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EXHIBIT 10.1
STRUCTURED EQUITY LINE FLEXIBLE FINANCIN(SM) AGREEMENT dated as of
June 30, 1998 (the "Agreement"), between Cheyenne LLC (the "Investor"), and
SciClone Pharmaceuticals, Inc., a corporation organized and existing under the
laws of the State of California (the "Company").
W I T N E S S E T H :
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may elect to issue to the Investor,
and, at the Company's option, the Investor shall purchase from the Company,
from time to time as provided herein, shares of the Company's Common Stock, no
par value (the "Common Stock"), for a maximum aggregate Purchase Price of
$32,000,000 (the "Maximum Offering Amount"); and
WHEREAS, such investments, if made, will be in reliance upon the
provisions of Section 4(2) promulgated by the Securities and Exchange
Commission ("SEC") under the United States Securities Act of 1933, as amended
(the "Securities Act"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
I.
CERTAIN DEFINITIONS
1.1 Defined Terms. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings
specified or indicated (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Additional Amount" shall have the meaning set forth in Section 2.1(b)
hereof.
"Additional Purchase Date" shall mean any Trading Day on which the
Investor notifies the Company by delivery of an Investor Notice of the
Investor's election to purchase all or a portion of an Additional Amount.
"Additional Purchase Notice" shall have the meaning set forth in
Section 2.3(b) hereof.
"Additional Warrant" shall have the meaning set forth in Section
2.6(b) hereof.
"Additional Warrant Share Amount" shall have the meaning set forth
in Section 2.6(b) hereof.
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"Affiliate" shall have the meaning ascribed to it in the Securities
Act and the rules thereunder.
"Applicable Percentage" shall mean in the first Investment Period
during the Commitment Period, 10%; in the second Investment Period, 9%; in the
third Investment Period, 8%; in the fourth Investment Period, 7%; and in the
fifth and succeeding Investment Periods, 6%.
"Balance Sheet" shall mean the unaudited consolidated balance sheet
of the Company as of March 31, 1998.
"Bankruptcy Code" shall mean title 11 of the United States Code, as
amended.
"Benefit Plan" shall have the meaning set forth in Section 5.12
hereof.
"Blue Sky Laws" shall mean the United States state securities and
takeover laws.
"Cancellation Notice" shall mean a notice delivered by the Company
in its sole and absolute discretion to the Investor with respect to an
Investment Period notifying the Investor that the Company shall not sell and
the Investor shall not purchase Common Stock represented by the Minimum
Obligation for such Investment Period.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
any and all equivalent ownership interests in a Person (other than a
corporation).
"Closing" shall mean the consummation of each purchase and sale of
Common Stock pursuant to Section 2.4 hereof.
"Closing Date" shall mean, with respect to each purchase and sale
of Common Stock, subject to the conditions contained herein, the second Trading
Day following the date of receipt of the Investor's Notice to the Company of
its election to purchase Common Stock from the Company (as extended pursuant to
this Agreement).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment Period" shall mean the period commencing on the date
that the first Investment Period begins and expiring on the earliest to occur
of (a) the election by the Company or the Investor to terminate the Investor's
obligation to purchase Common Stock pursuant to Section 10.4 herein, (b) the
date on which the Investor shall have made purchases of Common Stock pursuant
to this Agreement in an aggregate Purchase Price of $32,000,000 or such lesser
maximum purchase amount as determined pursuant to Section 2.2, (c) the date
this Agreement is terminated pursuant to Section 2.5, and (d) the date
occurring twenty four (24) months (subject to extension as provided by Section
2.2(c)(ii)) from the date of commencement of such period.
"Common Stock" shall have the meaning set forth in the recitals
above.
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"Company Assets" shall have the meaning set forth in Section 5.16
hereof.
"Compensation Plans" shall mean any stock or option or similar
equity-based compensation plans.
"Condition Satisfaction Date" shall have the meaning set forth in
Section 3.2 hereof.
"Effective Date" shall mean June 30, 1998, or such later date as
the Company shall have (i) delivered fully executed versions of the Warrant and
the Registration Rights Agreement, and any other documents required to be
delivered pursuant to the terms of this Agreement, and (ii) agreed by such date
to the final form of Exhibits to this Agreement.
"Environmental Laws" shall mean all federal, state, local and
foreign laws and regulations relating to pollution or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Equity Offering" shall mean the issuance and sale by the Company,
(a) in a registered public offering or (b) in a transaction exempt from or not
subject to the registration requirements of the Securities Act, of any shares
of Common Stock or securities which are convertible into or exchangeable for
the Company's Common Stock or any warrants, options or other rights to
subscribe for or purchase its Common Stock or any such convertible or
exchangeable securities (other than securities issued or issuable to any
present or future employee, officer, director or consultant of the Company
pursuant to any Compensation Plans), upon the conversion or exchange of
convertible or exchangeable securities (excluding the Series C Preferred Stock
or the warrants to purchase Common Stock issued in connection with the sale of
such Series C Preferred Stock) or upon the exercise of warrants (excluding the
Warrants), or other rights, or upon the issuance of any shares of Common Stock
issued upon exercise of options, conversion or exchange of convertible or
exchangeable securities, warrants or other rights outstanding on the date of
execution and delivery of this Agreement and listed in the SEC Documents on
file with the SEC (other than the Warrants) and other than (i) shares of Common
Stock which may be issued upon exercise of options granted under the
Compensation Plans, (ii) shares of Common Stock which may be issued upon
exercise of the Warrants, and (iii) shares of Common Stock or securities which
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities, in each case which are issued in
strategic corporate partnering transactions that do not result in any
acquisition or other change in control of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Final Warrant" shall have the meaning set forth in Section 2.6(c).
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"Floor Price" shall be the dollar amount designated by the Company
in a Floor Price Notice, provided that the Company shall not designate the
Floor Price at a dollar amount less than $1.50. In the event a Floor Price
Notice is not received with respect to a certain Investment Period, the Floor
Price set for the preceding Investment Period will continue to be the Floor
Price.
"Floor Price Notice" shall mean a written notice delivered by the
Company to the Investor on, or as of, the tenth (10th) day preceding the
commencement of an Investment Period which sets forth the Floor Price for such
Investment Period.
"Food and Drug Act" shall mean the Federal Food, Drug and Cosmetic
Act, 21 U.S.C. Sections 301 et seq. and the rules and regulations promulgated
thereunder.
"4.9% Limit" shall have the meaning specified in Section 2.2(d)
hereof.
"GAAP" shall have the meaning set forth in Section 5.9(a).
"Governmental Entity" shall mean any federal, state, local or
foreign legislative body, court, government, department or instrumentality, or
governmental, administrative or regulatory authority or agency.
"Investment Amount" shall mean the dollar amount paid by the
Investor on any Mandatory Purchase Date or Additional Purchase Date, as the
case may be.
"Investment Period" shall mean each successive three-month period
(subject to extension as provided by Section 2.5(a)(ii)) commencing on (a) in
the case of the first Investment Period, the eleventh (11th) Trading Day
following the date the Registration Statement is declared effective, provided
that the first Investment Period may start as of a different date upon the
mutual written consent of the Company and Investor, and (b) in the case of
subsequent Investment Periods, commencing on the first Trading Day subsequent
to the expiration of the immediately preceding Investment Period.
"Investor Notice" shall have the meaning set forth in Section
2.3(c)(ii) hereof.
"Knowledge of the Company" shall mean the actual knowledge, without
independent inquiry, of any of the executive officers of the Company.
"Knowledge of the Investor" shall mean the actual knowledge,
without independent inquiry, of any of the executive officers of the Investor.
"Liens" shall have the meaning set forth in Section 5.16 hereof.
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"Mandatory Purchase Date" shall mean, any Trading Day during any
Investment Period on which the Investor notifies the Company by delivery of an
Investor Notice of its election to purchase all or a portion of the Minimum
Obligation in respect of such Investment Period.
"Mandatory Purchase Notice" shall have the meaning set forth in
Section 2.3(a) hereof.
"Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company which
is material and adverse to the Company or to the Company and any other entities
controlled by the Company, taken as a whole, or any condition or situation
which could prohibit, impair or otherwise interfere with the ability of the
Company to enter into and perform its obligations under this Agreement, the
Registration Rights Agreement or the Warrants.
"Materials of Environmental Concern" shall mean hazardous
substances as defined under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. and hazardous
wastes as defined under the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq. and petroleum and petroleum products and such other
chemicals, materials or substances as are listed as "hazardous wastes",
"hazardous materials", "toxic substances", or words of similar import under any
similar federal, state, local or foreign laws.
"Maximum Offering Amount" shall have the meaning set forth in the
introductory paragraphs hereof.
"Minimum Obligation" shall have the meaning set forth in Section
2.1(a) hereof.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Person" shall mean an individual, partnership, corporation,
limited liability company, trust or unincorporated organization, or a
government or agency or subdivision thereof.
"Principal Market" shall mean the New York Stock Exchange, the
American Stock Exchange, or the Nasdaq National Market System, whichever is at
the time the principal trading exchange or market for the Common Stock.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.
"Purchase Price" shall have the meaning set forth in Section 2.4(b)
hereof.
"Registration Rights Agreement" shall have the meaning set forth in
Section 2.6(b) hereof.
"Registration Statement" shall have the meaning set forth in
Section 3.2(a) hereof.
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"SEC" shall mean Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 5.9
hereof.
"Securities Act" shall have the meaning set forth in the recitals
above.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, together with the rules and regulations promulgated
thereunder.
"Stock Price" on a given Trading Day shall mean the low trading
price for the Common Stock on the Principal Market during such Trading Day, as
reported by The Wall Street Journal, and excluding trades by or on behalf of
Investor or any affiliate of Investor.
"Subsidiary" shall mean, with respect to any Person, any
corporation, limited or general partnership, trust, association or other
business entity of which 50% or more of the outstanding Capital Stock or other
interests entitled to vote in the election of the board of directors of such
corporation (irrespective of whether, at the time, Capital Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or
one or more Subsidiaries of such Person.
"Tax Return" shall mean any report, return, information statement
or other information required to be supplied to any federal, state, local or
foreign taxing authority, or any election permitted to be made, in connection
with Taxes.
"Taxes" shall mean all taxes, charges, fees, levies, duties or
other assessments, including without limitation all net income, gross income,
gross receipts, franchise, value added, sales, use, property, ad valorem,
transfer, withholding, profits, license, employee, payroll, social security,
unemployment, excise, estimated, severance and any other taxes, duties,
withholdings, fees, assessments or charges of any kind whatsoever, including
any interest, penalties or additional amounts attributable thereto, imposed by
any federal, state, local or foreign taxing authority.
"Trading Day" shall mean any day during which the New York Stock
Exchange shall be open for business and on which trading of the Common Stock on
the Principal Market shall not have been suspended or limited.
