Purchaser shall have no obligation to indemnify the
Company hereunder with respect to breaches of representations and
warranties unless and until the aggregate amount of Losses
arising as a result of the breach of representations and
warranties shall exceed $100,000 and then the Purchaser shall be
liable for the entire amount of Losses;
(ii) the Purchaser shall have no obligation to indemnify the
Company hereunder for Losses arising as a result of the breach of
representations and warranties in excess of $3,000,000; and
(iii) the Purchaser's obligation under this Section 5.4 with
respect to representations and warranties shall terminate on the
third anniversary of the Closing Date (except with respect to
claims made prior to such date).
(c) Promptly upon receipt by a party indemnified under this Section
5.4 of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against the
indemnifying party, such indemnified party shall notify the indemnifying party
in writing of the commencement of such action, but the failure so to notify the
indemnifying party shall not relieve it of any liability which it may have to
any indemnified party under this Section 5.4 unless such failure materially
adversely affects the defense of such action. In case notice of commencement of
any such action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and to assume the defense
of such action at its own expense, with counsel chosen by it, if the
indemnifying party acknowledges to the indemnified party in writing its
obligation to indemnify the indemnified party with respect to such action. The
indemnifying party shall be liable for the fees and expenses of counsel for the
indemnified party for any period during which the
13
indemnifying party has not assumed the defense thereof (other than during any
period in which the indemnified party shall have failed to give notice of the
action as provided above). If the indemnifying party assumes the defense of an
action, the indemnified party shall agree to any settlement, compromise or
discharge of such action that the indemnifying party may recommend and that by
its terms obligates the indemnifying party to pay the full amount of the
liability in connection with such action, and which releases the indemnified
party completely in connection with such action; provided that, the indemnifying
party shall not agree, without the prior written consent of the indemnified
party, to the entry of any judgment or settlement, compromise or decree that
provides for injunctive or other nonmonetary relief affecting the indemnified
party. The indemnified party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be paid by the indemnified party unless (i) the
indemnifying party fails to assume the defense of such action in a timely manner
and in accordance with the foregoing or (ii) the indemnified party has been
advised in writing by counsel that representation of such indemnified party and
the indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
such indemnified party). In the foregoing circumstances, the indemnified parties
shall be entitled to engage, and the indemnifying party shall pay the reasonable
costs and expenses of, one counsel (plus any necessary local counsel) for all
indemnified parties. The indemnifying party shall not be liable for any
settlement entered into without its prior written consent (which consent shall
not be unreasonably withheld or delayed).
5.5 Shares Issuable Upon Conversion. The Company shall at all times
reserve and keep available, out of its authorized and unissued stock, solely for
the purpose of effecting the conversion of the Debenture, the full number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of the entire amount of the Debenture from time to time outstanding.
The Company shall from time to time, in accordance with the laws of the State of
Delaware, increase the authorized number of shares of Common Stock if at any
time the number of shares of Common Stock authorized and not then outstanding
shall be insufficient to permit the conversion of the entire amount of the
Debenture then outstanding.
5.6 Confidentiality.
(a) Each of the Company and the Purchaser acknowledges that all of the
Confidential Information made available to it by the other party is confidential
and proprietary to the disclosing party and, accordingly, agrees to maintain
such information in confidence for a period of three (3) years after disclosure
thereof. The receiving party further covenants that it shall not disclose any
such information to a third party except to its employees, agents,
representatives, (including, but not limited to, legal advisors, financial
advisors and auditors) or any other person under its authorization
("Representatives"), on a need to know basis, provided such Representatives are
made aware of and agree to abide by the foregoing obligations of the receiving
party.
(b) Notwithstanding anything above to the contrary, the term
"Confidential Information" shall not apply to information that is (i) in the
public domain, (ii) received by the receiving party on an unrestricted basis
where the receiving party has no duty of confidentiality to
14
the party providing such information or (iii) required to be disclosed to a
governmental or other regulatory authority or pursuant to legal process, in
which case the receiving party shall promptly notify the other party of such
disclosure.
