Exhibit 10.20
FORM OF SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement (together with the schedules and exhibits
hereto, this "Agreement"), dated as of May 7, 2002, by and between Bioenvision,
Inc., a Delaware corporation (the "Company"), and each of the Persons (as
defined below) who has executed a signature page to this Agreement (each a
"Purchaser," and together, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Company, the Securities (as such term
is defined below) as set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, the parties hereto hereby agree as
follows:
1. Authorization and Sale of Purchased Shares.
1.1 Authorization. The Company has duly authorized the issuance and
sale of up to 5,920,000 shares of its Series A Preferred Stock, par value $0.001
per share (the "Series A Preferred Stock"), with the powers, designations,
preferences, rights, qualifications, limitations and restrictions contained in
the Certificate of Designations of the Series A Preferred Stock, in the form of
Exhibit A hereto (the "Certificate of Designations"), to be acquired by the
Purchasers in accordance with the terms of this Agreement. With the purchase of
each share of Series A Preferred Stock, the Purchasers will also receive one (1)
warrant (the "Warrant") to purchase one (1) share of Common Stock, par value
$0.001 per share (the "Common Stock"), in the form of Exhibit B hereto. The
Series A Preferred Stock and the Warrants are collectively referred to herein as
the "Securities". The Purchasers of the Series A Preferred Stock shall have the
benefit of certain registration rights in respect of the shares of Common Stock
underlying the Securities on the terms and conditions of a Registration Rights
Agreement, in the form of Exhibit C hereto (the "Registration Rights
Agreement"). The Company is making the offering of the Securities (the
"Offering") for sale only to individuals, entities or groups, including, without
limitation, corporations, limited liability companies, limited or general
partnerships, joint ventures, associations, joint stock companies, trusts,
unincorporated organizations, or governments or any agencies or political
subdivisions thereof (each, a "Person") who are "accredited investors" (as
defined herein). All subscription proceeds received will be deposited directly
into an Escrow Account (as defined below) as described in Section 2.1 herein.
SCO Securities LLC ("SCO Securities" or the "Placement Agent") is the Company's
placement agent for the Offering, but other registered broker-dealers ("Other
Participating Agents") may also place Securities with the consent of SCO
Securities.
1.2 Subscription.
Subject to the terms and conditions hereinafter set forth in this
Agreement, each Purchaser hereby offers to purchase, at a price of $3.00 per
share, the number of shares of Series A Preferred Stock set forth beneath each
such Purchaser's name on the signature pages of this Agreement, for an aggregate
purchase price (the "Purchase Price") to be paid by such Purchaser in the amount
set forth on the signature page beneath such Purchaser's name. The Purchasers
understand that the Purchasers will receive one (1) Warrant to purchase one (1)
share of Common Stock for every share of Series A Preferred Stock for which this
subscription is accepted. The Company may accept or reject subscriptions, in
whole or in part, or accept subscriptions for less than the $60,000 minimum
subscription, in its sole discretion.
1.3 Subscription Procedures. To submit this Subscription, each
Purchaser must deliver (i) this Agreement, including, without limitation, the
annexed Purchaser Questionnaire, both duly completed and executed, (ii) an
executed Registration Rights Agreement, and (iii) the purchase price, in full,
for the Securities, in the amount of $3.00 for each share of Series A Preferred
Stock for which such Purchaser is subscribing. The payment must be made in U.S.
dollars, in immediately available funds, and must be delivered by certified
check or wire transfer of immediately available funds. Certified checks must be
made payable to Xxxxx Xxxxxxx LLP. The wire instructions are as follows:
Bank Name: Citibank, N.A.
Address: 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxx Xxxxxxxx
Bank Phone #: 000-000-0000
Account Name: Xxxxx Xxxxxxx LLP Escrow Account
Account #: 00000000
ABA Transit #: 000000000
Reference: Bioenvision, Inc.----301140-1
Xxxxxx X. Xxxxxxxxx---212-835-6000
Payment, and the other documents required for subscription must be
delivered to the following address:
Xxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Reference: Bioenvision, Inc.---301140-1
2. Closing.
Upon acceptance of subscriptions totaling $12,000,000 (the "Initial
Minimum Offering"), the Company shall hold a closing of the purchase and sale of
such Securities (the "Initial Closing"); provided that the Company satisfies the
Purchasers with reasonable assurance that at least $3,000,000 of additional
Securities will be invested in the Company on similar terms as soon as
practicable (but no more than 30 days) after the Initial Closing. Upon
acceptance of subscriptions totaling $17,750,000, the Company shall hold a final
closing (the "Final Closing," and together with the Initial Closing, the
"Closings"). The Initial Closing and the Final Closing will take place at such
location as may be agreed upon by the Company and the Placement Agent; however,
the Final Closing will take place within thirty (30) days after the Initial
Closing. The date of the Initial Closing will be referred to as the "Initial
Closing Date" and the date of the Final Closing is referred to as the "Final
Closing Date." At the Closing with respect to the subscription by each
Purchaser, to the extent the same is accepted by the Company, the Company will
register in the name of each such Purchaser that number of Securities being
purchased by such Purchaser in accordance with the information on the applicable
signature page of this Agreement.
2.1 Escrow. Pending the Closings, all funds paid in respect of this
Agreement shall be deposited in an attorney escrow account (the "Escrow
Account") maintained by Xxxxx Xxxxxxx LLP (the "Escrow Agent") pursuant to an
Escrow Agreement, dated as of the date hereof, by and among the Company, each
Purchaser and the Escrow Agent (the "Escrow Agreement"). The Escrow Account
shall not be interest bearing. If the Company accepts subscriptions for the
Securities at or prior to the Initial Closing Date or the Final Closing Date, as
the case may be, then all subscription proceeds received for subscriptions
accepted by the Company prior to such Closing Date shall be paid over to the
Company at each Closing, net of the placement fee and offering expenses, which
shall be paid to the appropriate parties at each such Closing. If the Company
shall not have received and accepted each Purchaser's subscription, then that
subscription shall be void and all funds paid hereunder by such Purchaser,
without deduction therefrom or interest thereon, shall be promptly returned to
such Purchaser.
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2.2. Return of Funds. If the Company does not receive subscriptions for
the Initial Minimum Offering, then the Escrow Agent shall return each
Purchaser's subscription amount within ten (10) business days of the date
hereof. Each Purchaser hereby authorizes and directs the Escrow Agent to return
or direct the return of any funds from the Escrow Account, without deduction
therefrom or interest thereon, to the same account from which the funds were
originally drawn, to the extent that such Purchaser's subscription is not
accepted prior to the termination of the Offering.
3. Conditions to the Obligations of each Purchaser at Closing.
The obligation of each Purchaser to purchase and pay for the Securities
subscribed for by such Purchaser at the applicable Closing is subject to the
satisfaction on or prior to the Initial Closing Date or the Final Closing Date,
as the case may be, of the following conditions, each of which may be waived by
the applicable Purchaser:
3.1 Opinion of Counsel to the Company. Each Purchaser or its
Representative (as defined in the Escrow Agreement) shall have received from
Xxxxx Xxxxxxx LLP, counsel for the Company, its opinion dated as of the Initial
Closing Date or Final Closing Date, as the case may be, and addressed to the
Purchasers (to the extent purchasing securities on such Closing Date), covering
the matters attached hereto as Exhibit D.
3.2 Representations and Warranties. The representations and warranties
of the Company contained in this Agreement which are qualified as to materiality
must be true and correct in all respects and the representations and warranties
of the Company contained in this Agreement which are not qualified as to
materiality must be true and correct in all material respects as of the Closing
Date except to the extent that the representations and warranties relate to an
earlier date in which case the representations and warranties must be true and
correct as written or true and correct in all material respects, as the case may
be, as of the earlier date.
3.3 Performance of Covenants. The Company will have performed or
complied with in all material respects all covenants and agreements required to
be performed by it on or prior to the Closing pursuant to this Agreement,
including, without limitation, the delivery of certificates evidencing the
shares of Series A Preferred Stock for which the Subscription made hereby is
accepted and one Warrant for each such share of Series A Preferred Stock.