"Value of Open Market Trading" shall mean, with respect to any
Trading Day, the product of the reported trading volume of the Common Stock on
the Principal Market, multiplied by the weighted average trading price (by
trading volume) of the Common Stock on such day (each as determined by
Bloomberg or any other reputable pricing service chosen by the Investor and
reasonably acceptable to the Company); provided, however, that in the event
that the Company consummates a registered public offering of Common Stock
(whether primary or secondary), the Trading Day on which such transaction is
consummated shall be excluded from any calculation under this Agreement based
upon the Value of Open Market Trading; provided
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further, that any block trades of 20,000 shares or more of Common Stock shall
not be included in the calculation when determining reported trading volume and
weighted average trading price.
"Volume Limit" shall have the meaning specified in Section 2.2(b)
hereof.
"Warrant" shall have the meaning set forth in Section 2.6(a)
hereof.
"Warrants" shall have the meaning set forth in Section 2.6(c)
hereof.
"Warrant Exercise Price" shall have the meaning set forth in
Section 2.6(a) hereof.
"Warrant Registration Statement" shall have the meaning set forth
in Section 3.2(a) hereof.
"Warrant Shares" shall have the meaning set forth in Section 2.6(b)
hereof.
II.
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1. INVESTMENTS. Subject to the terms and conditions set
forth herein (including, without limitation, the provisions of Article III
hereof), during the Commitment Period:
(a) Mandatory Quarterly Purchases at Company's Election. If the
Company, in its sole discretion, elects to deliver a Mandatory Purchase Notice
with respect to any Investment Period in accordance with Section 2.3(a), then
upon the Company's delivery of such Mandatory Purchase Notice, the Investor
shall be obligated in such Investment Period to purchase ("Mandatory Purchase")
from the Company shares of Common Stock during such Investment Period for an
aggregate Purchase Price of up to $3,000,000, subject to the adjustments and
limitations imposed by this Agreement (the "Minimum Obligation"). Upon receipt
of a Mandatory Purchase Notice, subject to the terms and conditions contained
herein, the Investor shall be obligated to purchase on one or more Closing
Dates in respect of each such Mandatory Purchase Date or Mandatory Purchase
Dates as the Investor elects during the Investment Period, shares of Common
Stock for an aggregate Purchase Price equal to the Minimum Obligation.
(b) Additional Amounts at the Company's Election. For any
Investment Period during which the Company elects to obligate the Investor to
make a Mandatory Purchase, the Company may deliver to the Investor an
Additional Purchase Notice with respect to the corresponding Investment Period
in accordance with Section 2.3(b). Upon any such delivery of an Additional
Purchase Notice with respect to an Investment Period, the Investor shall be
obligated to purchase shares of Common Stock from the Company (in addition to
the Minimum Obligation) during such Investment Period for an aggregate Purchase
Price of up to $1,000,000 (which individual purchases shall be at least $50,000
and multiples of $50,000 in excess thereof), subject to the
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adjustments and limitations imposed by this Agreement (the "Additional
Amount"). Upon receipt of such Additional Purchase Notice, the Investor shall
be obligated to purchase on each Closing Date in respect of each such
Additional Purchase Date or Additional Purchase Dates as the Investor elects
during the Investment Period to which such Additional Purchase Notice relates,
shares of Common Stock for an aggregate Purchase Price equal to the Additional
Amount.
(c) Purchase of Less Than or More Than Minimum Obligation and
Additional Amount. Upon delivery of a Mandatory Purchase Notice (and, if the
Company elects, an Additional Purchase Notice), the Investor may purchase an
amount of Common Stock in any Investment Period equal to up to five percent
(5%) more than, or less than, the Minimum Obligation and/or the Additional
Amount, and any such purchases shall be treated for purposes of this Agreement
as being equal to the Minimum Obligation and/or the Additional Amount,
respectively.
SECTION 2.2. LIMITATIONS ON INVESTMENT AMOUNT.
(a) Overall Maximum. In no event shall the aggregate amount of
the purchases made by the Investor pursuant to Section 2.1 exceed the Maximum
Offering Amount.
(b) Investment Period Limits. Notwithstanding the obligation of
the Investor to purchase shares of Common Stock pursuant to Section 2.1(a) and
(b), the aggregate Investment Amount for any Investment Period (whether
pursuant to a Minimum Obligation or an Additional Purchase Notice or any
combination thereof) shall not exceed the lesser of (x) the Minimum Obligation
plus the amount set forth in the Additional Purchase Notice, if any, or (y) an
amount equal to the product of (I) the Applicable Percentage of the average
daily Value of Open Market Trading of the Common Stock on the Principal Market
for each Trading Day during the Investment Period immediately preceding such
Investment Period times (II) the number of Trading Days in which the Stock
Price is above the Floor Price in such immediately preceding Investment Period
(rounded up to the next increment of $10,000), or (z) an amount equal to the
product of (I) the Applicable Percentage of the average daily Value of Open
Market Trading of the Common Stock on the Principal Market for each Trading Day
during such Investment Period times (II) the number of Trading Days in which
the Stock Price is above the Floor Price in such Investment Period (rounded up
to the next increment of $10,000) (the lower of the amounts referred to in
clause (y) and (z), the "Volume Limit"); provided, however, that the Investor
may waive, in whole or in part, the Volume Limit in any Investment Period.
(c) Floor Price
(i) Limit for Mandatory Purchases and Additional Purchases.
Notwithstanding anything to the contrary contained herein, the Investor shall
not acquire any shares of Common Stock during any Investment Period pursuant to
a Minimum Obligation or an Additional Purchase Notice if the Stock Price during
all of the four (4) Trading Days prior to but excluding a Mandatory Purchase
Date or an Additional Purchase Date is below the Floor Price.
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(ii) Reset of Floor Price. At any time, but no more than
three (3) times during any Investment Period, the Company may reset the Floor
Price to a value within fifteen percent (15%) of the then-current Floor Price
by delivering a written notice to the Investor; provided, however, that the
Company may adjust the Floor Price to any value at any time with the prior
consent of the Investor.
(d) 4.9% Limit. Notwithstanding anything herein to the contrary,
the Investor shall not be required or entitled to purchase shares of Common
Stock pursuant to this Agreement on any Closing Date to the extent such
purchase, when aggregated with all other shares of Common Stock then owned by
the Investor, and with the shares of Common Stock beneficially or deemed
beneficially owned by the Investor pursuant hereto, and the Warrant Shares (if
then issued and outstanding) theretofore issued to the Investor pursuant to
Section 2.6 and still owned by the Investor, would result in the Investor or
any Affiliate of the Investor beneficially owning more than 4.9% of all the
issued and outstanding Common Stock on such Closing Date, as determined in
accordance herewith and Section 13(d) of the Exchange Act (the "4.9% Limit").
The Investor represents that Themis Partners L.P. and Heracles Fund are not
Affiliates of the Investor for purposes of this provision.
SECTION 2.3. MECHANICS OF NOTIFICATION
(a) Mandatory Purchase Notice.
(i) On or before the twentieth (20th) day preceding the
commencement of an Investment Period, unless otherwise agreed by the parties to
this Agreement, the Chief Executive Officer or the Senior Vice President of the
Company (or such other person as designated by either in writing) may, at the
Company's sole discretion, deliver a written notice to the Investor (each such
notice being a "Mandatory Purchase Notice") which states that the Investor
shall be obligated to purchase the Minimum Amount during such Investment Period
subject to the terms and conditions contained herein. Each Mandatory Purchase
Notice shall be irrevocable.
(ii) Company Cancellation of Minimum Obligation. In the
event the Company intends not to obligate the Investor to purchase Common Stock
represented by the Minimum Obligation during an Investment Period, on or before
the twentieth (20th) day preceding the commencement of such Investment Period,
the Company shall deliver a Cancellation Notice to the Investor. Such
Cancellation Notice shall be irrevocable.
(iii) Inaction Deemed a Mandatory Purchase Notice. In the
event the Company fails to deliver a Mandatory Purchase Notice or a
Cancellation Notice pursuant to section (a)(i) and (a)(ii) above with respect
to any Investment Period, the Company shall be deemed to have delivered a
Mandatory Purchase Notice with respect to such Investment Period.
(b) Additional Purchase Notices. Unless the Company has delivered
a Cancellation Notice relating to an Investment Period, the Chief Executive
Officer or the Senior Vice President (or such other person as designated by
either in writing) of the Company may, in the Company's sole discretion,
deliver an Additional Purchase Notice to the Investor on or before the
twentieth
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(20th) day preceding the commencement of the Investment Period (each such
notice being an "Additional Purchase Notice"), stating the Additional Amount
which the Investor shall be required to purchase during such Investment Period
(in addition to shares of Common Stock representing the Minimum Obligation).
Each Additional Purchase Notice shall be irrevocable. An Additional Purchase
Notice may not be delivered if the Company has delivered a Cancellation Notice
with respect to the same Investment Period.
(c) Date of Delivery of Notices.
(i) Notices to the Investor. A Mandatory Purchase Notice, an
Additional Purchase Notice and a Cancellation Notice (each, a "Company Notice")
and any other notice sent by the Company to the Investor shall be deemed to be
delivered on the Trading Day it is received by facsimile or otherwise received
in writing via courier, hand delivery or first-class mail (return receipt
requested) by the Investor if such notice is received prior to 5:00 P.M. New
York time, or on the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 5:00 P.M. New York time or on any day which is not
a Trading Day (in which case the provisions of Section 2.2(c) and the
conditions to the Closing must be satisfied as of such immediately succeeding
Trading Day).
(ii) Notices to the Company. Any notice sent by the Investor
to the Company notifying the Company of the Investor's election to purchase
Common Stock (each an "Investor Notice") and any other notice sent by the
Investor to the Company shall be deemed to be delivered on the Trading Day it
is received by facsimile or otherwise received in writing via courier, hand
delivery or first-class mail (return receipt requested) by the Company if such
notice is received prior to 5:00 P.M. California time, or on the immediately
succeeding Trading Day if it is received by facsimile or otherwise after 5:00
P.M. California time or on any day which is not a Trading Day (in which case
the provisions of Section 2.2(c) and the conditions to the Closing must be
satisfied as of such immediately succeeding Trading Day).
SECTION 2.4. CLOSINGS
(a) Certificates Against Payment. On each Closing Date (i) the
Company shall deliver to the Investor one or more certificates representing the
number of shares of Common Stock to be purchased by the Investor pursuant to
Section 2.1 registered in the name of the Investor or, at the Investor's
option, deposit such certificate(s) into such account or accounts previously
designated by the Investor and (ii) the Investor shall deliver to the Company
the amount determined pursuant to Section 2.4(c). In addition, on or prior to
the Closing Date, each of the Company and the Investor shall deliver all
documents, instruments and writings required to be delivered or reasonably
requested by either of them pursuant to this Agreement in order to implement
and effect the transactions contemplated herein.