(c) Each party acknowledges that damages for disclosure of
Confidential Information in violation of this Section 5.6 would be an inadequate
remedy and that in the event of any such disclosure, the other party shall be
entitled to seek injunctive relief or other equitable relief in addition to any
and all remedies available at law or in equity.
5.7 Notification. The Purchaser will notify the Company promptly of
the sale of any of the Registrable Securities, other than sales pursuant to a
registration statement contemplated in ARTICLE VI hereof, and the Purchaser will
furnish any information reasonably requested by the Company (including, if so
requested, a legal opinion in form and substance reasonably satisfactory to the
Company and its counsel) to evidence the exemption from the registration
requirements of the Securities Act, and the state securities laws, in reliance
upon which such sales have been made.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Demand Registration.
(a) The Company agrees that upon receipt of written notice from the
Purchaser, on or after the conversion of the Debenture, requesting registration
of Registrable Securities (a "Registration Demand"), the Company shall with
reasonable promptness, and in any case not later than one hundred twenty (120)
days after receipt by the Company of the Registration Demand, file a
registration statement with the SEC relating to the Registrable Securities as to
which registration is requested in the Registration Demand. The Company shall
use its reasonable best efforts to make such registration statement become
effective and to qualify the same under the Blue Sky laws of such states as may
be requested; provided, however, that with respect to compliance with Blue Sky
laws, the Company shall not be obligated to qualify as a foreign corporation or
as a dealer in securities or to execute or file any general consent to service
of process under the laws of any such state where it is not so subject and would
not otherwise be required to so qualify but for this sentence. The Company shall
not be obligated to effect more than two registrations (whether on Form S-3 (or
any successor or similar form) if the Company is so eligible to use such form or
on Form S-1 (or any successor or similar form) if the Company is not so eligible
to use such Form S-3) under this Section 6.1(a). The Company shall not be
obligated to effect a registration hereunder at any time when the Purchaser
could sell all Registrable Securities within 90 days pursuant to Rule 144 under
the Securities Act. The Company shall not be deemed to have complied with its
obligations under this Section 6.1(a) to effect a registration of Registrable
Securities unless and until the applicable registration statement has been
declared effective by the SEC under the Securities Act and, in the event such
registration statement is not so declared effective, the Purchaser's right to
such demand registration statement pursuant to this Section 6.1(a) shall be
reinstated.
15
(b) Notwithstanding the foregoing, the Company shall not be obligated
to file a registration statement pursuant to this Section 6.1 if it has filed a
registration statement for any purpose within the preceding six month period.
The Company shall be entitled to postpone for a reasonable period of time, not
to exceed one hundred twenty (120) days (and only once can this right be
invoked), the filing of any registration statement otherwise required to be
filed by it, if the Board of Directors of the Company determines, in its
reasonable good faith judgment, that such registration statement would be
detrimental to the Company and its stockholders and the Company gives to the
Purchaser written notice of such determination in which event the Company shall
have the right to defer such filing for a period of not more than one hundred
twenty (120) days after receipt of such request by the Purchaser in accordance
with Section 6.1(a). In such event, the Purchaser shall have the right to
withdraw the request for registration by giving written notice to the Company
within sixty (60) days after receipt of the notice of postponement and, in such
event, the Purchaser's right to such demand registration statement pursuant to
this Section 6.1 shall be reinstated.
(c) Any Registration Demand pursuant to this Section 6.1 shall:
(i) specify the number of shares of Registrable Securities
intended to be offered, state the firm intention of the Purchaser
to offer such securities for sale and describe the intended
method of distribution;
(ii) contain an undertaking on the part of the Purchaser to
provide all such information and materials concerning the
Purchaser and take all such action as may be required to permit
the Company to comply with all applicable requirements of the SEC
in connection with such registration statement; and
(iii) contain an undertaking on the part of the Purchaser to enter
into an underwriting agreement in customary form.
(d) Neither the Company nor any other Person (other than the Purchaser
and its transferees) shall be entitled to have Common Stock ("Other Registrable
Securities") registered in connection with the registration of Registrable
Securities pursuant to this Section 6.1 unless the Company or such other Person
shall agree for the benefit of the Purchaser that the number of shares of Other
Registrable Securities to be included in such registration may be reduced (pro
rata among all Persons holding Other Registrable Securities), or that all of
such Other Registrable Securities may be excluded from any such registration, if
the Company or the Purchaser is advised in writing by the managing underwriter
that such reduction or exclusion is necessary to avoid materially adversely
affecting the public offering of the securities being offered by the Purchaser.