3.4 No Injunctions; etc. No court or governmental injunction, order or
decree prohibiting the purchase and sale of the Securities will be in effect.
There will not be in effect any law, rule or regulation prohibiting or
restricting the sale or requiring any consent or approval of any Person that has
not been obtained to issue and sell the Securities to the Purchasers.
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3.5 Closing Documents. The Company will have delivered to each
Purchaser or its Representative the following:
(a) a certificate of the President of the Company certifying that the
conditions in Sections 3.2 and 3.3 have been satisfied;
(b) Prior to the Initial Closing, a certificate of the Secretary of the
Company, dated as of that Closing Date, certifying (i) the attached copies of
the Certificate of Incorporation and By-laws of the Company, (ii) the
resolutions of the Board of Directors of the Company (the "Board") authorizing
the execution, delivery and performance of this Agreement and the issuance of
the Securities (including, but not limited to, for purposes of Section 203 of
the Delaware General Corporation Law) and (iii) the incumbency of the officers
duly authorized to execute this Agreement and the other documents contemplated
by this Agreement; and for every other Closing, a certificate certifying that
the foregoing certificate continues to be true, correct and complete;
(c) a certificate of the Secretary of State of the State of Delaware,
dated as a recent date (but no more than five business days) prior to the
Closing Date, to the effect that the Company is in good standing in the State of
Delaware and that all annual reports, if any, have been filed as required and
that all taxes and fees have been paid in connection therewith;
(d) a copy of the Certificate of Designations certified by the
Secretary of State of the State of Delaware;
(e) a certificate evidencing the shares of Series A Preferred Stock as
to which the Company has accepted such Purchaser's subscription;
(f) a certificate evidencing a Warrant to purchase one share of Common
Stock for each share of Series A Preferred Stock for which the Company has
accepted such Purchaser's subscription pursuant to this Agreement;
(g) the Registration Rights Agreement duly executed by the Company; and
(h) the Escrow Agreement duly executed by the Company.
3.6 Waivers and Consents. The Company will have obtained all consents
and waivers necessary to execute and deliver this Agreement and all related
documents and agreements and to issue and deliver the Securities, and all
consents and waivers will be in full force and effect.
3.7 Board of Directors. At Closing, the Board shall adopt a resolution
pursuant to which the Board shall consist of the following five (5) persons:
Xxxxxxxxxxx X. Xxxx, M.D.
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxxx, C.A.
Xxxxxx X. Xxxx
Xxxxxx Xxxxxx, M.D.
3.8 Confidentiality Agreements. The Company shall have received signed
confidentiality agreements and assignment of invention agreements substantially
in the form of Exhibit E attached hereto (a "Confidentiality Agreement") with
all employees of the Company.
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4. Conditions to the Obligations of the Company at Closing.
The obligation of the Company to issue and sell the Securities to any
Purchaser at the applicable Closing with respect to the Securities for which the
Company has accepted the Subscription made by the such Purchaser by means of
this Agreement is subject to the satisfaction on or prior to each Closing Date
of the following conditions, each of which may be waived by the Company:
4.1 Receipt of Purchase Price. The Company shall have received payment
in full in immediately available funds in U.S. dollars of the Purchase Price
with respect to the Securities for which the Company has accepted the
Subscription made by such Purchaser by means of this Agreement; provided that
the Company may only have an Initial Closing upon the receipt of subscriptions
in the amount of the Initial Minimum Offering.
4.2 Representations and Warranties. The representations and warranties
of such Purchaser contained in this Agreement which are qualified as to
materiality must be true and correct in all respects and the representations and
warranties of such Purchaser contained in this Agreement which are not qualified
as to materiality must be true and correct in all material respects as of the
applicable Closing Date.
4.3 Performance of Covenants. Such Purchaser will have performed or
complied with in all material respects all covenants and agreements required to
be performed by such Purchaser on or prior to the Closing pursuant to this
Agreement.
4.4 Purchaser Questionnaire. All of the information furnished by such
Purchaser in the confidential purchaser questionnaire accompanying this
Agreement (the "Purchaser Questionnaire") shall have been accurate and complete
in all material respects.
4.5 No Injunctions. No court or governmental injunction, order or
decree prohibiting the purchase or sale of the Securities will be in effect.
4.6 Closing Documents. Each Purchaser will have delivered to the
Company the Registration Rights Agreement and the Escrow Agreement duly executed
by such Purchaser.
5. Representations and Warranties of each Purchaser.
Each Purchaser, in order to induce the Company to accept this offer,
hereby represents and warrants, severally and not jointly, as follows:
5.1 Due Authorization. Each Purchaser represents for such Purchaser to
the Company that such Purchaser has full power and authority and has taken all
action necessary to authorize such Purchaser to execute, deliver and perform
such Purchaser's obligations under this Agreement. This Agreement is the legal,
valid and binding obligation of such Purchaser in accordance with its terms.
5.2 Accredited Investor. Each Purchaser represents that such Purchaser
is an Accredited Investor as that term is defined in Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
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5.3 No Investment Advice. The Company has not made any other
representations or warranties to such Purchaser other than as set forth herein
or incorporated herein by reference with respect to the Company or rendered any
investment advice.
5.4 Investment Experience. Each Purchaser represents that such
Purchaser has not authorized any Person to act as such Purchaser's Purchaser
Representative (as that term is defined in Regulation D of the General Rules and
Regulations under the Securities Act) in connection with this transaction. Such
Purchaser has such knowledge and experience in financial, investment and
business matters that such Purchaser is capable of evaluating the merits and
risks of the prospective investment in the securities of the Company. Such
Purchaser has consulted with such independent legal counsel or other advisers as
such Purchaser has deemed appropriate to assist such Purchaser in evaluating the
proposed investment in the Company.
5.5 Adequate Means. Each Purchaser represents as to such Purchaser that
such Purchaser (i) in the case of an individual only, has adequate means of
providing for such Purchaser's current financial needs and possible
contingencies; and (ii) can afford (a) to hold unregistered securities for an
indefinite period of time as required; and (b) sustain a complete loss of the
entire amount of the subscription.
5.6 Access to Information. Each Purchaser represents that such
Purchaser has been afforded the opportunity to ask questions of, and receive
answers from the officers and/or directors of the Company acting on its behalf
concerning the terms and conditions of this transaction and to obtain any
additional information, to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information furnished; and has had such
opportunity to the extent such Purchaser considers appropriate in order to
permit such Purchaser to evaluate the merits and risks of an investment in the
Company. It is understood that all documents, records and books pertaining to
this investment have been made available for inspection, and that the books and
records of the Company will be available upon reasonable notice for inspection
by investors during reasonable business hours at its principal place of
business. The foregoing shall in no way be deemed to limit the ability of each
Purchaser to rely on the representations and warranties set forth herein or
incorporated herein by reference.
5.7 No Endorsement. Each Purchaser further acknowledges that this
Offering has not been passed upon or the merits thereof endorsed or approved by
any state or federal authorities.
5.8 Non-Registered Securities. Each Purchaser acknowledges that the
offer and sale of the Securities have not been registered under the Securities
Act or any state securities laws and the Securities and the underlying shares of
Common Stock may be resold only if registered pursuant to the provisions
thereunder or if an exemption from registration is available. Each Purchaser
understands that the Offering of the Securities is intended to be exempt from
registration under the Securities Act, based, in part, upon the representations,
warranties and agreements of such Purchaser contained in this Agreement.
5.9 No Resale. Each Purchaser represents that the Securities being
subscribed for, and the securities underlying the subscription, are being
acquired solely for the account of such Purchaser for such Purchaser's
investment and not with a view to, or for resale in connection with, any
distribution in any jurisdiction where such sale or distribution would be
precluded. By such representation, such Purchaser means that no other Person has
a beneficial interest in the Securities or the securities underlying the
subscription, and that no other Person has furnished or will furnish directly or
indirectly, any part of or guarantee the payment of any part of the
consideration to be paid by such Purchaser to the Company in connection
therewith. Such Purchaser does not intend to dispose of all or any part of the
Securities or the securities underlying the subscription except in compliance
with the provisions of the Securities Act and applicable state securities laws,
and understands that the Securities and the securities underlying the
subscription are being offered pursuant to a specific exemption under the
provisions of the Securities Act, which exemption(s) depends, among other
things, upon the compliance with the provisions of the Securities Act.