(b) Purchase Price Per Share. The purchase price per share of the
Company's Common Stock (the "Purchase Price") shall be 97% of the Stock Price
during the four (4) Trading Days prior to but excluding a Mandatory Purchase
Date or an Additional Purchase Date, as the case may be; provided, however,
that upon Investor's prior notice to the Company, which
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notice may be provided orally, any trading price below the Floor Price may be
considered to be equal to the Floor Price for purposes of determining the
Purchase Price. Investor agrees not to actively participate in the market with
the intention of reducing the Stock Price.
(c) Payment for the Common Stock. On the Closing Date, the
Investor shall pay to the Company the Investment Amount (less any amounts
withheld pursuant to Section 11.2) by federal funds wire transfer or transfer
of New York Clearing House funds, and shall receive from the Company the number
of shares of Common Stock determined by dividing the Investment Amount by the
Purchase Price (rounded to the nearest whole number of shares). Such
Investment Amount, as so adjusted, shall be paid into such account(s)
previously designated by the Company prior to the relevant Closing Date.
SECTION 2.5. TERMINATION, SUSPENSION AND MODIFICATION OF INVESTMENT
OBLIGATION
(a) (i) Blocking Events. The Investor shall not purchase any
shares of Common Stock from the Company on any Closing Date, nor shall a
Mandatory Purchase Notice or an Additional Purchase Notice be delivered at any
time during the Commitment Period when there shall exist any one or more of the
following: (A) the withdrawal of the effectiveness of the Registration
Statement, (B) the Company's failure to satisfy the requirements of Section 3.2
or 3.3, or (C) any failure or interruption in the compliance by the Company
with the covenants provided in Article VI.
(ii) Reduction or Elimination of Investor Obligation to
Purchase and Extension of Investment Period. In the event that one or more of
the events listed in Section 2.5(a)(i)(A) through (C) above occur during the
Investment Period, the obligation of the Investor to purchase shares of Common
Stock (either pursuant to a Minimum Obligation or an Additional Purchase
Notice) during such Investment Period shall, unless waived in writing by the
Investor, be reduced (but in no event shall such reduction result in a negative
number) by subtracting an amount calculated by multiplying the amount which the
Investor would otherwise be obligated to purchase by a fraction, the numerator
of which shall be 1-1/2 times the number of Trading Days within such Investment
Period that such event or events exist and the denominator of which shall be
the number of Trading Days within such Investment Period (without adjustment
for the Stock Price being below the Floor Price pursuant to Section 2.2(c))
from the Investor's obligation during such Investment Period. If such event
remains uncured for a period of greater than ten (10) Trading Days or exists
during the last ten (10) Trading Days of the Investment Period, the remaining
obligation of the Investor to purchase shares of Common Stock pursuant to a
Minimum Obligation or an Additional Purchase Notice shall be canceled for the
remainder of the Investment Period. If such event exists on the last day
preceding an Investment Period on which the Company has not delivered a
Cancellation Notice with respect to such Investment Period, the Company shall,
unless waived in writing by the Investor, have ten (10) Trading Days in which
to cure, and if cured within such period, the commencement of the Investment
Period shall be postponed for such number of days during such period as the
event remained uncured, but in no event shall such Investment Period be
postponed for a period in excess of ten (10) Trading Days.
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(b) Additional Events of Termination of Investor Obligation. The
obligation of the Investor to purchase shares of Common Stock under this
Agreement may, if the Investor in its sole and absolute discretion so elects,
be terminated (including with respect to a Closing Date which has not yet
occurred) in the event that (i) the Registration Statement shall not have been
declared effective by the SEC on or before one hundred twenty (120) days from
the Effective Date; (ii) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement or Warrant Registration Statement,
or any withdrawal of the effectiveness of the Registration Statement or Warrant
Registration Statement for a period greater than twenty (20) Trading Days in
any Investment Period for any reason other than as a result of subsequent
corporate developments which would require such Registration Statement or
Warrant Registration Statement to be amended to reflect such event in order to
maintain its compliance with the disclosure requirements of the Securities Act;
or (iii) the Company shall at any time fail to comply with the requirements of
Sections 6.2, 6.3, 6.4, 6.6 or 6.7 and the Company shall fail to cure such
noncompliance within (A) five (5) Trading Days after receipt of notice from the
Investor of its election to terminate this Agreement, provided that the
Investor has been notified by the Company of such noncompliance within two (2)
Trading Days of the occurrence of such noncompliance or, if the noncompliance
relates to a failure of the Company to comply with the provisions of Section
6.6, the Investor otherwise becomes aware of such noncompliance or (B)
otherwise within five (5) Trading Days of the occurrence of such noncompliance;
provided, however, that notwithstanding the foregoing, the Investor may, in its
sole and absolute discretion, terminate this Agreement if the Company shall
fail to maintain the listing of the Common Stock on a Principal Market, or if
trading of the Common Stock on a Principal Market shall have been suspended for
a period of ten (10) consecutive Trading Days.
SECTION 2.6. WARRANT
(a) Warrant. On the Effective Date, the Company will issue to the
Investor a warrant, exercisable by the Investor in its sole and absolute
discretion from time to time within five (5) years from the date of issuance
(the "Warrant") to purchase 200,000 shares of Common Stock at an exercise price
per share equal to 150% of the closing sale price of the Common Stock on the
Principal Market on the Trading Day immediately preceding the Effective Date
(the "Warrant Exercise Price"). The Warrant shall provide that it shall not be
exercisable on any date to the extent that such exercise would limit the
ability of the Investor to purchase shares of Common Stock as a result of a
Minimum Obligation or an Additional Purchase Notice such that its holding would
exceed the 4.9% Limit. The Warrant shall be delivered by the Company to the
Investor upon execution of this Agreement by the parties hereto.
(b) Additional Warrants.
(i) Upon each and every purchase by the Investor of
Common Stock, whether pursuant to the delivery of Mandatory Purchase Notices
alone or through a combination of Mandatory Purchase Notices and Additional
Purchase Notices (each, a "Purchase"), the Investor shall receive the right to
purchase Common Stock pursuant to a warrant issued by the Company to the
Investor five (5) business days following the end of each calendar year (each,
an "Additional Warrant" and collectively, the "Additional Warrants") during the
Commitment Period
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for a number of shares equal to the Additional Warrant Share Amount (as defined
in Section 2.6(b)(iii) below) for such calendar year.
(ii) Each Additional Warrant shall entitle the holder
thereof to purchase Common Stock from time to time within five (5) years from
the Effective Date of this Agreement at an exercise price per share equal to
150% of the weighted average of the Purchase Prices at which shares of Common
Stock were purchased at the Closings of all Purchases by the Investor during
such calendar year (the "Additional Warrant Exercise Price").
(iii) "Additional Warrant Share Amount" shall mean, for any
given calendar year, a number of shares equal to 5,000 times a fraction, where
the denominator is $500,000 and the numerator is the aggregate Purchase Price
of Common Stock purchased at the Closings of all Purchases by the Investor in
such calendar year (rounded to the nearest $100,000 increment); provided that
no more than 150,000 Additional Warrants shall be issued with respect to a
given calendar year for which an Additional Warrant Share Amount is calculated
pursuant to this Section 2.6(b).
(iv) Each Additional Warrant shall provide that it shall
not be exercisable on any date to the extent that such exercise would limit the
ability of the Investor to purchase shares of Common Stock as a result of a
Minimum Obligation or an Additional Purchase Notice such that its holding would
exceed the 4.9% Limit.
(c) Final Warrant. Within five (5) Trading Days of the end of the
Commitment Period, the Company will issue to the Investor a warrant,
exercisable by the Investor in its sole and absolute discretion from time to
time within five (5) years from the Effective Date of this Agreement (the
"Final Warrant," and collectively with the Warrant and the Additional Warrants,
if any, the "Warrants") to purchase that number of shares of Common Stock equal
to 300,000 less the number of shares issuable upon exercise of any and all
Additional Warrants issued pursuant to Section 2.6(b), at an exercise price per
share equal to the lesser of (A) the exercise price per share of the Warrant,
or (B) 150% of the closing sale price of the Common Stock on the Principal
Market on the Trading Day immediately preceding the last day of the Commitment
Period (the "Final Warrant Exercise Price"). The Final Warrant shall provide
that it shall not be exercisable on any date to the extent that such exercise
would limit the ability of the Investor to purchase shares of Common Stock as a
result of a Minimum Obligation or an Additional Purchase Notice such that its
holding would exceed the 4.9% Limit. Each of the Warrant, the Additional
Warrants, if any, and the Final Warrant shall be substantially in the form of
Exhibit A hereto.
(d) Registration Rights for Warrant Shares. The resale by the
Investor of Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares") shall be subject to a registration rights agreement (the "Registration
Rights Agreement") entered into between the Company and the Investor on the
date of execution of this Agreement.
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III.
CONDITIONS TO DELIVERY OF MANDATORY
PURCHASE NOTICES, ADDITIONAL PURCHASE NOTICES AND CONDITIONS TO CLOSING
3.1 Conditions Precedent to the Obligation of the Company
to Issue and Sell Common Stock. The obligation hereunder of the Company to
issue and sell Common Stock to the Investor incident to each Closing is subject
to the satisfaction, at or before each such Closing, of each of the conditions
set forth below, which conditions cannot be waived without the prior written
consent of the Company.
(a) Accuracy of the Investor's Representation and
Warranties. The representations and warranties of the Investor set forth in
this Agreement shall be true and correct in all material respects as of the
date of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior to such
Closing.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which, in the reasonable opinion of the Company and its legal
counsel, prohibits or adversely affects any of the transactions contemplated by
this Agreement, and no proceeding shall have been commenced which may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
3.2 Conditions Precedent to the Obligation of the Investor
to Purchase pursuant to the Minimum Obligation or an Additional Purchase
Notice. The obligation of the Investor to purchase pursuant to the Minimum
Obligation and the right of the Company to deliver a Mandatory Purchase Notice
or an Additional Purchase Notice and the obligation of the Investor hereunder
to acquire and pay for Common Stock incident to a Closing is subject to the
satisfaction, on the tenth (10th) day preceding an Investment Period for which
the Company has not delivered a Cancellation Notice, or on the date of delivery
of an Additional Purchase Notice, as the case may be, and on the applicable
Closing Date (each a "Condition Satisfaction Date") of each of the following
conditions, which conditions cannot be waived without the prior written consent
of the Company and the Investor.
(a) Registration of the Common Stock with the SEC.