At any time before the registration statement covering Registrable Shares
pursuant to this Section 6.1 becomes effective, the Purchaser may request the
Company to withdraw or not to file the registration statement. In that event, if
such request of withdrawal shall not have been caused by, or made in response
to, a Material Adverse Effect on the Company, the Purchaser shall have used one
of its Registration Demand rights under this Section 6.1 unless the Purchaser
shall pay to the Company the Purchaser's pro rata expenses incurred by the
Company (based on the number of shares of the Purchaser being registered to the
total number of shares being registered) through the date of such request.
16
6.2 Piggyback Rights.
(a) If the Company proposes to file a registration statement under the
Securities Act on behalf of the Company or otherwise, the Company shall give
written notice of such registration no later than seven (7) business days before
its filing with the SEC to the Purchaser regardless of whether the Purchaser is
holding the Debenture or Registrable Securities; provided, that registrations
relating solely to securities to be issued by the Company in connection with any
acquisition, employee stock option or employee stock purchase or savings plan on
Form S-4 or S-8 (or successor Forms) under the Securities Act shall not be
subject to this Section 6.2. If the Purchaser so request in writing within seven
(7) business days after delivery of such notice by the Company, the Company
shall include in any such registration statement any Common Stock obtained (or
to be obtained) by the Purchaser upon conversion of the Debenture held by the
Purchaser and requested to be included in such registration. Any such written
request by the Purchaser shall contain an undertaking on the part of the
Purchaser to provide all such information and materials concerning the Purchaser
and take such action as may be required to permit the Company to comply with all
applicable requirements of the SEC in connection with such registration.
Notwithstanding Section 7.1, for purposes of this Section 6.2(a), any and all
notices by the Company to the Purchaser shall be in writing and will be deemed
to have been duly given only if delivered by facsimile transmission against
facsimile and telephonic confirmation.
(b) The Company may require that the number of shares of Registrable
Securities to be included in such registration be reduced (pro rata among the
Purchaser and any other Person exercising "piggy-back" registration rights), or
that all of such shares be excluded from any such registration, if the Company
is advised in writing by the managing underwriter of the offering that such
reduction or exclusion is necessary to avoid materially adversely affecting the
public offering of the securities being offered by the Company. In the event
that (i) the Purchaser converts all or less than all of the remaining principal
amount of the Debenture together with all accrued and unpaid interest in order
to participate in such registration and (ii) the number of shares of Registrable
Securities to be included in such registration are reduced as contemplated
above, then an amount equal to the number of shares that the Purchaser is
cutback multiplied by the applicable Conversion Price shall be added back to the
outstanding principal amount of the Debenture.
6.3 Expenses. In the event that the Purchaser participates in a
registration under this Article VI, the Purchaser shall be responsible for the
underwriting discounts and selling commissions applicable to the Registrable
Securities sold by the Purchaser and any expenses incurred by the Purchaser in
connection therewith, in proportion to the number of securities sold by all
holders thereunder, except that the Company shall pay the reasonable costs and
expenses of the Purchaser's counsel ("Purchaser's Counsel") for each
registration in which the Purchaser participates in an amount not to exceed
$20,000 (per registration); provided, however, that the Purchaser shall pay the
reasonable costs and expenses of the Purchaser's Counsel for each registration
after the Purchaser has used one of its Registration Demand rights under Section
6.1. Except as otherwise specifically provided in this Article VI, the costs and
expenses of any registration and qualification pursuant to Article VI hereof
shall be borne by the Company. Such costs and expenses shall include the fees
and expenses of counsel for the
17
Company and of its accountants, all other costs, reasonable fees and expenses of
the Company incident to the preparation, printing and filing under the
Securities Act of the registration statement and all amendments and supplements
thereto, the cost of furnishing copies of each preliminary prospectus, each
final prospectus and each amendment or supplement thereto to underwriters,
dealers and the Purchaser and the costs and expenses (including fees and
disbursements of counsel) incurred in connection with the qualification under
the Blue Sky laws of various jurisdictions.