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5.10 Legend. Each Purchaser hereby acknowledges and agrees that the
Company may insert the following or similar legend on the face of the
certificates evidencing the Securities purchased by such Purchaser and the
shares of Common Stock issued upon the conversion or exercise thereof, as the
case may be, if required in compliance with the Securities Act or state
securities laws:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws
and may not be sold or otherwise transferred or disposed of except
pursuant to an effective registration statement under the Securities
Act and any applicable state securities laws, or an exemption from
registration under the Securities Act and any applicable state
securities laws; provided that, if requested by the Company, an opinion
of counsel reasonably satisfactory in form and substance is furnished
to the Company that an exemption from the registration requirements of
the Securities Act is available."
5.11 Broker's or Finder's Commissions. No finder, broker, agent,
financial person or other intermediary has acted on behalf of any Purchaser in
connection with the sale of the Securities by the Company or the consummation of
this Agreement or any of the transactions contemplated hereby. No Purchaser has
had any direct or indirect contact with any other investment banking firm (or
similar firm) with respect to the offer of the Securities by the Company to the
Purchasers or the Purchasers' subscriptions for the Securities.
Each Purchaser certifies that each of the foregoing representations and
warranties by such Purchaser sets forth in this Section 5 are true as of the
date hereof and shall survive such date.
6. Representations and Warranties of the Company.
For purposes of this Section 6 only, references to the Company shall
mean the Company and Pathagon, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("Pathagon"), taken as a whole, except where reference
to Pathagon would be inappropriate in the context of a representation or
warranty. The Company represents and warrants to the Purchasers that:
6.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has full corporate power and authority to
own and hold its properties and to conduct its business. The Company is duly
licensed or qualified to do business, and in good standing, in each jurisdiction
in which the nature of its business requires licensing, qualification or good
standing, except for any failure to be so licensed or qualified or in good
standing that would not have a material adverse effect on the Company or its
results of operations, assets or financial condition or on its ability to
perform its obligations under this Agreement or to issue the Securities (a
"Material Adverse Effect").
6.2 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of 50,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock, par value $0.001 per share (the "Preferred Stock").
As of the date hereof, (i) 16,887,786 shares of Common Stock were issued and
outstanding, (ii) 2,200,000 shares of Common Stock were reserved for issuance
upon exercise of outstanding options issued to certain officers of the Company,
(iii) 2,904,544 shares of Common Stock were reserved for issuance upon exercise
of outstanding options issued to persons other than officers of the Company,
(iv) 1,800,000 shares of Common Stock were reserved for issuance upon the
exercise of outstanding warrants and (v) no shares of Preferred Stock were
issued or outstanding. The Company has also agreed to issue options to purchase
up to $3 million of shares of Common Stock to Ilex Oncology, Inc. ("Ilex")
pursuant to that certain Co-Development Agreement, dated as of March 12, 2001,
by and between the Company and Ilex in the event that certain milestones are
achieved under such agreement, but no shares have been reserved in respect to
those contingent options. In addition, there are 7,473,082 shares of Common
Stock reserved for a stock option plan for the Company's employees; none of
which such options are outstanding (the "Available Unissued Stock Option Pool").
All the outstanding shares of Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive rights
created by or through the Company, and have been issued in compliance with all
federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities.
Except as set forth prior to the date hereof in the Commission Documents (as
defined below) or in this Section 6.2 or on Schedule 6.2 hereof, there are no
other options, warrants or other rights, convertible debt, agreements,
arrangements or commitments of any character obligating the Company to issue or
sell any shares of capital stock of or other equity interests in the Company.
The Company is not obligated to retire, redeem, repurchase or otherwise
reacquire any of its capital stock or other securities. Except as disclosed in
the Commission Documents or on Schedule 6.2, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party. Except as disclosed on Schedule
6.2, neither the Company nor any of its Subsidiaries directly or indirectly own
or have any investment in any of the capital stock of, or any other proprietary
interest in, any Person that is not a Subsidiary. Upon consummation of the
transactions contemplated hereby, assuming all of the Securities offered
hereunder have been issued and are outstanding, the Securities shall represent,
on a fully diluted basis, approximately 42% of the Company's outstanding capital
stock, which does not include the Available Unissued Stock Option Pool but does
include the Warrants issuable to SCO Securities (the "SCO Warrants") in
connection with this Offering. The Company has not adopted a stockholders rights
plan, poison pill or similar arrangement. The consummation of the transactions
contemplated by this Agreement will not accelerate the vesting schedule of any
of the Company's outstanding options or warrants. For purposes of the foregoing,
"Fully Diluted" means: (i) all shares of Company capital stock outstanding
immediately following the Final Closing; (ii) all securities, including options
and warrants, convertible into or exercisable for shares of Company capital
stock, as if exercised and converted to the fullest extent of their terms; (iii)
all securities issuable pursuant to contractual or other obligations of the
Company existing at the Final Closing; and (iv) all shares of Company capital
stock reserved for issuance to employees, consultants or directors of the
Company or other Persons not including the securities described in clause (ii).
"Fully Diluted" does not include the Available Unissued Stock Option Pool.
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Schedule 6.2 sets forth, as of the Closing Date, a true and complete
list of each of the Subsidiaries of the Company. The Company owns all of the
issued and outstanding capital stock of the Subsidiaries, free and clear of all
Liens. All of such shares of capital stock are duly authorized, validly issued,
fully paid and non-assessable, and were issued in compliance with the
registration and qualification requirements of all applicable federal, state and
foreign securities laws. Except as set forth on Schedule 6.2, there are no
options, warrants, conversion privileges, subscription or purchase rights or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued, unauthorized or treasury shares of capital stock or
other securities of, or any proprietary interest in, any of the Subsidiaries,
and there is no outstanding security of any kind convertible into or
exchangeable for such shares or proprietary interest. Other than Pathagon, none
of the Subsidiaries conducts any material business or operations, owns any
material assets or is liable for any material Liabilities.
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"Subsidiaries" means, as of the relevant date of determination, with
respect to any Person, a corporation or other Person of which 50% or more of the
voting power of the outstanding voting equity securities or 50% or more of the
outstanding economic equity interest is held, directly or indirectly, by such
Person. Unless otherwise qualified, or the context otherwise requires, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
6.3 Corporate Power, Authorization; Enforceability. The Company has
full corporate power and authority to execute, deliver and enter into this
Agreement, the Certificate of Designations, the Registration Rights Agreement
and the Warrants (collectively, the "Transaction Documents") and to consummate
the transactions contemplated hereby and thereby. All action on the part of the
Company, its directors or stockholders necessary for the authorization,
execution, delivery and performance of the Transaction Documents by the Company,
the authorization, sale, issuance and delivery of the Securities contemplated
hereby and the performance of the Company's obligations hereunder and thereunder
has been taken. The Securities to be purchased on each Closing Date and the
shares of Common Stock issuable upon the conversion of the Series A Preferred
Stock and the exercise of the Warrants have been duly authorized and, when
issued in accordance with this Agreement, the Certificate of Designations and
the Warrants, as the case may be, will be validly issued, fully paid and
nonassessable and will be free and clear of any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences) (collectively, "Liens") imposed by or through the Company other
than restrictions imposed by this Agreement, the Certificate of Designations,
the Warrants and the Registration Rights Agreement, as the case may be, and
applicable securities laws. Except as set forth in Schedule 6.2, no preemptive
or other rights to subscribe for or purchase equity securities of the Company
exists with respect to the issuance and sale of the Securities or the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock or
exercise of the Warrants. The Transaction Documents have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
6.4 Financial Statements and Commission Filings; Undisclosed
Liabilities. (a) Included in the Company's Form 10-KSB/A for the year ended June
30, 2001 (the "2001 10-KSB") are true and complete copies of the audited
consolidated balance sheet (the "Balance Sheet") of the Company as of June 30,
2001, and the related audited consolidated statements of operations, and cash
flows for the years ended June 30, 2001, June 30, 2000 and the period from
August 16, 1996 through June 30, 2001; and the related audited consolidated
statements of stockholders' equity (deficit) for the period from August 16, 1996
through June 30, 2001 (the "Financial Statements"), accompanied by the report of
each of Xxxxx Xxxxxxxx LLP and Ernst & Young LLP. As of their respective dates,
the Financial Statements complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Securities and Exchange Commission (the "Commission") with respect thereto.