The Company shall have filed with the SEC (i) a registration statement (the
"Registration Statement") for the registration of the resale by the Investor of
Common Stock to be acquired pursuant to this Agreement (not including Common
Stock to be issued upon exercise of the Warrants) under the Securities Act,
which Registration Statement shall have been filed as early as practicable, but
in no event later than thirty (30) days following execution of this Agreement
and which Registration
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Statement shall have been declared effective by the SEC no later than one
hundred twenty (120) days following the Effective Date, and (ii) in accordance
with the Registration Rights Agreement, a registration statement for the
registration of the resale by the Investor of Common Stock to be issued upon
exercise of the Warrants (the "Warrant Registration Statement"), which Warrant
Registration Statement shall have been filed within thirty (30) days following
execution of this Agreement and which Warrant Registration Statement shall have
been declared effective by the SEC no later than one hundred twenty (120) days
following the Effective Date. Furthermore, the Company shall have filed (i)
with the applicable state securities commissions such blue sky filings as shall
have been requested by the Investor, and (ii) any required filings with the
NASD or exchange or market where the Common Stock is traded.
(b) Effective Registration Statement. The
Registration Statement shall be in effect and shall remain effective on each
Condition Satisfaction Date and (i) neither the Company nor the Investor shall
have received notice that the SEC has issued or intends to issue a stop order
with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so, and (ii) no
other suspension of the use of the Registration Statement or related Prospectus
shall exist.
(c) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company as set forth in
this Agreement and the Registration Rights Agreement shall be true and correct
in all material respects as of each Condition Satisfaction Date as though made
at each such time (except for representations and warranties made as of a
specific date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition
Satisfaction Date.
(d) Performance by the Company. The Company shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with by
the Company at or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits or adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced
which may have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
(f) Adverse Changes. Since March 31, 1998, the date
through which the most recent quarterly report of the Company on Form 10-Q has
been prepared and filed with the SEC, no event which had or is reasonably
likely to have a Material Adverse Effect has occurred, except as disclosed in
the SEC Documents or Company press releases subsequent to such date.
(g) No Suspension of Trading In or Delisting of Common
Stock. The trading of the Common Stock shall not have been suspended by the
SEC, the Principal Market or
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the NASD, and the Common Stock shall have been approved for listing or
quotation on and shall not have been delisted from the Principal Market. The
issuance of shares of Common Stock with respect to the applicable Closing, if
any, shall not violate the shareholder approval requirements of the Principal
Market.
(h) Legal Opinions. Except as otherwise provided in
this Section 3.2(h), the Company shall have caused to be delivered to the
Investor, (i) within five (5) Trading Days following the effective date of the
Registration Statement and the Warrant Registration Statement, as applicable,
(ii) as of a date within five (5) Trading Days after the date of the Company's
filing of its most recent quarterly report on Form 10-Q (or the date by which
such report is required to be filed), (iii) as of a date within five (5)
Trading Days after the date on which the Company announces, whether on a
preliminary or definitive basis, its fourth quarter or full-year financial
results, (iv) to the extent provided by Section 3.3, and (v) as of a date
within five (5) Trading Days of a the beginning of an Investment Period as to
which the Company has not delivered a Cancellation Notice pursuant to 2.3
hereof, or as of a date within five (5) Trading Days of the delivery of an
Additional Purchase Notice, an opinion of the Company's independent counsel
containing the opinions and statements set forth in Exhibit B hereto, addressed
to the Investor stating, inter alia, that no facts have come to such counsel's
attention that would cause it to believe that the Registration Statement or the
Warrant Registration Statement, as applicable (as amended, if applicable),
contains an untrue statement of material fact or omits a material fact required
to make the statements contained therein, not misleading or that the underlying
Prospectus (if applicable, as so amended or supplemented) contains an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading; provided, however, that in the event that such an opinion
cannot be delivered by the Company's independent counsel to the Investor, the
Company shall promptly notify the Investor and promptly revise each of the
Registration Statement and the Warrant Registration Statement, as applicable,
and the Company shall deliver a Cancellation Notice and shall not deliver a
Mandatory Purchase Notice or an Additional Purchase Notice or, if such
Cancellation Notice has not been timely delivered or a Mandatory Purchase
Notice or an Additional Purchase Notice shall have been delivered in good faith
without knowledge by the Company that an opinion of independent counsel cannot
be delivered as required, shall postpone, if necessary, any pending Closing
Date for a period of up to five (5) Trading Days until such an opinion is
delivered to the Investor (or such Closing shall otherwise be canceled). In
the event of such a postponement, the Purchase Price of the Common Stock to be
issued at such Closing as determined pursuant to Section 2.4 shall be the lower
of such Purchase Price as calculated as of the originally scheduled Closing
Date or as of the actual Closing Date. The Company's independent counsel shall
also deliver to the Investor on the Effective Date opinions in form and
substance satisfactory to the Investor addressing, among other things,
corporate matters and the exemption from registration under the Securities Act
of the issuance of the Common Stock by the Company to the Investor under this
Agreement; provided, however, that no opinions shall be required to be
delivered pursuant to this Section 3.2(h) unless and until the Company delivers
a Mandatory Purchase Notice with respect to an Investment Period; and provided,
further, that no opinions shall be required to be delivered pursuant to this
Section 3.2(h) for any Investment Period for which the Company delivers a
Cancellation Notice.
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(i) Accountant's Letter.
(i) The Company shall engage its independent
auditors to perform the procedures in accordance with the provisions of
Statement on Auditing Standards No. 71, as amended, as agreed to by the parties
hereto, and reports thereon as shall have been reasonably requested by the
Investor with respect to certain financial information contained in the
Registration Statement and shall have delivered to the Investor a report
addressed to the Investor, (x) within five (5) Trading Days following the
effective date of the Registration Statement and (y) within ten (10) Trading
Days following the filing with the SEC of each SEC Document containing unaudited
financial statements of the Company which is deemed to be incorporated by
reference in the Registration Statement; provided, however, that no "agreed upon
procedures" report shall be required to be delivered pursuant to this Section
3.2(i) unless and until the Company delivers a Mandatory Purchase Notice with
respect to an Investment Period; and provided, however, that no "agreed upon
procedures" report shall be required to be delivered pursuant to this Section
3.2(i) for any Investment Period for which the Company delivers a Cancellation
Notice.
(ii) In the event that the Investor shall have
requested delivery of an "agreed upon procedures" report pursuant to Section
3.3, the Company shall engage its independent auditors to perform certain
agreed upon procedures and report thereon as shall have been reasonably
requested by the Investor with respect to certain financial information of the
Company and the Company shall deliver to the Investor a copy of such report
addressed to the Investor.
(iii) In the event that a report required by
this Section 3.2 cannot be delivered by the Company's independent auditors, the
Company shall, if necessary, promptly revise the Registration Statement and the
Company shall deliver a Cancellation Notice and shall not deliver an Additional
Purchase Notice or, if a such Cancellation Notice cannot be timely delivered or
an Additional Purchase Notice shall have been delivered in good faith without
knowledge by the Company that a report of its independent auditors cannot be
delivered as required, postpone such Closing Date for a period of up to five
(5) Trading Days until such a report is delivered (or such Closing shall
otherwise be canceled). In the event of such a postponement, the Purchase
Price of the Common Stock to be issued at such Closing as determined pursuant
to Section 2.4 shall be the lower of such Purchase Price as calculated as of
the originally scheduled Closing Date and as of the actual Closing Date.
(j) Officer's Certificate. The Company shall have
delivered to the Investor, on each Closing Date, a certificate in form and
substance reasonably acceptable to the Investor, executed by an executive
officer of the Company and to the effect that all the conditions to such
Closing shall have been satisfied as at the date of each such certificate.
(k) Due Diligence. No dispute between the Company and
the Investor shall exist pursuant to Section 3.3 as to the adequacy of the
disclosure contained in the Registration Statement.
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(l) Beneficial Ownership Limitation. On each Closing
Date, (i) the Investor shall not be required or entitled to purchase shares of
Common Stock to the extent such purchase would result in the Investor's or any
affiliate of the Investor's Common Stock holdings to exceed the 4.9% Limit, and
(ii) the Investor shall have received and been reasonably satisfied with such
other certificates and documents as shall have been reasonably requested by the
Investor in order for the Investor to confirm the Company's satisfaction of the
conditions set forth in this Section 3.2(l). For purposes of clause (i) of
this Section 3.2(l), in the event that the amount of Common Stock outstanding
as determined in accordance with Section 13(d) of the Exchange Act and the
regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Minimum Obligation begins or the Additional Purchase Notice
associated with such Closing Date is given, the amount of Common Stock
outstanding on such Closing Date shall govern for purposes of determining
whether the Investor, when aggregating all Purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares, would own more than
4.9% of the Common Stock following such Closing Date.
3.3 Due Diligence Review. The Company shall make
available, during normal business hours, for inspection and review by the
Investor, advisors to and representatives of the Investor (who may or may not
be affiliated with the Investor and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of Common Stock on
behalf of the Investor pursuant to the Registration Statement or the Warrant
Registration Statement or amendments or supplements thereto or any blue sky,
NASD or other filing, all financial and other records, all SEC Documents and
other filings with the SEC, and all other corporate documents and properties of
the Company as may be reasonably necessary for the purpose of such review, and
cause the Company's officers, directors and employees, within a reasonable time
period, to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
The Company shall not disclose nonpublic information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
nonpublic information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
nonpublic information for review. The Company may, as a condition to disclosing
any nonpublic information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from trading
in Common Stock during such period of time as they are in possession of
nonpublic information) in form reasonably satisfactory to the Company and the
Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate nonpublic information to any investors
who purchase stock in the Company in a
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public offering, to money managers or to securities analysts, provided,
however, that notwithstanding anything herein to the contrary, the Company
will, as hereinabove provided, immediately notify the advisors and
representatives of the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting nonpublic
information (whether or not requested of the Company specifically or generally
during the course of due diligence by and such persons or entities), which, if
not disclosed in the Prospectus included in the Registration Statement, would
cause such Prospectus to include a material misstatement or to omit a material
fact required to be stated therein in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. Nothing
contained in this Section 3.3 shall be construed to mean that such persons or
entities other than the Investor (without the written consent of the Investor
prior to disclosure of such information) may not obtain nonpublic information
in the course of conducting due diligence in accordance with the terms of this
Agreement; provided, however, that in no event shall the Investor's advisors or
representatives disclose to the Investor the nature of the specific event or
circumstances constituting any nonpublic information discovered by such
advisors or representatives in the course of their due diligence without the
written consent of the Investor prior to disclosure of such information. The
Investor's advisors or representatives shall make complete disclosure to the
Investor's independent counsel of all events or circumstances constituting
nonpublic information discovered by such advisors or representatives in the
course of their due diligence upon which such advisors or representatives form
the opinion that the Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein,
in the light of the circumstances in which they were made, not misleading.