6.4 Procedures.
(a) In connection with any registration pursuant to this Article VI,
the Company may require that the Purchaser effect the offer and sale of
Registrable Securities pursuant to an underwritten offering with underwriters
reasonably acceptable to the Company.
(b) In the case of each registration or qualification pursuant to
Article VI, the Company will keep the Purchaser and Purchaser's Counsel advised
as to the initiation of proceedings for such registration and qualification and
as to the completion thereof, and will advise the Purchaser and Purchaser's
Counsel, upon request, of the progress of such proceeding. The Company will give
the Purchaser and Purchaser's Counsel the opportunity to review any registration
statement prepared pursuant to this Article VI, each prospectus included
therein, and each amendment thereto or supplement thereto, before the same is
filed with the SEC, and will give the Purchaser and Purchaser's Counsel such
access to its books and records and such opportunities to discuss the business
of the Company with its officers, counsel and the independent auditors who have
certified its financial statements, as shall be reasonably necessary in order to
allow the Purchaser and Purchaser's Counsel to conduct a reasonable and diligent
investigation within the meaning of the Securities Act. The Company will notify
the Purchaser upon the happening of any event as a result of which any
prospectus included in a registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing.
(c) At the Company's expense, the Company will keep each registration
and qualification involving an underwritten offering under this Article VI
effective (and in compliance with the Securities Act) by such action as may be
necessary or appropriate for a period of one-hundred twenty (120) days after the
effective date of such registration statement (or until all the securities
registered pursuant thereto have been sold), including, without limitation, the
filing of post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration statement current and
the further qualification under any applicable Blue Sky or other state
securities laws to permit such sale or distribution, all as requested by the
Purchaser.
(d) In connection with any registration under this Article VI, the
Company shall cause the Registrable Securities being registered to be listed on
such securities exchange or eligible for trading on such over-the-counter market
as other securities of the Company of the same class are traded, in each case
not later than the effective date of such registration statement.
18
(e) The Company shall use its reasonable best efforts to obtain from
its independent auditors "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters, addressed to the underwriters.
(f) The Company shall use its reasonable best efforts to obtain from
its counsel an opinion or opinions in customary form, addressed to the
underwriters and the Purchaser selling Registrable Securities.
6.5 Provision of Documents. The Company will, at its expense, furnish
to the Purchaser and Purchaser's Counsel such number of registration statements,
prospectuses, and other documents incident to any registration or qualification
referred to in this Article VI as may be reasonably requested.
6.6 Indemnification.
(a) The Company will indemnify and hold harmless the Purchaser and any
underwriters (as defined in the Securities Act) for the Purchaser and each
person, if any, who controls the Purchaser or such underwriters within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities, joint or several, and
expenses (including reasonable attorneys' fees and expenses and reasonable costs
of investigation) to which the Purchaser or such underwriters or such
controlling person may be subject, under the Securities Act or otherwise,
insofar as any thereof arise out of or are based upon (i) any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement under which Registrable Securities were registered under the
Securities Act pursuant to this Article VI, any prospectus contained therein, or
any amendment or supplement thereto, or (ii) the omission (or alleged omission)
to state in any item referred to in the preceding clause (i) 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, except
insofar as such losses, claims, damages, liabilities or expenses arise out of or
are based upon any untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished to the Company by the
Purchaser (or by any underwriter on behalf of and at the specific direction of
the Purchaser) in writing specifically for use therein (with respect to which
information the Purchaser shall so indemnify and hold harmless the Company, any
underwriters for the Company and each person, if any, who controls the Company
or such underwriters within the meaning of the Securities Act; provided,
however, that the maximum liability of the Purchaser or such underwriter under
this indemnity shall be limited to the amount of the net proceeds received by
the Purchaser or such underwriter from the sale of such Registrable Securities
to which such indemnification relates). The indemnity contained in this Section
6.6(a) shall not inure to the benefit of an indemnified party to the extent that
the loss, claim, damage, liability or expense results from an untrue statement
in or omission from a preliminary prospectus, a copy of which was made available
to the indemnified party, and (i) such untrue statement in or omission from the
preliminary prospectus was corrected in the final prospectus, a copy of which
was made available to the indemnified party, and (ii) the indemnified party
failed to cause a copy of such final prospectus to be delivered to the person
19
asserting such claim at or prior to the written confirmation of the sale of
securities to such person.