The Financial Statements have been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP"), consistently applied, during the
periods involved (except in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). The Company keeps proper accounting
records in which all material assets and liabilities and all material
transactions of the Company are recorded in conformity with GAAP.
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(b) Except as set forth on Schedule 6.4(b), since June 30, 2001, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (all of the foregoing, including, but not limited to, the 2001 10-KSB,
filed prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "Commission Documents") and all such
Commission Documents were filed within the time periods specified in the
Exchange Act. As of their respective filing dates, each Commission Document
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder applicable to the Commission Documents, and no Commission Document
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, subject to the planned restatement of certain quarterly reports in
fiscal year 2001 as disclosed by the Company in the press release announcing its
fiscal year 2001 results. As of their respective filing dates, the financial
statements of the Company included in the Commission Documents complied as to
form in all material respects with then applicable accounting requirements and
with the published rules and regulations of the Commission with respect thereto,
were prepared in accordance with GAAP and as of their respective dates, fairly
presented in all material respects the consolidated financial position of the
Company and the results of its operations as of the time and for the periods
indicated therein (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-QSB, and Regulations
S-B and S-X of the Commission), subject to the planned restatement of certain
quarterly reports in fiscal year 2001 as disclosed by the Company in the press
release announcing its fiscal year 2001 results.
(c) Since June 30, 2001, the Company has not incurred any liabilities
or obligations of any nature, whether or not accrued, absolute, contingent or
otherwise ("Liabilities"), other than liabilities (i) disclosed in the
Commission Documents filed prior to the date of this Agreement, (ii) adequately
provided for in the Balance Sheet or disclosed in any related notes thereto,
(iii) incurred in connection with this Agreement, or (iv) incurred in the
ordinary course of business.
6.5 No Material Adverse Changes. Since June 30, 2001, except as
disclosed in the Commission Documents filed subsequent to that date, there has
not been any material adverse change in the business, financial condition or
operating results of the Company.
6.6 Absence of Certain Developments. Except as contemplated by this
Agreement and the Commission Documents, since June 30, 2001, through the date
immediately preceding each Closing Date, the Company has not (a) issued any
stock, options, bonds or other corporate securities other than as reflected in
Section 6.2 hereof, (b) borrowed any amount or incurred or became subject to any
Liabilities (absolute, accrued or contingent), other than current Liabilities
incurred in the ordinary course of business and Liabilities under contracts
entered into in the ordinary course of business, (c) discharged or satisfied any
material Lien or adverse claim or paid any obligation or Liability (absolute,
accrued or contingent), other than current Liabilities shown on the Balance
Sheet and current Liabilities incurred in the ordinary course of business, (d)
declared or made any payment or distribution of cash or other property to the
stockholders of the Company or purchased or redeemed any securities of the
Company, (e) mortgaged, pledged or subjected to any material Lien or adverse
claim any of its properties or assets, except for Liens for taxes not yet due
and payable or otherwise in the ordinary course of business, (f) sold, assigned
or transferred any of its assets, tangible or intangible, except in the ordinary
course of business or in an amount less than $250,000, (g) suffered any
extraordinary losses or waived any rights of material value other than in the
ordinary course of business, (h) made any capital expenditures or commitments
therefor other than in the ordinary course of business or in an amount less than
$250,000, (i) entered into any other transaction other than in the ordinary
course of business in an amount less than $250,000 or entered into any material
transaction, whether or not in the ordinary course of business, (j) made any
charitable contributions or pledges, (k) suffered any damages, destruction or
casualty loss, whether or not covered by insurance, affecting any of the
properties or assets of the Company or any other properties or assets of the
Company which could, individually or in the aggregate, have or result in a
Material Adverse Effect, (l) made any material change in the nature or
operations of the business of the Company, (m) participated in any transaction
that would have a Material Adverse Effect or otherwise acted outside the
ordinary course of business, (n) the Company has not increased the compensation
of any of its officers or the rate of pay of any of its employees, except as
part of regular compensation increases in the ordinary course of business, (o)
subject to the planned restatement of certain quarterly reports in fiscal year
2001 as disclosed by the Company in the press release announcing its fiscal year
2001 results, effected any material change in the accounting principles or
practice of the Company except as required by reason of a change in GAAP or (p)
entered into any agreement or commitment to do any of the foregoing.
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6.7 No Conflict; Governmental Consents. (a) The execution and delivery
by the Company of this Agreement, the Registration Rights Agreement and the
Warrant and the consummation of the transactions contemplated hereby and thereby
will not (i) result in the violation of any provision of the Certificate of
Incorporation or By-laws or other organizational documents of the Company, (ii)
result in any violation of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or Governmental Authority to or by
which the Company is bound, or (iii) conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any bond, debenture, note or other
evidence of indebtedness, or any material lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to
which the Company is a party or by which it or its property is bound, nor result
in the creation or imposition of any Lien upon any of the properties or assets
of the Company, except for, in the case of clauses (ii) and (iii) of this
subsection 6.7(a), any violation, conflict, breach or default which would not
have a Material Adverse Effect.
(b) No material consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other Governmental Authority or Person,
and no lapse of any waiting period under any Requirements of Law, remains to be
obtained (or lapsed) or is otherwise required to be obtained by the Company in
connection with the authorization, execution and delivery of this Agreement, the
Registration Rights Agreement and the Warrant or the consummation of the
transactions contemplated hereby or thereby, including, without limitation the
issue and sale of the Securities and the shares of Common Stock underlying such
Securities, except filings as may be required to be made by the Company after
each Closing with (i) the Commission, (ii) the National Association of
Securities Dealers, Inc. ("NASD"), (iii) the Nasdaq Stock Market, Inc. and (iv)
state blue sky or other securities regulatory authorities. For purposes of this
Agreement, "Requirements of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing (each, a "Governmental Authority") or stock exchange, in each case
applicable or binding upon such Person or any of its property or to which such
Person or any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
-11-
6.8 Litigation. Except as set forth in the Commission Documents, there
are no claims, actions, suits, investigations or proceedings pending or, to the
Company's knowledge, threatened proceedings against the Company or its
respective assets, at law or in equity, by or before any Governmental Authority,
or by or on behalf of any third party, except for any claim, action, suit,
investigation or proceeding which would not have a Material Adverse Effect nor
does the Company have knowledge that there is any reasonable basis for any of
the foregoing. There are no claims, actions, suits, investigations or
proceedings pending or, to the Company's knowledge, threatened proceedings
against the Company contesting the right of the Company to use, sell, import,
license, or make available to any Person any of the Company's products or
services currently or previously sold, offered, licensed or made available to
any Person or used by the Company or opposing or attempting to cancel any of the
Company's Intellectual Property rights, except for any claim, action, suit,
investigation or proceeding which would not have a Material Adverse Effect.