Upon receipt of such disclosure, the Investor's independent counsel shall
consult with the Company's independent counsel in order to address the concern
raised as to the existence of a material misstatement or omission and to
discuss appropriate disclosure with respect thereto; provided, however, that
such consultation shall not constitute the advice of the Company's independent
counsel to the Investor as to the accuracy of the Registration Statement and
related Prospectus. In the event after such consultation the Investor's
independent counsel reasonably believes that the Registration Statement
contains an untrue statement or a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading, (a) the Company shall file with the SEC an amendment to
the Registration Statement responsive to such alleged untrue statement or
omission and provide the Investor, as promptly as practicable, with copies of
the Registration Statement and related Prospectus, as so amended, (b) if the
Company disputes the existence of any such material misstatement or omission,
(i) the Company's independent counsel shall provide the Investor's independent
counsel with an opinion stating that nothing has come to their attention that
would lead them to believe that the Registration Statement or the related
Prospectus, as of the date of such opinion, contains an untrue statement of a
material fact or omits a material fact required to be stated in the
Registration Statement or the related Prospectus or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading and (ii) in the event the dispute relates to the adequacy
of financial disclosure and the Investor shall reasonably request, the
Company's independent auditors shall provide to the Company a letter outlining
the performance of such "agreed upon procedures" as shall be reasonably
requested by the Investor
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and the Company shall provide the Investor with a copy of such letter, or (c)
if the Company disputes the existence of any such material misstatement or
omission, and the dispute relates to the timing of disclosure of a material
event and the Company's independent counsel is unable to provide the opinion
referenced in clause (b)(i) above to the Investor, then this Agreement shall be
suspended for a period of up to thirty (30) days, at the end of which, if the
dispute still exists between the Company's independent counsel and the
Investor's independent counsel, the Company shall either (i) amend the
Registration Statement as provided above, (ii) provide to the Investor the
Company's independent counsel opinion and a copy of the letter of the Company's
independent auditors referenced above, or (iii) the obligation of the Investor
to purchase shares of Common Stock pursuant to this Agreement shall terminate.
The Investor hereby agrees to hold harmless the Company's independent auditors
from any liability that may arise out of the delivery of an "agreed upon
procedures" letter pursuant to clause (b)(ii) above.
IV.
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company as follows:
4.1 No Present Arrangement. The Investor is entering into
this Agreement for its own account and the Investor has no present arrangement
(whether or not legally binding) at any time to sell the Common Stock to or
through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold the Common Stock
for any minimum or other specific term and reserves the right to dispose of the
Common Stock at any time in accordance with federal and state securities laws
applicable to such disposition.
4.2 Sophisticated Investor. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and the
Investor has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in Common Stock.
The Investor acknowledges that an investment in the Common Stock is
speculative and involves a high degree of risk.
4.3 Authority. The Investor has full power and authority
as a limited liability company to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Investor.
No other proceedings on the part of Investor are necessary to approve and
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby in accordance with the terms hereof. This
Agreement has been validly executed and delivered by the Investor and is a
valid and binding agreement of the Investor enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
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4.4 No Brokers. The Investor has taken no action that
would give rise to any claim by any person for brokerage commission, finder's
fees or similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
4.5 Not an Affiliate. The Investor is not an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
4.6 Organization and Standing. The Investor is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware, and has all requisite power and authority as
a limited liability company to carry on its business as now being conducted,
and is duly qualified to do business and in good standing in each jurisdiction
in which the nature of the business conducted by it makes such qualifications
necessary, except where the failure to be so qualified or in good standing
would not reasonably be expected to have a material adverse effect.
4.7 Absence of Conflicts. The execution and delivery of
this Agreement and any other document or instrument executed in connection
herewith, and the consummation of the transactions contemplated thereby, and
compliance with the requirements thereof, will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on the
Investor, or the provision of any indenture, instrument or agreement to which
the Investor is a party or is subject, or by which the Investor or any of its
assets is bound, or conflict with or constitute a material default thereunder,
or result in the creation or imposition of any lien pursuant to the terms of
any such indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by the Investor to any third party, or require the approval
of any third party (which has not been obtained) pursuant to any material
contract, agreement, instrument, relationship or legal obligation to which the
Investor is subject or to which any of its assets, operations or management may
be subject.
4.8 Disclosure: Access to Information. The Investor has
received all documents, records, books and other information pertaining to the
Investor's investment in the Company that have been requested by the Investor.
The Investor further acknowledges that it understands that the Company is
subject to the periodic reporting requirements of the Exchange Act, and the
Investor has reviewed or received copies of any such reports that have been
requested by it.
4.9 Manner of Sale. At no time was the Investor presented
with or solicited by or through any leaflet, public promotional meeting,
television advertisement or any other form of general solicitation or
advertising.
4.10 Financial Capability. The Investor presently has or
will have the financial capacity and the necessary capital to perform its
obligations hereunder.
4.11 No NASD Proceedings. To the Knowledge of the Investor,
there are no disciplinary proceedings involving the Investor or any of its
employees pending before the NASD.
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4.12 Not a Broker or Dealer. The Investor is not a "broker" or a
"dealer" (as such terms are defined in the Securities Act or the Securities
Exchange Act).
4.13 Not a Member of the NASD. The Investor is not a "member" of
the NASD or a "person associated with a member" of the NASD (as such terms are
defined in the By-laws and rules of the NASD).
4.14 No Hedging or Short Selling. (a) During the period sixty (60)
days prior to the date of this Agreement the Investor has not engaged in any
short sales or hedging of any kind in anticipation of this Agreement, and (b)
during the term of this Agreement the Investor may make sales in anticipation
of Mandatory Purchase Notices, but may not make any sales with the intention of
reducing the price of the Common Stock to Investor's benefit.
V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the SEC Documents, Company press releases or
in the Disclosure Schedule delivered by the Company to the Investor on the date
hereof, the Company represents and warrants to the Investor as follows:
5.1 Corporate Organization. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and, if
applicable, in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not
reasonably be expected to have a Material Adverse Effect. The Company has made
available to the Investor or its agents complete and correct copies of the
Articles of Incorporation, as amended, and by-laws of the Company as in effect
on the date hereof.
5.2 Capitalization.
(a) The authorized Capital Stock of the Company
consists of (i) 75,000,000 shares of Common Stock and (ii) 10,000,000 shares of
preferred stock, no par value (the "Preferred Stock"). As of May 31, 1998,
there were (i) 17,405,384 shares of Common Stock issued and outstanding all of
which are duly authorized and validly issued, fully paid and nonassessable and
(ii) 1,072,398 shares of Common Stock reserved for issuance pursuant to stock
options granted or which may be granted under the Compensation Plans, and (iii)
900,000 shares of Common Stock are reserved for issuance upon conversion of the
Series C Preferred Stock and certain warrants. The Company has not issued any
Common Stock since October 14, 1997, except pursuant to the exercise of stock
options or pursuant to the Company's Employee Stock
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Purchase Plan, nor has the Company since such date repurchased or redeemed or
acquired any such shares. No shares of Capital Stock of the Company are
entitled to preemptive rights.
(b) Except as set forth in Section 5.2(a) above,
the Company does not have outstanding any Capital Stock or securities
convertible into or exchangeable for any shares of Capital Stock or any
options, warrants or other rights, agreements, arrangements or commitments of
any character to which the Company is a party or otherwise obligating the
Company to issue or sell or entitling any Person to acquire from the Company,
and the Company is not a party to any agreement, arrangement or commitment
obligating it to repurchase, redeem or otherwise acquire, any shares of its
Capital Stock or securities convertible into or exchangeable for any of its
Capital Stock.
(c) Upon issuance of the Common Stock, and payment
of the Purchase Price therefor, pursuant to a purchase and sale in accordance
with the terms of this Agreement, the Company will transfer to the Investor
good and valid title to the Common Stock, free and clear of any Lien, other
than Liens, if any, created by the Investor and such Common Stock will be duly
authorized, fully paid and nonassessable.
5.3 Subsidiaries.
(a) The Company does not have any Subsidiaries
other than those listed on Schedule 5.3(a) of the Disclosure Schedule. Each
Subsidiary is wholly-owned by the Company.
(b) (i) All the outstanding stock or other equity
or ownership interests of each Subsidiary is owned free and clear of all Liens
and is validly issued and (ii) there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which any
Subsidiary is a party or otherwise obligating any Subsidiary to issue or sell,
or entitling any Person to acquire from any Subsidiary, and no Subsidiary is a
party to any agreement, arrangement or commitment obligating it to repurchase,
redeem or otherwise acquire, any shares of the Capital Stock or any securities
convertible into or exchangeable for the Capital Stock of any such Subsidiary.
5.4 Authorization. The Company has full corporate power
and authority to execute and deliver this Agreement, the Registration Rights
Agreement and the Warrants, to issue the Common Stock pursuant to this
Agreement and the Warrants, and to consummate the transactions contemplated
hereby and thereby in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement, the Registration Rights Agreement
and the Warrants, and the issuance of the Common Stock issuable upon a Closing
and pursuant to the Warrants, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of the Company. No other corporate proceedings on the part of the
Company are necessary to approve and authorize the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants, and the
issuance of the Common Stock issuable upon a Closing and pursuant to the
Warrants, and the consummation of the transactions contemplated hereby and
thereby in accordance with the terms hereof and
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thereof, except for any approval of the Company's shareholders that may be
required pursuant to Rule 4460 of the Marketplace Rules of the Nasdaq Stock
Market. This Agreement, the Registration Rights Agreement and the Warrants,
have been duly executed and delivered by the Company, and the Common Stock
issuable in accordance with the terms of this Agreement or upon exercise of the
Warrants, will be duly and validly issued, fully paid and nonassessable, and
each of this Agreement, the Registration Rights Agreement and the Warrants,
when executed and delivered constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
to the extent limited by (i) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity.
5.5 No Violation; Consents.
(a) Assuming the making or receipt of all filings,
notices, registrations, consents, approvals, permits and authorizations
described in this Section 5.5, the execution and delivery of this Agreement,
the Registration Rights Agreement and the Warrants, and the issuance of the
Common Stock, the consummation of the transactions contemplated hereby, by the
Registration Rights Agreement and the Warrants, the compliance by the Company
with any of the provisions hereof or of the Registration Rights Agreement and
the Warrants, will not (i) conflict with, violate or result in any breach of
the Articles of Incorporation, as amended, or by-laws of the Company or its
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default or give rise to any
right of termination, cancellation or acceleration under, or result in the
creation of any Lien on or against any of the properties of the Company or any
of its Subsidiaries pursuant to any of the terms or conditions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) violate any
statute, law, rule, regulation, writ, injunction, judgment, order or decree of
any Governmental Entity, binding on the Company or any of its Subsidiaries or
any of their properties or assets, excluding from the foregoing clauses (i) and
(ii) conflicts, violations, breaches, defaults, rights of termination,
cancellation or acceleration, and liens which, individually or in the
aggregate, would not have a Material Adverse Effect, would not prevent or
materially delay consummation of the transactions contemplated hereby and would
not affect the validity of the issuance of the Common Stock.
