Exhibit 10.18.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of October 29, 2003, by and between INYX, INC., a Nevada
corporation (the "Company"), and INYX PHARMA LTD., a corporation established
under the law of England and Wales (the "Subsidiary") and Laurus Master Fund,
Ltd., a Cayman Islands company (the "Purchaser"). (The Company and the
Subsidiary are collectively referred to herein as the "Borrower").
RECITALS
WHEREAS, the Borrower has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of $4,500,000 (the
"Note"), which Note is convertible into shares of the Company's common stock,
$.001 par value per share (the "Common Stock") at a fixed conversion price of
$1.00 per share of Common Stock ("Fixed Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to
purchase up to 1,350,000 shares of the Company's Common Stock in connection with
Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and Warrant on the
terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Borrower agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Borrower a Note in the amount of $4,500,000 convertible in
accordance with the terms thereof into shares of the Company's Common Stock in
accordance with the terms of the Note and this Agreement. The Note purchased on
the Closing Date shall be known as the "Offering." A form of the Note is annexed
hereto as Exhibit A. The Note will have a Maturity Date (as defined in the Note)
thirty six (36) months from the date of issuance. Collectively, the Note and
Warrant (as defined in Section 2) and Common Stock issuable in payment of the
Note, upon conversion of the Note and upon exercise of the Warrant are referred
to as the "Securities".
C-1
2. FEES AND WARRANT. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a
Warrant to purchase 1,350,000shares of Common Stock in connection with the
Offering (the "Warrant") pursuant to Section 1 hereof. The Warrant must be
delivered on the Closing Date. A form of Warrant is annexed hereto as Exhibit B.
All the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit of the
Purchaser by the Company are hereby also made and granted in respect of the
Warrant and shares of the Company's Common Stock issuable upon exercise of the
Warrant (the "Warrant Shares").
(b) Upon execution and delivery of this Agreement by the
Company and Purchaser, the Company shall pay to Laurus Capital Management, LLC,
manager of Purchaser (i) a closing payment in an amount equal to three and one
half percent (3.5%) of the aggregate principal amount of the Note. The foregoing
fee is referred to herein as the "Closing Payment".
(c) The Company shall reimburse the Purchaser for its
reasonable legal fees not to exceed $37,500 for services rendered to the
Purchaser in preparation of this Agreement and the Related Agreements (as
hereinafter defined), and expenses in connection with the Purchaser's due
diligence review of the Company and relevant matters.
(d) The Closing Payment, legal fees and due diligence fees
(net of the $10,000 deposit previously paid by the Company on October 7, 2003)
shall be paid at closing out of funds held pursuant to a Funds Escrow Agreement
of even date herewith among the company, Purchaser, and an Escrow Agent (the
"Funds Escrow Agreement") and a disbursement letter (the "Disbursement Letter").
3. CLOSING, DELIVERY AND PAYMENT.
3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form
attached hereto as Exhibit C, at the Closing on the Closing Date, the Borrower
will deliver to the Purchaser, among other things, a Note in the form attached
as Exhibit A representing the principal amount of $4,500,000 and a Warrant in
the form attached as Exhibit B in the Purchaser's name representing 1,350,000
Warrant Shares and the Related Agreements (defined below) and the Purchaser will
deliver to the Company, among other things, the amounts set forth in the
Disbursement Letter by certified funds or wire transfer.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER .
Each of the Company and the Subsidiary hereby jointly and severally
represents and warrants to the Purchaser as of the date of this Agreement as set
forth below which disclosures are supplemented by, and subject to the Company's
filings under the Securities Exchange Act of 1934 (collectively, the "Exchange
Act Filings"), copies of which have been provided to the Purchaser.