6.9 Compliance with Laws; No Default or Violation; Contracts. The
Company is in compliance in all material respects with all Requirements of Law
and all orders issued by any court or Governmental Authority against the Company
in all material respects. To the Company's knowledge, there is no existing or
currently proposed Requirement of Law which could reasonably be expected to
prohibit or restrict the Company from, or otherwise materially adversely affect
the Company in, conducting its business in any jurisdiction in which it now
conducts or proposes to conduct such business. The Company has all material
licenses, permits and approvals of any Governmental Authority (collectively,
"Permits") that are necessary for the conduct of the business of the Company;
(ii) such Permits are in full force and effect; and (iii) no violations are or
have been recorded in respect of any Permit. No material expenditure is
presently required by the Company to comply with any existing Requirements of
Law or order. Except as would not be reasonably expected to have a Material
Adverse Effect, the Company is not (i) in default under or in violation of any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party of by which it or any of its properties is bound or (ii) in
violation of any order, decree or judgment of any court, arbitrator or other
Governmental Authority. The contracts described in the Commission Documents or
incorporated by reference therein that are material to the Company
(collectively, the "Contractual Obligations") are in full force and effect on
the date hereof, and neither the Company nor, to the Company's knowledge, any
other party to such contracts is in breach of or default under any of such
contracts nor, to the Company's knowledge, does any condition exist that with
notice or lapse of time or both would constitute a default by such other party
thereunder. The Company has not received notice of a default and is not in
default under, or with respect to, any Contractual Obligation nor, to the
Company's knowledge, does any condition exist that with notice or lapse of time
or both would constitute a default thereunder. All of such Contractual
Obligations are valid, subsisting, in full force and effect and binding upon the
Company and, to the Company's knowledge, the other parties thereto, and the
Company has paid in full or accrued all amounts due thereunder and has satisfied
in full or provided for all of its liabilities and obligations thereunder.
Without limiting the foregoing, the Company has provided to the Purchasers true
and correct copies, as in effect on the date hereof, of that certain (i)
Co-Development Agreement (including all amendments, waivers, consents and other
documents relating thereto), dated August 31, 1998, among the Company and
Southern Research Institute, and (ii) Co-Development Agreement (including all
amendments, waivers, consents and other documents relating thereto), March 12,
2001, among the Company and Ilex (collectively, the "Co-Development
Agreements"), and there exists no violation, breach, event of default or event
that, but for the giving of notice or the lapse of time or both, would
constitute an event of default thereunder, and the Company has no knowledge that
any Person is terminating or may seek to terminate or challenge the terms of, or
rights set forth in, either of the Co-Development Agreements.
6.10 Insurance. The Company maintains and will continue to maintain
insurance of the types and in the amounts that the Company reasonably believes
is adequate for its business, including, but not limited to, insurance covering
all real and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against by similarly situated companies, all of which insurance is in full force
and effect.
-12-
6.11 Environmental Matters. The Company is in compliance, in all
material respects, with all applicable Environmental Laws. There is no civil,
criminal or administrative judgment, action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter pending
or, to the Company's knowledge, threatened against the Company pursuant to
Environmental Laws. To the Company's knowledge, there are no past or present
events, conditions, circumstances, activities, practices, incidents, agreements,
actions or plans which could reasonably be expected to prevent compliance with,
or which have given rise to or will give rise to liability which would have a
Material Adverse Effect, under Environmental Laws. For purposes of the
foregoing, "Environmental Laws" means federal, state, local and foreign laws,
principles of common laws, civil laws, regulations, and codes, as well as
orders, decrees, judgments or injunctions, issued, promulgated, approved or
entered thereunder relating to pollution, protection of the environment or
public health and safety.
6.12 Taxes. The Company has paid or caused to be paid, or has
established reserves in accordance with GAAP for all Tax liabilities applicable
to the Company for all fiscal years that have not been examined and reported on
by the taxing authorities (or closed by applicable statutes). No additional Tax
assessment against the Company has been heretofore proposed or, to the Company's
knowledge, threatened by any Governmental Authority for which provision has not
been made on its balance sheet.
No tax audit is currently in progress and there is no unassessed
deficiency proposed or, to the Company's knowledge, threatened against the
Company. The Company has no knowledge of any change in the rates or basis of
assessment of any Tax (other than federal income tax), of the Company which
would reasonably be expected to have a Material Adverse Effect. The Company has
not agreed to or is required to make any adjustments under section 481 of the
Code by reason of a change of accounting method or otherwise. None of the assets
of the Company is required to be treated as being owned by any Person, other
than the Company or any of its subsidiaries, pursuant to the "safe harbor"
leasing provisions of Section 168(f)(8) of the Code. The company is not a
"United States real property holding corporation" (a "USRPHC") as that term is
defined in Section 897(c)(2) of the Code and the regulations promulgated
thereunder.
For purposes of this Agreement, "Code" means the Internal Revenue Code
of 1986, as amended, and "Taxes" means any federal, state, provincial, county,
local, foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative, minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
6.13 Intellectual Property.
(a) "Intellectual Property" shall mean all of the following as they are
necessary in connection with the business of the Company as presently conducted
and as they exist in all jurisdictions throughout the world, in each case, to
the extent owned by or licensed to the Company: (i) patents, patent applications
and inventions, designs and improvements described and claimed therein,
patentable inventions and other patent rights (including any divisions,
continuations, continuations-in-part, reissues, reexaminations, or interferences
thereof, whether or not patents are issued on any such applications and whether
or not any such applications are modified, withdrawn, or resubmitted)
("Patents"); (ii) trademarks, service marks, trade dress, trade names, brand
names, designs, logos, or corporate names, whether registered or unregistered,
and all registrations and applications for registration thereof ("Trademarks");
(iii) copyrights and mask works, including all renewals and extensions thereof,
copyright registrations and applications for registration thereof, and
non-registered copyrights ("Copyrights"); (iv) trade secrets, inventions,
know-how, process technology, databases, confidential business information,
customer lists, technical data and other proprietary information and rights
("Trade Secrets"); (v) computer software programs, including, without
limitation, all source code, object code, and documentation related thereto
("Software"); (vi) Internet addresses, domain names, web sites, web pages and
similar rights and items ("Internet Assets"); and (vii) all licenses,
sublicenses and other agreements or permissions including the right to receive
royalties, or any other consideration related to the property described in
(i)-(vi). The Intellectual Property contains all of the intellectual property
necessary to operate the business of the Company as currently conducted.
-13-
(b) The Company exclusively owns (or otherwise has the right to use the
Intellectual Property pursuant to a valid license, sublicense or other
agreement), free and clear of all Liens, and has the unrestricted right (subject
to any such license terms, if applicable) to use, sell, license, or sublicense
all Intellectual Property.
(c) Schedule 6.13(c) sets forth all issued Patents, registrations,
filings and applications for any Patents, Trademarks and Copyrights filed by the
Company, specifying as to each item, as applicable: the title; the
jurisdiction(s) in which the item is issued or registered or in which an
application for issuance or registration has been filed; and the issuance,
registration, or application numbers and dates.
(d) Schedule 6.13(d) sets forth all material licenses, sublicenses,
distributor agreements and other agreements or permissions ("IP Licenses") under
which the Company is a (i) licensor, or (ii) licensee, distributor, or reseller,
except such licenses, sublicenses and other agreements relating to off-the-shelf
software which is commercially available on a retail basis for less than $200
per license and $5,000 in the aggregate and used solely on the computers of the
Company ("Off-the-Shelf Software"). To the knowledge of the Company, all of the
IP Licenses are valid, enforceable, and in full force and effect, and, with
respect to the Company, will continue to be on identical terms immediately
following the completion of the transactions contemplated by this Agreement.
(e) All products made, used or sold by the Company under the Patents
have been marked with the proper patent notice.
(f) All products and materials made, used or sold by the Company
containing Trademarks bear the proper federal registration notice where
permitted by law.
(g) All works encompassed by the Copyrights and used by the Company
have been marked with the proper copyright notice.
(h) To the Company's knowledge, upon reasonable inquiry in accordance
with sound business practice and business judgment, all the Company's
Intellectual Property rights are valid and enforceable. The Company has taken
all reasonably necessary actions to maintain and protect each item of
Intellectual Property owned by the Company.
(i) The Company has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of its Trade Secrets and the proprietary
nature and value of its Intellectual Property. To the best of the Company's
knowledge, none of the Trade Secrets, wherever located, the value of which is
contingent upon maintenance of confidentiality thereof, have been disclosed to
any employee, representative or agent of the Company or any other person not
obligated to maintain such Trade Secret in confidence pursuant to a
confidentiality agreement entered into with the Company, except as required
pursuant to the filing of a patent application by the Company.