(b) Except for (i) applicable requirements, if any,
under Blue Sky Laws, (ii) the filing of additional listing applications with
Nasdaq, and (iii) the filing of the Registration Statement and Warrant
Registration Statement, no filing, consent, approval, permit, authorization,
notice, registration or other action of or with any Governmental Entity is
required to be made or obtained by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement,
the Registration Rights Agreement and the Warrants, the issuance of the Common
Stock or the consummation by the Company of the transactions contemplated
hereby and thereby.
5.6 Compliance With Applicable Law. The businesses of the
Company are not being conducted in violation of any law, ordinance, rule,
regulation, judgment, decree or order of
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any Governmental Entity, except for possible violations which, individually or
in the aggregate, would not have a Material Adverse Effect. The Company and
each of its Subsidiaries possess all domestic and foreign governmental
licenses, permits, authorizations and approvals and have made all registrations
and given all notifications required under federal, state, local or foreign law
to carry on in all respects their businesses as currently conducted, except as
otherwise disclosed in writing by the Company to the Investor on or prior to
the date hereof, and except where the failure to have any such licenses,
permits, authorizations or approvals, individually or in the aggregate, would
not have a Material Adverse Effect. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, threatened, other than those the
outcome of which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
5.7 Compliance With Food and Drug Act.
(a) FDA Permits. The Company and each of its
Subsidiaries have all material licenses, permits, consents, approvals and
authorizations that are required under the Food and Drug Act and any similar
foreign law, rule or regulation (collectively, the "FDA Permits") in connection
with the conduct of the businesses of the Company and each of its Subsidiaries
as presently conducted. The Company has obtained and owns or has the right to
use the FDA Permits in accordance with the terms thereof. Each FDA Permit is
valid and in full force and effect. The FDA Permits are currently effective
and sufficient for the operation of the Company's businesses as currently
conducted. All information supplied by or on behalf of the Company and each of
its Subsidiaries to obtain or maintain each FDA Permit was, as of the date
given, true and complete in all material respects. The Company and each of its
Subsidiaries has complied in all material respects with all conditions and
requirements imposed by the FDA Permits and neither the Company nor any of its
Subsidiaries has received any notice of cancellation, suspension or termination
of any of the FDA Permits and to the Knowledge of the Company no Governmental
Entity intends to cancel, suspend or terminate any of the FDA Permits or that
valid grounds for such cancellation, suspension or termination exist.
(b) Food and Drug Act. (i) The Company and each of
its Subsidiaries are in compliance in all material respects with all applicable
requirements of the Food and Drug Act and any similar foreign law, rule or
regulation, (ii) the Company's and each of its Subsidiaries' existing inventory
of products held for sale, and all products manufactured by the Company, any of
its Subsidiaries or any of the Company's Affiliates and sold within the two (2)
years preceding the date hereof, have been produced in compliance in all
material respects with all applicable requirements of the Food and Drug Act or
any similar foreign law, rule or regulation, including, without limitation, all
"current good manufacturing practices" and similar requirements thereunder and
(iii) to the Knowledge of the Company there is no event, condition,
circumstance, activity, practice, incident, action or plan of the Company or
any Subsidiary which is likely to interfere with or prevent the Company's or
any of its Subsidiaries continued compliance with all applicable requirements
of the Food and Drug Act or any similar foreign law, rule or regulation, or
which may give rise to any common law or legal liability of the Company or any
Subsidiary under, or otherwise form the basis of any Lien or any claim, action,
suit, arbitration, inquiry, proceeding or investigation by or before any
Governmental Entity based on or related to, the Food and Drug
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Act or any similar foreign law, rule or regulation, other than those the
outcome of which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
5.8 Litigation. There is no claim, action or proceeding
(including any condemnation proceeding) pending or, to the Knowledge of the
Company, threatened against or relating to the Company or any of its
Subsidiaries by or before any Governmental Entity or arbitrator that if
adversely determined, individually or in the aggregate, would have a Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any of
its Subsidiaries that has had, or would reasonably be expected in the future to
have, a Material Adverse Effect or which reasonably could be expected to
materially adversely affect the transactions contemplated by this Agreement.
5.9 SEC Documents, Financial Statements.
(a) The Common Stock is registered pursuant to
Section 12(g) of the Securities Exchange Act and the Company has filed all
reports, schedules, forms, statements and other documents, together with all
exhibits, financial statements and schedules thereto required to be filed by it
with the SEC pursuant to the reporting requirements of the Securities Exchange
Act, including material filed pursuant to Section 13(a) or 15(d), (all of the
foregoing, and all other documents and registration statements, whether
heretofore or hereafter filed with the SEC since January 1, 1996, and the
Registration Statement, when declared effective, being hereinafter referred to
as the "SEC Documents"). The Common Stock is currently listed or quoted on the
Principal Market, which is, as of the date hereof the Nasdaq National Market.
The Company has delivered or made available to the Investor true and complete
copies of the SEC Documents through March 31, 1998. The Company has not
provided to the Investor any material information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Exchange Act or the Securities Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such SEC Documents,
and none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated herein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of the date of delivery by the
Investor of the Prospectus contained in the Registration Statement in
connection with sales of Common Stock by the Investor, such Prospectus will
comply in all material respects with the requirements of the Securities Act and
the rules and regulations of the SEC promulgated thereunder, and other federal,
state and local laws, rules and regulations applicable to such Prospectus. The
financial statements of the Company included (or incorporated by reference) in
the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a
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consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes
or may be condensed or summary statements) and fairly present in all material
respects the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(b) During the three (3) years preceding the date
hereof, the SEC has not issued an order preventing or suspending the use of any
prospectus relating to the offering of any shares of Common Stock or instituted
proceedings for that purpose.
5.10 No Undisclosed or Contingent Liabilities. Neither the
Company nor any of its Subsidiaries has any claims, liabilities or obligations
of any nature whatsoever (whether absolute, accrued, contingent or otherwise
and whether due or to become due) that would be required to be reflected or
reserved against on a consolidated balance sheet of the Company and its
consolidated Subsidiaries under GAAP, except for claims, liabilities or
obligations (i) reflected or reserved against on the Balance Sheet, (ii)
disclosed in the Company's most recent Form 10-K or any SEC Document filed
subsequent to such Form 10-K or (iii) incurred by the Company or any of its
Subsidiaries since March 31, 1998 in the ordinary course of business and
consistent with past practice and that, individually or in the aggregate, would
not have a Material Adverse Effect.
5.11 Taxes. The Company and its Subsidiaries have timely
filed all necessary Tax Returns and notices and have paid all federal, state,
county, local and foreign taxes of any nature whatsoever for all the tax years
through December 31, 1996 indicated on such Tax Returns as being due and
payable, to the extent such taxes have become due (other than taxes which are
being challenged in good faith by the Company and have been adequately reserved
for by the Company). There are no tax deficiencies which would reasonably be
expected to have a Material Adverse Effect; the Company and its Subsidiaries
have paid all Taxes which have become due, whether pursuant to any assessments,
or otherwise, and there is no further liability (whether or not disclosed on
such returns) or assessments for any such Taxes, and no interest or penalties
accrues or accruing with respect thereto; the amounts currently set up as
provisions for Taxes or otherwise by the Company and its Subsidiaries on their
books and records are sufficient in all material respects for the payment of
all their unpaid federal, foreign, state, county and local taxes accrued
through the dates as of which they speak, and for which the Company and its
Subsidiaries may be liable in their own right, or as transferee of the assets
of, as successor to any other corporation, association, partnership, joint
venture or other entity.
5.12 Employee Benefit Plans. All employee benefit plans and
other benefit arrangements covering the employees of the Company and its
Subsidiaries (the "Benefit Plans") have been operated and administered in all
material respects in compliance with their terms and applicable law, and there
are no claims, liabilities or obligations of any kind whatsoever relating to
the Benefit Plans which individually or in the aggregate would have a Material
Adverse Effect.
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5.13 Absence of Certain Changes. Since March 31, 1998, the
business of the Company and its Subsidiaries has been conducted in the ordinary
course consistent with past practices and there has not been:
(i) to the Knowledge of the Company, any
event, occurrence, development or state of circumstances or facts which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment
of any dividend or other distribution with respect to any shares of Capital
Stock of the Company, other than the normal quarterly dividend of the Company,
or any repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of Capital Stock or other securities of,
or other ownership interests in, the Company or any Subsidiary;
(iii) any amendment of any material term of
any outstanding security of the Company or any Subsidiary;
(iv) any incurrence, assumption or guarantee
by the Company or any Subsidiary of any indebtedness for borrowed money, other
than working lines of credit or borrowings under existing lines of credit, and
any license fees and royalties and pursuant to any lease;
(v) any creation or assumption by the Company
or any Subsidiary of any Lien on any material asset other than in the ordinary
course of business consistent with past practice;
(vi) any making of any loan, advance or
capital contributions to or investment in any Person in excess of $100,000
other than loans, advances or capital contributions to or investments in
wholly-owned Subsidiaries made in the ordinary course of business consistent
with past practice;
(vii) any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of the Company or any Subsidiary which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect;
(viii) any transaction or commitment made, or
any contract or agreement entered into, by the Company or any Subsidiary
relating to its assets or business (including the acquisition or disposition of
any assets) or any relinquishment by the Company or any Subsidiary of any
contract or other right, in either case, material to the Company and the
Subsidiaries, taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practice and those
contemplated by this Agreement; or
(ix) any change in any method of accounting or
accounting practice by the Company or any Subsidiary.
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5.14 Environmental Matters.
(a) The Company and its Subsidiaries have obtained
all permits, licenses and other authorizations, and have made all registrations
and given all notifications, that are required with respect to the operation of
their respective businesses under all applicable Environmental Laws other than
those permits, licenses, other authorizations, registrations and notifications
the failure of which to obtain or make, individually or in the aggregate, would
not have a Material Adverse Effect.
(b) The Company and its Subsidiaries are in
compliance in all material respects with all terms and conditions of the
required permits, licenses and other authorizations referred to in subsection
(a) of this Section 5.14, and also in compliance in all material respects with
any other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, settlement agreement, notice or demand letter issued,
entered, promulgated or approved thereunder, other than where the failure to be
in such compliance, individually or in the aggregate, would not have a Material
Adverse Effect.
(c) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter (collectively "Actions") pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries relating in any way to Environmental Laws or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder other than Actions that, if
determined adversely to the Company or such Subsidiaries, would not reasonably
be expected to have a Material Adverse Effect.
5.15 Material Contracts.
(a) Neither the Company nor any Subsidiary is a
party to or bound by any agreement or arrangement material to the Company and
its Subsidiaries taken as a whole ("Material Contracts").