C-2
4.1 Organization, Good Standing and Qualification. Each of the
Company and the Subsidiary (a) is a corporation duly organized, validly existing
and in good standing under the laws of its incorporation; and (b) has the
corporate power and authority to own and operate its properties and assets, to
execute and deliver this Agreement, and the Note and the Warrant to be issued in
connection with this Agreement, the security agreement relating to the Note
dated as of October 29, 2003 between the Borrower and the Purchaser (including
all documentation requested by the Purchaser in connection with granting and
perfection of a security interest in the collateral of the Borrower located in
the United Kingdom (the "Collateral") (the "UK Security Agreements") the
Registration Rights Agreement relating to the Securities dated as of October 29,
2003 between the Company and the Purchaser and all other agreements referred to
herein (collectively, the "Related Agreements"), to issue and sell the Note and
the shares of Common Stock issuable upon conversion of the Note (the "Note
Shares"), to issue and sell the Warrant and the Warrant Shares, and to carry out
the provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted. Each of the Company and the Subsidiary is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or the subsidiary or their respective
businesses.
4.2 Subsidiaries. Except as set forth on Schedule 4.2, the Company
owns all of the issued and outstanding capital stock of the Subsidiary. The
Company does not own or control any equity security or other interest of any
other corporation, limited partnership or other business entity.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the
date hereof consists of 160,000,000shares, of which 150,000,000 are shares of
Common Stock, par value $.001 per share, 25,450,000 shares of which are issued
and outstanding, and 10,000,000 are shares of preferred stock, par value $.001
per share of which no shares are issued outstanding. The authorized capital
stock of the Subsidiary, as of the date hereof consists of 1,250,000 shares, of
which 1,250,000 are shares of Common Stock, par value 0.001 GB pence per share,
1,000,000 shares of which are issued and outstanding.
(b) Except as disclosed on Schedule 4.3, other than (i) the
shares reserved for issuance under the Borrower's stock option plans; and (ii)
shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Borrower of any of its securities. Except as
disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the
Note or Warrant, or the issuance of any of the Note Shares or Warrant Shares,
C-3
nor the consummation of any transaction contemplated hereby will result in a
change in the price or number of any securities of the Borrower outstanding,
under anti-dilution or other similar provisions contained in or affecting any
such securities.
(c) All issued and outstanding shares of the Company's Common
Stock (i) have been duly authorized and validly issued and are fully paid and
nonassessable and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of
the shares of the Common Stock are as stated in the Company's Articles of
Incorporation (the "Charter"). The Note Shares and Warrant Shares have been duly
and validly reserved for issuance. When issued in compliance with the provisions
of this Agreement and the Company's Charter, the Securities will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Securities may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate action on
the part of the Borrower , its officers and directors necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Borrower hereunder at the Closing and, the authorization,
sale, issuance and delivery of the Note and Warrant has been taken or will be
taken prior to the Closing. The Agreement and the Related Agreements, when
executed and delivered and to the extent it is a party thereto, will be valid
and binding obligations of the Borrower enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, and (b) general principles of equity that
restrict the availability of equitable or legal remedies. The sale of the Note
and the subsequent conversion of the Note into Note Shares are not and will not
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with. The issuance of the Warrant and the
subsequent exercise of the Warrant for Warrant Shares are not and will not be
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with.
4.5 Liabilities. The Borrower, to the best of its knowledge, has
no material contingent liabilities, except current liabilities incurred in the
ordinary course of business and liabilities disclosed in any Exchange Act
Filings or as set forth on Schedule 4.5.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Borrower is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Borrower in excess of $100,000 (other than obligations of, or payments to, the
Borrower arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Borrower (other than
C-4
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting the development, manufacture or
distribution of the Borrower's products or services, or (iv) indemnification by
the Borrower with respect to infringements of proprietary rights.
(b) Since June 30, 2003, the Borrower has not (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (ii) incurred any indebtedness for
money borrowed or any other liabilities (other than ordinary course obligations)
individually in excess of $100,000 or, in the case of indebtedness and/or
liabilities individually less than $100,000, in excess of $250,000 in the
aggregate, (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $150,000, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Borrower has reason to believe are affiliated therewith) shall
be aggregated for the purpose of meeting the individual minimum dollar amounts
of such subsections.