-14-
(j) The Company is diligently prosecuting all Patent applications it
has filed, as instructed by patent counsel. The Company is diligently filing and
preparing to file Patent applications for all inventions in a manner and within
a sufficient time period to avoid statutory disqualification of any potential
Patent application.
(k) Each present or past employee, officer, consultant or any other
person who developed any part of any Company product or any Intellectual
Property that is or will be made, used or sold by the Company has executed a
valid and enforceable Confidentiality Agreement with the Company.
(l) Unless otherwise disclosed by the Company or pursuant to a current
license, it is not necessary for the Company's business to use any Intellectual
Property owned by any present or past director, officer, employee or consultant
of the Company (or persons the Company presently intends to hire). Except as set
forth on Schedule 6.13(l), to the knowledge of the Company, at no time during
the conception or reduction to practice of any of the Company's Intellectual
Property was any developer, inventor or other contributor to such Intellectual
Property operating under any grants from any Governmental Authority or subject
to any employment agreement, invention and assignment, nondisclosure agreement
or other Contractual Obligation with any Person that could adversely affect the
Company's rights to its Intellectual Property.
(m) To the knowledge of the Company, upon reasonable inquiry in
accordance with sound business practice and business judgment, none of the
Intellectual Property, products or services owned, used, developed, provided,
sold or licensed by the Company, or made for, used or sold by or licensed to the
Company by any person infringes upon or otherwise violates any Intellectual
Property rights of others.
(n) To the knowledge of the Company, upon reasonable inquiry in
accordance with sound business practice and business judgment, no Person is
infringing upon or otherwise violating the Intellectual Property rights of the
Company.
6.14 Employee Benefit Plans.
(a) Neither the Company nor any entity which is or was under common
control within the meaning of Section 414(b), (c), (m) or (o) of the Code
maintains or contributes to, or has within the preceding six years maintained or
contributed to, or may have any liability with respect to any employee benefit
plan subject to Title IV of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 412 of the Code or any "multiple employer plan"
within the meaning of the Code or ERISA. Each employee benefit plan,
arrangement, policy, program, agreement or commitment which the Company
maintains, contributes to or may have any liability in respect to (each, a
"Plan") has been established and administered in accordance with its terms, and
complies in form and in operation with the applicable requirements of ERISA, the
Code and other applicable Requirements of Law. No claim with respect to the
administration or the investment of the assets of any Plan (other than routine
claims for benefits) is pending. No event has occurred in connection with which
the Company or any Plan, directly or indirectly, could be subject to any
material liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Plan, or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which the Company has
agreed to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirement of, any such statute, regulation
or order. The Company has no liability, whether absolute or contingent,
including any obligations under any Plan, with respect to any misclassification
of any person as an independent contractor rather than as an employee.
-15-
(b) The Company does not have any obligations to provide or any direct
or indirect liability, whether contingent or otherwise, with respect to the
provision of health or death benefits to or in respect of any former employee,
except as may be required pursuant to Section 4980B of the Code and the
corresponding provisions of ERISA and the cost of which are fully paid by such
former employees.
(c) There are no unfunded obligations under any Plan which are not
fully reflected on the Financial Statements.
6.15 FDA Matters. After due investigation, (i) the Company currently
has no reasonable basis to believe that any Governmental Authority, including,
but not limited to, the United States Food and Drug Administration (the "FDA"),
will ultimately prohibit the marketing, sale, license or use in the United
States or elsewhere of any product developed, produced or marketed by the
Company or with third parties (including, without limitation, Ilex) (each, a
"Product"), (ii) the Company knows of no product or process which the FDA has
prohibited from being marketed or used in the United States which in function
and composition is substantially similar to any Product, (iii) the Company has
no Product on clinical hold nor any reason to expect that any Product is likely
to be placed on clinical hold, (iv) the Company has disclosed to the Purchaser
all submissions to the FDA made by the Company and the FDA responses (and other
material correspondence received from or submitted to the FDA by the Company),
including, but not limited to, all FDA warning letters, regulatory letters and
notice of adverse finding letters and the relevant responses, received by the
Company or any agent thereof relative to the development of its Products, (v)
none of the Company or, to the Company's knowledge, its employees, its
Affiliates or its agents, has ever been sanctioned, formally or otherwise, by
the FDA, and (vi) there has not been any suspensions or debarments by the FDA or
other federal departments and state regulatory bodies against the Company or, to
the Company's knowledge, any current or former employees of the Company.
6.16 Investment Company. The Company is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
6.17 Compliance. The Common Stock is registered pursuant to Section
12(g) of the Exchange Act, and is listed on the OTC bulletin board, and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the OTC bulletin board. The Company has complied
with all requirements with respect to the issuance of the Purchased Shares and
the listing thereof on the OTC bulletin board. The Company has not taken and
will not, in violation of applicable law, take, any action outside the ordinary
course of business designed to or that might reasonably be expected to cause or
result in unlawful manipulation of the price of the Common Stock to facilitate
the sale or resale of the Purchased Shares.
6.18 Private Offerings. Assuming the truth of each Purchaser's
representations and acknowledgments contained in Section 5 hereof, neither the
Company nor any Person acting on its behalf (other than the Purchasers, as to
whom the Company makes no representations) has offered or sold the Securities by
means of any general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act. The Company has not sold the Securities to
anyone other than the subscribers to this Agreement. Each Security shall bear
substantially the same legend set forth in Section 8 hereof for at least so long
as required by the Securities Act.
-16-
6.19 Broker's or Finder's Commissions. Except as set forth on Schedule
6.19, no finder, broker, agent, financial person or other intermediary has acted
on behalf of the Company in connection with the sale of the Securities by the
Company or the consummation of this Agreement or any of the transactions
contemplated hereby. The Company has not had any direct or indirect contact with
any other investment banking firm (or similar firm) with respect to the offer of
the Securities by the Company to the Purchasers or the Purchasers' subscriptions
for the Securities.
6.20 Disclosure. The Transaction Documents do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading. The Company does not
have any knowledge of any fact that has specific application to the Company
(other than general economic or industry conditions) and that can reasonably be
foreseen to cause a Material Adverse Effect that has not been set forth in the
Transaction Documents or the Commission Documents.
The Company certifies that each of the foregoing representations and
warranties by the Company sets forth in this Section 6 are true as of the date
hereof and shall survive such date as contemplated in Section 7.1.
7. Indemnification.
7.1 The Company agrees to indemnify and hold harmless the Purchasers,
their affiliates and each of their respective directors, officers, general and
limited partners, principals, agents and attorneys (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties") from and
against any and all losses, claims, damages, Liabilities, costs (including
reasonable attorneys' fees) and expenses (collectively, "Losses") to which any
Indemnified Party may become subject, insofar as such Losses arise out of, in
any way relate to, or result from (i) any breach of any representation or
warranty made by the Company contained in or made pursuant to this Agreement, or
(ii) the failure of the Company to fulfill any agreement or covenant contained
in or made pursuant to this Agreement. All of the representations and warranties
of the Company made herein shall survive the execution and delivery of this
Agreement until the date that is ninety (90) days after the filing by the
Company with the Commission of audited financial statements of the Company for
the fiscal year ending June 30, 2003 (or, if such fiscal year changes and no
such audited consolidated financial statements are available, then the successor
fiscal year), except for (a) Sections 6.1 (Organization, Good Standing and
Qualification), 6.2 (Capitalization), 6.3 (Corporate Power, Authorization;
Enforceability), 6.18 (Private Offerings) and 6.19 (Broker's or Finder's
Commission), which representations and warranties shall survive indefinitely (or
if indefinite survival is not permitted by law, then for the maximum period
permitted by applicable law), (b) Section 6.12 (Taxes), which representation and
warranty shall survive until the later to occur of (i) the lapse of the statute
of limitations with respect to the assessment of any tax to which such
representation and warranty relates (including any extensions or waivers
thereof) and (ii) sixty (60) days after the final administrative or judicial
determination of the Taxes to which such representation and warranty relates,
and no claim with respect to Section 6.12 may be asserted thereafter with the
exception of claims arising out of any fact, circumstance, action or proceeding
to which the party asserting such claim shall have given notice to the other
parties to this Agreement prior to the termination of such period of reasonable
belief that a tax liability will subsequently arise therefrom, and (c) Section
6.11 (Environmental Matters), which representation and warranty shall survive
until the lapse of the applicable statute of limitations. Except as set forth
herein, all of the covenants, agreements and obligations of the parties hereto
shall survive the Final Closing indefinitely (or if indefinite survival is not
permitted by law, then for the maximum period permitted by applicable law).