(b) Each Material Contract is in full force and
effect and constitutes a legal, valid and binding obligation of the Company or
the Subsidiary party thereto and, to the Knowledge of the Company, each other
party thereto, and is enforceable against the Company or its Subsidiaries and,
to the Knowledge of the Company, each other party thereto in accordance with
its terms, except to the extent that such enforceability is limited by (i)
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity, and neither the Company nor
any of its Subsidiaries, nor, to the Knowledge of the Company, any other party
thereto is in conflict therewith or in violation or breach thereof or default
thereunder, except for such conflicts, violations, breaches and defaults which,
individually or in the aggregate, would not have a Material Adverse Effect.
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5.16 Properties; Encumbrances. Subject to the next
succeeding sentence, each of the Company and its Subsidiaries has good and
valid title, and in the case of real property, insurable title, to all material
properties and assets which it purports to own (real, personal and mixed,
tangible and intangible, including all forms of goodwill, rights, intellectual
property and intellectual property rights) (collectively, the "Company
Assets"), including, without limitation, all the material properties and assets
reflected on the Balance Sheet (except for (i) real and personal property sold
since the date of the Balance Sheet or which was obsolete or no longer useful
in connection with the businesses of the Company and its Subsidiaries and (ii)
capital leases reflected on the Balance Sheet), and all material properties and
assets purchased by the Company and its Subsidiaries since the date of the
Balance Sheet. All Company Assets are free and clear of all liens, mortgages,
claims, interests, charges, security interests or other encumbrances or adverse
interests of any nature whatsoever and other title or interest retention
arrangements ("Liens"), except (A) as reflected on the Balance Sheet, (B) as
set forth on Schedule 5.16 of the Disclosure Schedule, (C) statutory Liens of
carriers, warehousemen, mechanics, workmen and materialmen for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice that are not yet delinquent or being contested in good faith, (D) such
defects, irregularities, encumbrances and other imperfections of title as
normally exist with respect to property similar in character and that,
individually or in the aggregate together with all other such exceptions, do
not have a Material Adverse Effect, (E) Liens for Taxes and (F) Liens that do
not interfere with the present use of the property subject to the Lien.
5.17 Insurance. All current primary, excess and umbrella
policies of insurance owned or held by or on behalf of or providing insurance
coverage to the Company or any of its Subsidiaries are in full force and
effect. With respect to all such insurance policies providing insurance
coverage to the Company or any of its Subsidiaries, no premiums are in arrears
and no notice of cancellation or termination has been received with respect to
any such policy, other than notices of cancellation or termination routinely
sent at the end of a policy term. The Company believes that the insurance
coverage of the Company and its Subsidiaries is consistent with the coverage
generally maintained by corporations of similar size and engaged in similar
lines of business except that the Company generally self-insures against
potential product liability exposure with respect to its marketed products.
5.18 Employee Claims; Labor Matters. There are no claims or
actions pending or, to the Knowledge of the Company, threatened between the
Company or any of its Subsidiaries and any of their respective employees,
unions, or former employees that would, or would be reasonably likely to,
individually or in the aggregate, have a Material Adverse Effect. The Company
and each of its Subsidiaries have no collective bargaining agreements covering
employees of the Company or any Subsidiary.
5.19 Material Disclosure. To the Knowledge of the Company,
there is no fact, transaction or development which the Company has not
disclosed to the Investor in writing (including pursuant to the SEC Documents
filed prior to the date hereof) which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. This
Agreement (including any Exhibit or Schedule hereto) and any written
statements, documents or certificates
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furnished to the Investor by the Company or its Subsidiaries prior to the date
hereof in connection with the transactions contemplated hereby, taken as a
whole, do not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated herein or therein or
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
5.20 Intellectual Property. The Company and its
Subsidiaries own or possess adequate patent rights or licenses or other rights
to use patent rights, inventions, trademarks, service marks, trade names and
copyrights necessary to conduct the general business now operated by them and
neither the Company nor any of its Subsidiaries has received any notice of
infringement or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trademarks, service marks, trade names or
copyrights which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
5.21 No General Solicitation in Regard to this Transaction.
Neither the Company nor any of its Subsidiaries or affiliates nor any
distributor or any person acting on its or their behalf has conducted any
general solicitation (as that term is used in Rule 502(c) of Regulation D) with
respect to any of the Common Stock offered hereby, nor have they made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
offered hereby under the Securities Act.
5.22 No Undisclosed Events or Circumstances. To the
Knowledge of the Company, since March 31, 1998, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company.
5.23 No Integrated Offering. Neither the Company, nor any
of its Subsidiaries or affiliates, nor any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, other than pursuant to this
Agreement, under circumstances that would require registration under the
Securities Act of the shares of Common Stock to be issued under this Agreement.
5.24 No Brokers. The Company has taken no action which
would give rise to any claim by any Person for brokerage commissions, finder's
fees or similar payments by the Investor relating to this Agreement for the
transactions contemplated hereby.
5.25 No Violation of Covenants. To the Knowledge of the
Company, no event of default has occurred and is continuing (or event which
with the lapse of time or notice or both would constitute such an event) which
has not otherwise been waived under any of the revolving credit facilities or
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument for money borrowed or any other material agreement to which the
Company or any of its Subsidiaries is bound, or to which any of the property or
assets of the Company or any of its Subsidiaries is subject.
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VI.
COVENANTS OF THE COMPANY
6.1 Registration Rights. The Company shall comply in all
respects with the terms of the Registration Rights Agreement.
6.2 Reservation of Common Stock. Except as disclosed in
the SEC Documents, the Company has reserved and will continue to reserve and
keep available at all times in any Investment Period, such number of shares of
Common Stock, free of preemptive rights, necessary to enable the Company to
satisfy any obligation to issue shares of its Common Stock incident to the
Closings in such Investment Period and incident to the exercise of the Warrants
issued hereunder; such amount of shares of Common Stock to be reserved to be
calculated based upon the Floor Price therefor under the terms of this
Agreement, and assuming the full exercise of the Warrants. The number of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder and the number of shares so reserved shall be increased to reflect
(a) potential increases in the Common Stock which the Company may thereafter be
so obligated to issue by reason of adjustments to the Purchase Price therefor
and the issuance of the Warrant, Additional Warrants, if any, and Final Warrant
and (b) stock splits and stock dividends and distributions.
6.3 Listing of Common Stock. During the term of this
Agreement, the Company hereby agrees to maintain the listing of the Common
Stock on a Principal Market, and as soon as practicable but in any event prior
to the commencement of the Commitment Period to list the additional shares of
Common Stock issuable under this Agreement (including Common Stock issuable
upon exercise of the Warrants). The Company further agrees that, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Common Stock issuable under this
Agreement (including Common Stock issuable upon exercise of the Warrants), and
will take such other action as is necessary or desirable to cause the Common
Stock to be listed on such other Principal Market as promptly as possible. If
the Principal Market is the Nasdaq National Market System, the Company shall
maintain sufficient net tangible assets to satisfy the requirements of the NASD
for the listing of the Common Stock on the Nasdaq National Market System.
6.4 Exchange Act Registration. During the term of this
Agreement, the Company will cause its Common Stock to continue to be registered
under Section 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange Act. If
required, the Company will take all action to continue the listing and trading
of its Common Stock on the Principal Market and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the NASD and the Principal Market.
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6.5 Registration on Form S-3. If the Company does not
initially file the Registration Statement on Form S-3, the Company shall use
its best efforts to refile and amend the Registration Statement on Form S-3.
6.6 Legends. The certificates evidencing the Common Stock
to be issued to the Investor at each Closing and upon the exercise of the
Warrant, Additional Warrants, if any, and Final Warrant (except as otherwise as
provided by Section 7.1) shall be free of legends or stop transfer or other
restrictions.
6.7 Corporate Existence. During the term of this
Agreement, the Company will take all steps necessary to preserve and continue
the corporate existence of the Company.
6.8 Additional SEC Documents. During the term of this
Agreement, the Company will notify the Investor, as and when all SEC Documents
are submitted to the SEC for filing.
6.9 "Blackout Period". During the term of this Agreement,
the Company will immediately notify the Investor upon the occurrence of any of
the following events in respect of a registration statement or related
Prospectus in respect of an offering of securities required to be registered
under this Agreement or the Registration Rights Agreement: (a) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the registration
statement for amendments or supplements to the registration statement or
related Prospectus; (b) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose;
(c) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of such registrable
securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (d) the happening of any event which makes any
statement made in the registration statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or which requires the making of any changes in the
registration statement, related Prospectus or documents so that, in the case of
the registration statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the
case of the related Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (e) the Company's reasonable
determination that a post-effective amendment to the registration statement
would be appropriate, in which event the Company will promptly make available
to the Investor any such supplement or amendment to the related Prospectus.
The Investor shall not be obligated to purchase any shares pursuant to a
Minimum Obligation or an Additional Purchase Notice during the Investment
Period in which any of the foregoing events continued.
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VII.
LEGENDS AND DELIVERY OF CERTIFICATES,
COMPLIANCE AND INVESTOR COVENANTS
7.1 Legends and Delivery of Certificates. The Warrants
and, unless otherwise provided below, the certificates evidencing the Common
Stock to be issued to the Investor at any Closing and upon exercise of the
Warrants, will bear the following legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
In the event shares of Common Stock are issued incident to a
Closing or upon exercise of the Warrants in circumstances pursuant to which
shares of Common Stock are either required to bear the Legend or are not to
bear the Legend, such certificates (bearing or not bearing the Legend, as
appropriate) shall be issued and delivered to the Investor or as otherwise
directed by the Investor on the applicable Closing Date or within two Trading
Days of the surrender of the Warrants for exercise (together with all other
documentation required to be delivered to effect such exercise), as applicable,
in each case against payment therefor.
The Company shall cause the transfer agent for the Common Stock to
issue and deliver to the Investor or as otherwise directed by the Investor,
shares of Common Stock not bearing the Legend, during the following periods and
under the following circumstances and without the need for any further advice
or instruction or documentation to the transfer agent by or from the Investor:
(a) At any time from and after the effective date
of the applicable registration statement: (i) incident to the issuance of any
shares of Common Stock pursuant to a Closing; (ii) incident to the exercise of
the Warrants; and (iii) upon any surrender of one or more certificates
evidencing Common Stock and which bear the Legend, to the extent accompanied by
a notice requesting the issuance of new certificates free of the Legend to
replace those surrendered; provided that in connection with such event the
Investor confirms to the transfer agent that it intends to sell such Common
Stock to a third party which is not an Affiliate of the Company or the
Investor, and the Investor agrees to redeliver such Common Stock to the
transfer agent to add the Legend in the event the Common Stock is not sold; and
(b) At any time from and after the Closing Date,
upon any surrender of one or more certificates evidencing Common Stock and
which bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those surrendered
and containing or also accompanied by representations that (i) the then holder
thereof is permitted to dispose of such Common Stock pursuant to Rule 144(k)
under the
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Securities Act, (ii) such holder intends to effect the sale or other
disposition of such Common Stock whether or not pursuant to the Registration
Statement, to a purchaser or purchasers who will not be subject to the
registration requirements of the Securities Act or (iii) such holder is not
then subject to such requirements; provided that in the case of surrenders
described in clauses (ii) and (iii) thereof, the holder provides an opinion of
counsel in form and substance reasonably satisfactory to the Company.