4.7 Obligations to Related Parties. Except as set forth on
Schedule 4.7 or in the Exchange Act Filings, there are no obligations of the
Borrower to officers, directors, stockholders or employees of the Borrower other
than (a) for payment of salary for services rendered and for bonus payments, (b)
reimbursement for reasonable expenses incurred on behalf of the Borrower, (c)
for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Boards of Directors of the Borrower) and (d) obligations listed
in the Borrower's financial statements or disclosed in any of its Exchange Act
Filings. Except as described above or set forth on Schedule 4.7, or in the
Exchange Act Filings none of the officers, directors or, to the best of the
Borrower's knowledge, key employees or stockholders of the Borrower or any
members of their immediate families, are indebted to the Borrower, individually
or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Borrower is
affiliated or with which the Borrower has a business relationship, or any firm
or corporation which competes with the Borrower, other than passive investments
in publicly traded companies (representing less than 1% of such company) which
may compete with the Borrower. Except as described above, no officer, director
or stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Borrower and no
agreements, understandings or proposed transactions are contemplated between the
Borrower and any such person. Except as set forth on Schedule 4.7 or in the
Exchange Act Filings, the Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
C-5
4.8 Changes. Since June 30, 2003, except as disclosed in any
Exchange Act Filings or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) Any change in the assets, liabilities, financial
condition, prospects or operations of the Borrower, other than changes in the
ordinary course of business, none of which individually or in the aggregate has
had or is reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition, prospects or operations of the Borrower;
(b) Any resignation or termination of any officer, key
employee or group of employees of the Borrower;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Borrower by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Borrower;
(e) Any waiver by the Borrower of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect material loans made by the Borrower
to any stockholder, employee, officer or director of the Borrower, other than
advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Borrower;
(i) Any labor organization activity related to the Borrower;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Borrower, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Borrower
is a party or by which it is bound which may materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
the Borrower;
C-6
(m) Any other event or condition of any character that, either
individually or cumulatively, has or may materially and adversely affect the
business, assets, liabilities, financial condition, prospects or operations of
the Borrower; or
(n) Any arrangement or commitment by the Borrower to do any of
the acts described in subsection (a) through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set
forth on Schedule 4.9 ("Permitted Liens"), and except for non-material leases on
personal property involving lease payments of less than $50,000 per year, the
Borrower has good and marketable title to its properties and assets, and good
title to its leasehold estates, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than (a) those resulting from taxes
which have not yet become delinquent, (b) minor liens and encumbrances which do
not materially detract from the value of the property subject thereto or
materially impair the operations of the Borrower, and (c) those that have
otherwise arisen in the ordinary course of business. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Borrower are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used. Except as set forth on
Schedule 4.9, the Borrower is in compliance with all material terms of each
lease to which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) Schedule 4.10 lists all of the Borrower's intellectual
property. The Borrower owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted and to the Borrower's knowledge as presently proposed
to be conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or agreements
of any kind relating to the foregoing proprietary rights, nor is the Borrower
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of "off the shelf" or standard products.
(b) Except as set forth on Schedule 4.10, The Borrower has not
received any communications alleging that the Borrower has violated any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity, nor is the Borrower
aware of any basis therefor.
(c) The Borrower does not believe it is or will be necessary
to utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Borrower, except for
inventions, trade secrets or proprietary information that have been rightfully
assigned to the Borrower.
4.11 Compliance with Other Instruments. Except as set forth on
Schedule 4.11, the Borrower is not in violation or default of any term of its
Charter or Bylaws, or of any material provision of any mortgage, indenture,
C-7
contract, agreement, instrument or contract to which it is party or by which it
is bound or of any judgment, decree, order or writ. The execution, delivery and
performance of and compliance with this Agreement and the Related Agreements to
which it is a party, and the issuance and sale of the Note by the Borrower and
the other Securities by the Borrower each pursuant hereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Borrower or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Borrower, its business or
operations or any of its assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there
is no action, suit, proceeding or investigation pending or, to the Borrower's
knowledge, currently threatened against the Borrower that prevents the Borrower
to enter into this Agreement or the Related Agreements, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Borrower, financially or otherwise, or
any change in the current equity ownership of the Borrower, nor is the Borrower
aware that there is any basis for any of the foregoing. The Borrower is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Borrower currently pending or which the
Borrower intends to initiate.