-17-
7.2 Promptly after receipt by an Indemnified Party under Section 7.1 of
notice of any claim as to which indemnity may be sought, including, without
limitation, the commencement of any action or proceeding, the Indemnified Party
will, if a claim in respect thereof may be made against the indemnifying party
under this Section, promptly notify the indemnifying party in writing of the
commencement thereof; provided that the failure of the Indemnified Party to so
notify the indemnifying party will not relieve the indemnifying party from its
obligations under this Section unless, and only to the extent that, such
omission results in the indemnifying party's forfeiture of substantive rights or
defenses or being materially prejudiced by the Indemnified Person's failure to
give such notice. In case any action or proceeding is brought against any
Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to assume the defense thereof
at its own expense, with counsel satisfactory to such Indemnified Party in its
reasonable approval (which approval will not be withheld or delayed
unreasonably); provided, however, that any Indemnified Party may, at its own
expense, retain separate counsel to participate in such defense at its own
expense. After notice from the indemnifying party to the Indemnified Party of
its election to so assume the defense thereof, the indemnifying party will not
be Liable to the Indemnified Party under that Section 7 for any legal or any
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof (other than reasonable costs of investigation) unless
incurred at the written request of the indemnifying party. Notwithstanding the
above, the Indemnified Party will have the right to employ counsel of its own
choice in any action or proceeding (and be reimbursed by the indemnifying party
for the reasonable fees and expenses of the counsel and other reasonable costs
of the defense) if, in the written opinion of such Indemnified Party's counsel,
representation of the Indemnified Party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests or conflicts between the Indemnified Party and any other party
represented by the counsel in the action; provided, however, that the
indemnifying party will not in connection with any one action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be Liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties,
except to the extent that local counsel, in addition to regular counsel, is
required in order to effectively defend against the action or proceeding. An
indemnifying party will not be Liable to any Indemnified Party for any
settlement or entry of judgment concerning any action or proceeding effected
without the consent of the indemnifying party, which consent shall not be
unreasonably withheld. The indemnifying party agrees that it will not, without
the prior written consent of the Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened claim relating
to the matters contemplated hereby (if any Indemnified Party is a party thereto
or has been actually threatened to be made a party thereto) unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising or that may arise out of such
claim. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
foregoing or anything to the contrary contained in this Agreement, (a) nothing
in this Section 7 shall restrict or limit any rights that any Indemnified Party
may have to seek equitable relief and (b) this Section 7 shall be the sole
remedy for any breach of the Company's representations and warranties contained
in Section 6 except with respect to claims arising out of fraud or willful
misconduct.
8. Covenants.
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8.1 Observation Rights. At any time Perseus-Xxxxx BioPharmaceutical
Fund, LP ("Perseus-Xxxxx") and its Affiliates (as such term is defined in Rule
405 of the Securities Act) are not represented on the Board pursuant to Section
3.7, so long as Perseus-Xxxxx owns at least 25% of the shares of the Series A
Preferred Stock acquired by it on the date hereof or 10% of the outstanding
shares of Common Stock on an "as-converted basis," Perseus-Xxxxx shall have the
right to (a) appoint a non-voting representative (the "Observer") to attend
meetings of the Board, to change the non-voting representative so appointed at
any time and, upon the resignation of such representative for any reason, to
reappoint such a representative, if and for so long as Perseus-Xxxxx does not
have a representative on the Board; (b) make proposals, recommendations and
suggestions to the Company's officers and directors relating to the business and
affairs of the Company at such reasonable times as may be requested by
Perseus-Xxxxx but in no event shall the Company be required to accept such
proposals, recommendations or suggestions; (c) discuss the Company's business
and affairs with the Company's officers, directors and independent accountants
at such reasonable times as may be requested by Perseus-Xxxxx; (d) have access
to such other information relating to the affairs of the Company as
Perseus-Xxxxx may reasonably request; and (e) have access to the properties and
facilities of the Company at such reasonable times as may be requested by
Perseus-Xxxxx. In addition, the Company shall provide Perseus-Xxxxx with a copy
of any materials to be distributed or discussed at such meetings at the same
time as provided to members of the Board. The Observer may be excluded from any
meeting or portion thereof and Perseus-Xxxxx may be excluded from access to
certain information and the properties and facilities of the Company if and to
the extent a majority of the Board reasonably determines in good faith that such
Observer's attendance at such meeting or portion thereof or Perseus-Xxxxx'x
receipt of such information or access to the properties and facilities of the
Company would adversely affect the attorney-client privilege between the Company
and its counsel, involve a conflict of interest between the Company and
Perseus-Xxxxx with respect to a material issue for the Company or might violate
any requirement of law, contract or confidentiality by which the Company is
bound. To the extent the information is non-public, Perseus-Xxxxx covenants and
agrees that it will not divulge such confidential information until such time as
such information (1) is or becomes generally available to the public other than
as a result of a disclosure by Perseus-Xxxxx or its affiliates or their
respective representatives, (2) was within Perseus-Xxxxx'x possession prior to
its being furnished to Perseus-Xxxxx by or on behalf of the Company pursuant
hereto, provided that the source of such information was not bound by a
non-disclosure or confidentiality agreement with respect to such information, or
(3) becomes available to Perseus-Xxxxx on a non-confidential basis from a source
other than the Company or any of its representatives, provided that such source
is not bound by a non-disclosure or confidentiality agreement with the Company
with respect to such information or is not otherwise prohibited from
transmitting the information to Perseus-Xxxxx. If Perseus-Xxxxx becomes legally
obligated to disclose confidential information by any governmental entity with
jurisdiction over it or pursuant to any proceeding (by oral questions,
interrogations, requests for information or documents, subpoena, civil
investigative demand or similar process) (each a "Proceeding"), Perseus-Xxxxx
will give the Company prompt written notice to allow the Company to seek a
protective order or other appropriate remedy. Such notice must include, without
limitation, identification of the information to be so disclosed and a copy of
the order (to the extent not prohibited in connection with any such Proceeding).
Perseus-Xxxxx will disclose only such information as is legally required and
will use commercially reasonable efforts to obtain confidential treatment for
any confidential information that is so disclosed. Any such disclosure shall not
be in violation of this Section 8.1.
8.2 Use of Proceeds. The Company will use the proceeds from this
Offering to continue the clinical development of clofarabine and trilostane; to
market and sell clofarabine and trilostane; and for general corporate purposes
and working capital.
8.2 Business Development. As soon as practicable after the Final
Closing, the Company shall use commercially reasonable efforts to: (a) create
and implement an annual budget, approved by the Board, (b) hire additional
personnel where necessary; and (c) obtain appropriate product liability
insurance to cover all risks associated with the Company's business that are
customarily insured against in the industry in such amounts as are customary in
the industry.
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8.3 Expenses. The Company shall pay the reasonable direct expenses of
Perseus-Xxxxx (or its designee) which may be incurred in connection with their
due diligence review and the negotiation, execution and delivery of this
Agreement, the Registration Rights Agreement and all other agreements relating
to the transactions contemplated hereby, including, but not limited to, legal
fees and expenses; provided, however, such fees and expenses to be reimbursed by
the Company are not to exceed $50,000 in the aggregate without the prior
approval of the Company.