(b) Promptly upon receipt by a party indemnified under this Section
6.6 of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6.6, such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party under this Section 6.6
unless such failure materially adversely affects the defense of such action. In
case notice of commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party shall be entitled
to participate in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it, if the indemnifying party
acknowledges to the indemnified party in writing its obligation to indemnify the
indemnified party with respect to such action. The indemnifying party shall be
liable for the fees and expenses of counsel for the indemnified party for any
period during which the indemnifying party has not assumed the defense thereof
(other than during any period in which the indemnified party shall have failed
to give notice of the action as provided above). If the indemnifying party
assumes the defense of an action, the indemnified party shall agree to any
settlement, compromise or discharge of such action that the indemnifying party
may recommend and that by its terms obligates the indemnifying party to pay the
full amount of the liability in connection with such action, and which releases
the indemnified party completely in connection with such action; provided that,
the indemnifying party shall not agree, without the prior written consent of the
indemnified party, to the entry of any judgment or settlement, compromise or
decree that provides for injunctive or other nonmonetary relief affecting the
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be paid by the indemnified party unless (i)
the indemnifying party fails to assume the defense of such action in a timely
manner and in accordance with the foregoing or (ii) the indemnified party has
been advised in writing by counsel that representation of such indemnified party
and the indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
such indemnified party). In the foregoing circumstances, the indemnified party
shall be entitled to engage, and the indemnifying party shall pay the reasonable
costs and expenses of, one counsel (plus any necessary local counsel) for the
indemnified party. No indemnifying party shall be liable for any settlement
entered into without its prior written consent, which consent shall not be
unreasonably withheld or delayed.
(c) If the indemnification provided for in this Section 6.6 is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities, expenses or actions in respect thereof
referred to in this Section 6.6, then the indemnifying party shall in lieu of
indemnifying such indemnified party contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, liabilities,
expenses or actions in such proportion as is appropriate to reflect the relative
fault of the Company, on the one hand, and the Purchaser (and its underwriters)
on the other, in connection
20
with the statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or actions as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact relates to information
supplied by the Company, on the one hand, or the Purchaser (and its underwriters
at the specific direction of the Purchaser), on the other hand, and the parties
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 6.6
were determined by pro rata allocation or by any other method of allocation
which did not take account of the equitable considerations referred to above.
The amount paid or payable by the indemnified party as a result of the losses,
claims, damages, liabilities or actions in respect thereof referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim; provided, however, that the maximum liability of the Purchaser
or underwriter hereunder shall be limited to the amount of the net proceeds
received by the Purchaser or underwriter from the sale of Registrable Securities
to which such contribution relates. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by nationally recognized overnight courier prepaid,
to the parties at the following addresses or facsimile numbers:
(i) If to the Company, to:
00
Xxxxxx Xxxxxxxxxxx
00 XX 0xx Xxxxxx
Xxxxx, XX 00000
Facsimile No.:
Attn: [______________]
with a copy to:
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxxx X. Xxxx, Esq.
and
(ii) If to the Purchaser, to:
[Aventis Pharmaceuticals Inc.]
000 Xxxxxxxx Xxxxxxxxx
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000-0000
Facsimile No.:
Attn: [______________]
with a copy to:
Xxxxxx Xxxxx & Bockius, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally against written receipt to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided for in this Section, be deemed given upon
facsimile confirmation, (iii) if delivered by mail in the manner described above
to the address as provided for in this Section, be deemed given on the earlier
of the third Business Day following mailing or upon receipt and (iv) if
delivered by nationally recognized overnight courier to the address as provided
in this Section, be deemed given on the earlier of the first Business Day
following the date sent by such overnight courier or upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other
22
Person to whom a copy of such notice is to be delivered pursuant to
this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
7.2 Reserved.
7.3 Entire Agreement. This Agreement and the Debenture supersede all
prior discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof.