7.2 No Other Legend or Stock Transfer Restrictions. No
legend has been or shall be placed on the share certificates representing the
Common Stock and no instructions or stop transfers or other restrictions on
transfer have been or shall be given to the Company's transfer agent with
respect thereto other than pursuant to the Company's Shareholder Rights Plan or
as expressly set forth in this Article VII.
7.3 Investor's Compliance. Nothing in this Article VII
shall affect in any way the Investor's obligations under any agreement to
comply with all applicable securities laws upon resale of the Common Stock.
VIII.
OTHER ISSUANCES OF COMMON STOCK
8.1 Equity Offering Adjustment to Purchase Price. In the
event that the Company makes an Equity Offering during an Investment Period,
then notwithstanding anything herein to the contrary, the purchase price per
share of Common Stock for any Investment Amount made solely within such
Investment Period but following the consummation of the Equity Offering shall
be the lower of (a) the lowest effective purchase price per share of Common
Stock received by the Company in any such Equity Offering, and (b) the price
per share of Common Stock determined hereunder with respect to Purchases of
Common Stock effected by the Investor during such Investment Period.
8.2 Other Adjustments to Purchase Price and Floor Price.
The daily low trading or closing sale price, as applicable, of the Common Stock
for any Trading Day used to calculate the Purchase Price and the Floor Price
shall be adjusted proportionally to reflect any stock splits, stock dividends,
reclassifications, combinations and similar transactions involving the
Company's Common Stock.
IX.
CHOICE OF LAW AND VENUE, WAIVER OF JURY TRIAL
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR
CHOICE OF LAW. The parties hereby agree that all actions or proceedings
arising directly or indirectly from or in connection with this Agreement
shall, at the
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option of either party, be litigated only in the United States District Court
for the Southern District of New York located in New York County, New York,
unless such District Court declines jurisdiction, in which case such actions or
proceedings shall be litigated only in the state court located in New York
County, New York. The parties consent to the jurisdiction and venue of the
foregoing court and consent that any process or notice of motion or other
application to said court or a judge thereof may be served inside or outside
the State of New York or the Southern District of New York by registered mail,
return receipt requested, directed to the party for which it is intended at its
address set forth in this Agreement (and service so made shall be deemed
complete five (5) Trading Days after the same has been posted as aforesaid) or
by personal service or in such other manner as may be permissible under the
rules of said court. The parties hereto hereby irrevocably waive any and all
right to a trial by jury with respect to any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
X.
ASSIGNMENT, ENTIRE AGREEMENT, AMENDMENT, TERMINATION
10.1 Assignment. Neither this Agreement nor any rights of
the Investor or the Company hereunder may be assigned by either party to any
other person. Notwithstanding the foregoing, the Investor's rights and
obligations under this Agreement may be assigned at any time, in whole, with
the prior written consent of the Company (which consent shall not be
unreasonably withheld) to any Affiliate of the Investor (a "Permitted
Transferee"). The rights and obligation of the Investor under this Agreement
shall inure to the benefit of, and be enforceable by and against, any such
Permitted Transferee.
10.2 Entire Agreement; Amendment. This Agreement, the
Registration Rights Agreement, 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, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
10.3 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Investor without its prior consent, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. Except as may be required by law, the Company shall consult with
the Investor before issuing any press release or otherwise making any public
statements with respect to this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation.
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10.4 Termination. (a) The Company may, in its sole
discretion, terminate this Agreement and Investor's obligation to purchase any
Investment Amount for the remainder of the Commitment Period.
(b) The Investor may terminate this Agreement as a result of (i)
a breach (which is not cured in accordance with this Agreement) by the Company
of any material representation, warranty, covenant or other obligation in this
Agreement or the Registration Rights Agreement or (ii) if the Investor
reasonably determines, in its sole discretion, at any time that the adoption
of, or change in, or any change in the interpretation or application of, any
law, regulation, rule, guideline or treaty (including, but not limited to,
changes of capital adequacy) makes it illegal or materially impractical for the
Investor to fulfill its commitment pursuant to this Agreement, but in the case
of either (i) or (ii) above, Investor may terminate this Agreement only after a
60-day period in which the parties negotiate in good faith, in the case of (i),
a reasonable substitute for such provision or, in the case of (ii), a
reasonable alternative manner not illegal or impossible for the Investor to
fulfill its commitment pursuant to this Agreement.
XI.
NOTICES, ETC., COST AND EXPENSES, INDEMNIFICATION
11.1 Notices, Etc.. All notices, demands, requests,
consents, approvals or other communications required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served or deposited in the mail, registered or
certified, return receipt requested, postage prepaid, or delivered by reputable
air courier service with charges prepaid, or transmitted by hand delivery,
telegram, telex or facsimile, addressed as set forth below, or to such other
address as such party shall have specified most recently by written notice:
(a) if to the Company, to: SciClone Pharmaceuticals Inc., 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxx, XX 00000; Attention: Xxxxx X. Xxxxx, Facsimile No.:
(000) 000-0000, with copies (which shall not constitute notice) to: Xxxx Xxxx
Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xx., Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx,
00000, Attention: Xxxxxx Xxxxxx, Esq., Facsimile No.: (650) 327- 3699; and
(b) if to the Investor, Cheyenne LLC, c/o The Palladin Group, 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Facsimile No.:
(000) 000-0000, with copies (which shall not constitute notice) to: Xxxxxx &
Xxxxxx, 000 00xx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000-0000, Attn. X. Xxxxxxxxx
Xxxxxx, Facsimile No.: (000) 000-0000. Subject to Section 2.3(c), notice shall
be deemed given on the date of service or transmission if personally served or
transmitted by telegram, telex or facsimile during normal business hours of the
recipient. Notice otherwise sent as provided herein shall be deemed given on
the third business day following the date mailed or on the second business day
following delivery of such notice by a reputable air courier service.
11.2 Costs and Expenses. The Company shall be responsible
for the Investor's (a) legal fees and related expenses incurred in entering
into this Agreement up to a maximum amount of $50,000, which shall be payable
upon execution and delivery of this Agreement, and (b) costs and expenses in
connection with the performance of its obligations hereunder up to a maximum
amount of $25,000 initially, and $5,000 quarterly thereafter. The Company
agrees to pay the
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Investor the amounts due under clause (b) of the preceding sentence within
thirty (30) days following the Investor's request therefor. In the event
payment is not received within such thirty (30) day period, Investor shall have
the right to deduct any such amounts owed by the Company to the Investor from
any amounts owed by the Investor to the Company pursuant to Section 2.4(c)
herein.
11.3 Indemnification.
(a) Indemnification of Investor. The Company
agrees to indemnify and hold harmless the Investor and each person, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, arising out of any untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including any Prospectus, or in any offering circular or
other document, as applicable, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statement therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), or in any offering circular or other
document, as applicable, or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, based upon any such untrue
statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 11.3(d) below) any such settlement is
effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever,
as incurred (including the fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above; provided, however, that
this indemnity agreement shall not apply to any loss, liability, claim, damage
or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by the Investor expressly for
use in the Registration Statement (or any amendment thereto), including any
Prospectus (or any amendment or supplement thereto), or in any offering
circular or other document, as applicable.
(b) Indemnification of Company. The Investor
agrees to indemnify and hold harmless the Company, its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15
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of the Securities Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto), including any
Prospectus (or any amendment or supplement thereto), or in any offering
circular or other document, as applicable, in reliance upon and in conformity
with written information furnished to the Company by the Investor expressly for
use in the Registration Statement (or any amendment or supplement thereto) or
in any offering circular or other document, as applicable.
(c) Action against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of his indemnity agreement. In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
own counsel in any such case but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties unless (i) the employment
of such counsel shall have been authorized in writing by the indemnifying party
in connection with the defense of such action at the expense of the
indemnifying party, (ii) the indemnifying party shall not have employed counsel
to have charge of the defense of such action within a reasonable time after
notice of commencement of the action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying party parties (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf of the
indemnified parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying party. In no event shall
the indemnifying party be liable for fees and expenses of more than one counsel
(in addition to one local counsel) separate from their own counsel for the
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry or any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 11.3 or Section 11.4 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of an
any indemnified party.
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(d) Settlement without Consent if Failure to
Reimburse. If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for the fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 11.3(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
11.4 Contribution. If the indemnification provided for in
Section 11.3 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to herein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred (a) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Investor on the other hand from the offering of
the Common Stock pursuant to this Agreement or (b) if the allocation provided
by clause (a) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (a)
above but also the relative fault of the Company on the one hand and of the
Investor on the other hand and in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as
well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and
the Investor on the other hand in connection with the offering of the Common
Stock pursuant to this Agreement shall be deemed to be in the same respective
portions as the total proceeds from the offering of the Common Stock pursuant
to this Agreement received by the Company from the Investor and the total
profits received by the Investor upon the sale of such Common Stock bear to the
aggregate public offering price.
The relative fault of the Company on the one hand and the Investor
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Investor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 11.4 were determined on a
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 11.4.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 11.4
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by
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any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or omission
or alleged omission.
Notwithstanding the provisions of this Section 11.4, the Investor
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Common Stock purchased by it and resold to the
public exceeds the amount of any damages which the Investor has otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 11.4, each person, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Investor, and each director of the Company, each officer of the Company
who signed the Registration Statement, and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act shall have the same rights to contribution as the
Company.
11.5 General Indemnification. Each party shall indemnify
the other against any loss, cost or damages (including reasonable attorney's
fees and expenses) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
XII.
MISCELLANEOUS
12.1 Counterparts. This Agreement may be executed in any
number of counterparts, all of which together shall constitute one instrument.
12.2 Survival: Severability. (a) The representations,
warranties, covenants and agreements of the parties hereto shall survive each
Closing hereunder. The indemnity and contribution agreements contained in
Sections 11.3 and 11.4 hereof shall survive and remain operative and in full
force and effect regardless of (i) any termination of this Agreement or of the
Commitment Period, (ii) any investigation made by or on behalf of any
indemnified party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Common Stock. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall
continue in full force and effect without said provision; provided that such
severability shall be ineffective if it materially changes the economic benefit
of this Agreement to any party.
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12.3 Title and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
12.4 Effectiveness of the Agreement. This Agreement shall
be effective as of the Effective Date.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the date
hereof.
CHEYENNE LLC SCICLONE PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxx
---------------------------------- ------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxx
Title: Title: Senior Vice President
[SIGNATURE PAGE TO STRUCTURED EQUITY LINE FLEXIBLE FINANCING AGREEMENT]