8.4 Conduct of the Company's Business. Except as contemplated by this
Agreement, during the period from the date hereof to the Final Closing Date, the
Company will conduct its business and operations solely in the ordinary course
of business consistent with past practice and use reasonable commercial efforts
to keep available the services of its officers and employees and preserve its
current relationships with customers, suppliers, licensors, creditors and others
having business dealings with it.
8.5 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement at the earliest
practicable date.
8.6 Liability Insurance. Promptly following the Initial Closing, the
Company shall purchase officers' and directors' liability insurance in an amount
customary for a company of comparable size and in a comparable business as the
Company and reasonably satisfactory to Perseus-Xxxxx.
8.7 Tax Matters.
(a) The parties hereto agree and acknowledge that (i) no party hereto
will treat the Series A Preferred Stock as "preferred stock" within the meaning
of Section 305 of the Code (the "Reporting Agreement") unless otherwise required
by a change in law and (ii) no party hereto shall take any position inconsistent
with the Reporting Agreement upon examination of any Tax Return, in any refund
claim, in any litigation or otherwise.
(b) The Company covenants that it will use commercially reasonable
efforts not to become a USRPHC at any time while any Purchaser owns any of the
Series A Preferred Stock (or any Common Stock obtained upon a conversion of the
Series A Preferred Stock (the "Conversion Stock")).
(c) In the event that a Purchaser desires to sell or dispose of any of
the Series A Preferred Stock or Conversion Stock, and upon demand by such
Purchaser, the Company agrees to deliver to such Purchaser a letter (the
"Letter") which complies with Sections 1.1445-2(c)(3) and 1.897-2(h) of the
Treasury Regulations, addressed to such Purchaser, stating whether or not the
Company is a USRPHC. The Letter shall be delivered to the Purchaser one business
day prior to the close of any sale or disposition of the Series A Preferred
Stock or Conversion Stock by the Purchaser (the "Delivery Date"). The Letter
shall be dated as of the Delivery Date and signed by a corporate officer who
must verify under penalties of perjury that the statement is correct to his
knowledge and belief pursuant to Section 1.897-2(h) of the Treasury Regulations.
9. FOR RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
-20-
10. No Waiver.
Notwithstanding any of the representations, warranties, acknowledgments
or agreements made herein by the Purchasers, the Purchasers do not thereby or in
any manner waive any rights granted to the Purchasers under federal or state
securities laws.
11. Miscellaneous.
11.1 Notices. Any notice or other communication given hereunder by any
party hereto to any other party hereto shall be in writing and delivered
personally or by facsimile transmission or sent by registered or certified mail
or by any express mail or overnight courier service, postage or fees prepaid:
If to the Company:
Bioenvision, Inc.
Xxx Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Purchasers:
To each Purchaser at such Purchaser's name and
address set forth on the signature page to this
Agreement
With a copy to:
SCO Securities LLC
1285 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
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Any notice that is delivered personally or by facsimile
transmission in the manner provided herein shall be deemed to have been duly
given to the party to whom it is directed upon actual receipt by such party or
its agent. Any notice that is addressed and mailed or sent by courier in the
manner herein provided shall be conclusively presumed to have been duly given to
the party to which it is addressed at the close of business, local time of the
recipient, on the fourth business day after the day it is so placed in the mail
or, if earlier, the time of actual receipt.
11.2 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns, provided, that no party may assign this
Agreement without the prior written consent of the other party, such consent not
to be unreasonably withheld; provided, further, that a Purchaser may assign this
Agreement to its affiliates without consent; provided that any transfer of
Securities or shares of Common Stock underlying such Securities must be in
compliance with the Transaction Documents and all applicable law.
11.3 Entire Agreement. This Agreement sets forth the entire agreement
and understanding among the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them; provided that any confidentiality agreement between the
Company and any Purchaser shall remain in effect. This Agreement may be amended
only by mutual written agreement of the Company and the Purchaser, and the
Company may take any action herein prohibited or omit to take any action herein
required to be performed by it, and any breach of any covenant, agreement,
warranty or representation may be waived, only if the Company has obtained the
written consent or waiver of the Purchasers purchasing a majority of the
Securities offered hereby.
11.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York with respect to contracts
made and to be fully performed therein, without regard to the conflicts of laws
principles thereof. The parties hereto hereby agree that any suit or proceeding
arising under this Agreement, or in connection with the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the County of New York and State of New York. By its execution
hereof, both the Company and the Purchasers hereby consent and irrevocably
submit to the in personam jurisdiction of the federal and state courts located
in the County of New York and State of New York and agree that any process in
any suit or proceeding commenced in such courts under this Agreement may be
served upon it personally or by certified or registered mail, return receipt
requested, or by Federal Express or other courier service, with the same force
and effect as if personally served upon the applicable party in New York and in
the city or county in which such other court is located. The parties hereto each
waive any claim that any such jurisdiction is not a convenient forum for any
such suit or proceeding and any defense of lack of in personam jurisdiction with
respect thereto.
11.5 Severability. The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction will not affect
any other provision of this Agreement, which will remain in full force and
effect. If any provision of this Agreement is declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the provision will be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof will nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions will be deemed dependent upon any other covenant
or provision unless so expressed herein.
11.6 No Waiver. A waiver by either party of a breach of any provision
of this Agreement will not operate, or be construed, as a waiver of any
subsequent breach by that same party.
-22-
11.7 Further Assurances. The parties agree to execute and deliver all
further documents, agreements and instruments and take further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
11.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which will
together constitute the same instrument.
11.9 No Third Party Beneficiaries. Nothing in this Agreement creates in
any Person not a party to this Agreement any legal or equitable right, remedy or
claim under this Agreement, and this Agreement is for the exclusive benefit of
the parties hereto. The parties expressly recognize that this Agreement is not
intended to create a partnership, joint venture or other similar arrangement
between any of the parties or their respective affiliates.
11.10 Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
11.11 Publicity Restrictions. Except as may be required by applicable
Requirements of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement, the transactions contemplated hereby without prior approval by the
other party hereto; provided that each Purchaser may disclose on its worldwide
web pages and its offering materials, if any, the name of the Company, the name
of the Chief Executive Officer of the Company, a brief description of the
business of the Company consistent with the Commission Documents or the
Company's press releases or other public statements, the Company's logo and the
aggregate amount of such Purchaser's investment in the Company. If any
announcement is required by applicable law or the rules of any securities
exchange or market on which such shares of Common Stock are traded to be made by
any party hereto, prior to making such announcement such party will deliver a
draft of such announcement to the other parties and shall give the other parties
reasonable opportunity to comment thereon. The parties agree to attribute and
otherwise indicate ownership of the other party's trademarks and logos.
11.12 Certification. Each Purchaser certifies that such Purchaser has
read this entire Agreement and that every statement on such Purchaser's part
made and set forth herein is true and complete in all material respects.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned has executed this Securities
Purchase Agreement on the date his signature has been subscribed and sworn to
below.
The shares of Series A Preferred Stock and the common stock purchase warrants
are to be issued in:
_______________________________________
Print Name of Investor
___________________ shares of Series A Preferred Stock
____ individual name subscribed for
___________________ Warrants subscribed for
____ joint tenants with rights of survivorship
Subscription price paid herewith:
$_________________ (being $3.00 x the number of shares
____ tenants in the entirety of Series A Preferred Stock listed above)
_______________________________________
____ corporation (an officer must sign) Print Name of Joint Investor
(if applicable)
_______________________________________
____ partnership (all general partners must sign) Signature of Investor
_______________________________________
____ trust Signature of Joint Investor
____ limited liability company _______________________________________
_______________________________________
(with a copy to:)
_______________________________________
_______________________________________
Address of Investor
-24-
Accepted as of the ___ day of May, 2002, as to _______________ shares of Series
A Preferred Stock and ____ Warrants; Subscription price accepted being
$______________, being $3.00 x the number of shares of Series A Preferred Stock
as to which this Subscription is accepted:
BIOENVISION, INC.
By: ___________________________________________
Name: Xx. Xxxxxxxxxxx X. Xxxx
Title: Chief Executive Officer