7.4 Survival. The representations, warranties, covenants and
agreements of the Company and the Purchaser contained in this Agreement will
survive the Closing.
7.5 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the Company shall at its own cost and expense
execute and deliver to the Purchaser such other documents and instruments,
provide such materials and information and take such other actions as the
Purchaser may reasonably request to consummate the transactions contemplated by
this Agreement and otherwise to cause the Company to fulfill its obligations
under this Agreement.
7.6 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
7.7 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
7.8 Right to Rely. Notwithstanding any right of any party (whether or
not exercised) to investigate the affairs of any other party contained in this
Agreement, each party has the right to rely fully upon the representations,
warranties, covenants and agreements contained in this Agreement.
7.9 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors and assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Article V or VI.
7.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by the Company without the prior written consent of the Purchaser, or
by the Purchaser without the prior written consent of the Company, and any
attempt to do so will be void; provided, however, that the Purchaser shall have
the right to assign this Agreement or any such right, interest or obligation to
any Person described in subsection (a) of the definition of Affiliate without
such consent of the Company. Subject to the preceding sentence, this Agreement
is binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
23
7.11 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
7.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance therefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
the rules governing the conflicts of laws. The parties hereby irrevocably
consent to the jurisdiction of the courts of the State of New York and of any
federal court located in such state in connection with any action or proceeding
arising out of or relating to this Agreement.
7.14 Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR ANY DOCUMENTS RELATED HERETO.
7.15 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
24
7.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[signature page to follow]
25
IN WITNESS WHEREOF, this Debenture Purchase Agreement has been duly
executed and delivered by the duly authorized representative of each party
hereto as of the date first above written.
Aphton Corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
Aventis Pharmaceuticals Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President, Global
Business Development
Exhibit A
SERIES A CONVERTIBLE DEBENTURE
Exhibit B
OPINION OF THE COMPANY'S COUNSEL
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
ARTICLE II
SALE AND PURCHASE OF DEBENTURE; CLOSING
2.1 Sale and Purchase of Debenture 4
2.2 The Closing 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Qualification 5
3.2 Authority 5
3.3 No Conflicts 5
3.4 Brokers 5
3.5 Exemption from Registration 6
3.6 Litigation 6
3.7 No Defaults 6
3.8 SEC Reports and Financial 6
Statements
3.9 Events Subsequent to the 6
Date of the Last Financial
Statement
3.10 Absence of Undisclosed 7
Liabilities
3.11 Title to Assets, Properties 7
and Rights
3.12 Patents, Trademarks, 7
Copyrights and Licenses
3.13 Governmental Consents 8
3.14 No Consent or Approval 8
Required
3.15 Compliance with Laws 8
3.16 Capitalization 8
3.17 Subsidiaries 8
3.18 Labor Relations. 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Organization; Power and 9
Authority
4.2 No Conflicts 9
4.3 Investor Representations 9
4.4 Brokers 11
4.5 Restrictions on Sale. 11
ARTICLE V
CERTAIN COVENANTS
5.1 Visits and Inspections. 12
5.2 Maintenance of Books and 12
Records; Financial
Statements; Report; Etc.
5.3 Insurance. 12
5.4 Indemnification 12
5.5 Shares Issuable Upon 14
Conversion
5.6 Notification 14
ARTICLE VI
REGISTRATION RIGHTS
6.1 Demand Registration 14
6.2 Piggyback Rights 16
6.3 Expenses 17
6.4 Procedures 17
6.5 Provision of Documents 18
6.6 Indemnification 18
ARTICLE VII
MISCELLANEOUS
7.1 Notices 20
7.2 Reserved. 22
7.3 Entire Agreement 22
7.4 Survival 22
7.5 Further Assurances; 22
Post-Closing Cooperation
7.6 Waiver 22
7.7 Amendment 22
7.8 Right to Rely 22
7.9 Third Party Beneficiaries 22
7.10 No Assignment; Binding 22
Effect
7.11 Headings 23
7.12 Invalid Provisions 23
7.13 Governing Law. 23
7.14 Waiver of Jury Trial 23
7.15 Construction 23
7.16 Counterparts 24