4.13 Tax Returns and Payments. The Borrower has timely filed all
tax returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to the
Borrower's knowledge all other taxes due and payable by the Borrower on or
before the Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on Schedule 4.13, the Borrower has not been
advised (a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof, or (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. The Borrower has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
4.14 Employees. Except as set forth on Schedule 4.14, the Borrower
has no collective bargaining agreements with any of its employees. There is no
labor union organizing activity pending or, to the Borrower's knowledge,
threatened with respect to the Borrower. Except as disclosed in the Exchange Act
Filings or on Schedule 4.14, the Borrower is not a party to or bound by any
currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Borrower's knowledge, no
employee of the Borrower, nor any consultant with whom the Borrower has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Borrower because of the
nature of the business to be conducted by the Borrower; and to the Borrower's
knowledge the continued employment by the Borrower of its present employees, and
the performance of the Borrower's contracts with its independent contractors,
will not result in any such violation. The Borrower is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
C-8
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Borrower. The Borrower has not received any notice alleging
that any such violation has occurred. Except for employees who have a current
effective employment agreement with the Borrower, no employee of the Borrower
has been granted the right to continued employment by the Borrower or to any
material compensation following termination of employment with the Borrower.
Except as set forth on Schedule 4.14, the Borrower is not aware that any
officer, key employee or group of employees intends to terminate his, her or
their employment with the Borrower, nor does the Borrower have a present
intention to terminate the employment of any officer, key employee or group of
employees.
4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, the Borrower is
presently not under any obligation, and has not granted any rights, to register
any of the Borrower's presently outstanding securities or any of its securities
that may hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Borrower's knowledge, no stockholder
of the Borrower has entered into any agreement with respect to the voting of
equity securities of the Borrower.
4.16 Compliance with Laws; Permits. Except as set forth on Schedule
4.16, to its knowledge, the Borrower is not in violation in any material respect
of any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Borrower. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of any of the Securities, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. The Borrower has all material
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which would
materially and adversely affect the business, properties, prospects or financial
condition of the Borrower.
4.17 Environmental and Safety Laws. The Borrower is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. Except as set forth on Schedule 4.17, no Hazardous
Materials (as defined below) are used or have been used, stored, or disposed of
by the Borrower or, to the Borrower's knowledge, by any other person or entity
on any property owned, leased or used by the Borrower. For the purposes of the
preceding sentence, "Hazardous Materials" shall mean (a) materials which are
listed or otherwise defined as "hazardous" or "toxic" under any applicable
local, state, federal and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials, or (b)
any petroleum products or nuclear materials.
C-9
4.18 Valid Offering. Assuming the accuracy of the representations
and warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 Full Disclosure. The Borrower has provided the Purchaser with
all information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant, including all information the Borrower believes
is reasonably necessary to make such investment decision. Neither this
Agreement, the exhibits and schedules hereto, the Related Agreements nor any
other document delivered by the Borrower to Purchaser or its attorneys or agents
in connection herewith or therewith or with the transactions contemplated hereby
or thereby, contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
Any financial projections and other estimates provided to the Purchaser by the
Borrower were based on the Borrower's experience in the industry and on
assumptions of fact and opinion as to future events which the Borrower, at the
date of the issuance of such projections or estimates, believed to be
reasonable.
4.20 Insurance. The Borrower has general commercial, product
liability, fire and casualty insurance policies with coverages which the
Borrower believes are customary for companies similarly situated to the Borrower
in the same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the
Borrower has filed all proxy statements, reports and other documents required to
be filed by it under the Exchange Act. The Borrower has furnished the Purchaser
with copies of (i) its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002 and (ii) its Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, 2003 and June 30, 2003, and the Form 8-K filings which
is has made during 2003 to date (collectively, the "SEC Reports"). Except as set
forth on Schedule 4.21, each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and none of
the SEC Reports, nor the financial statements (and the notes thereto) included
in the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.22 Listing. The Company's Common Stock is traded on the NASD Over
the Counter Bulletin Board ("OTCBB") and satisfies all requirements for the
continuation of such trading. The Company has not received any notice that its
Common Stock will be deleted from the OTCBB or that its Common Stock does not
meet all requirements for trading.
4.23 No Integrated Offering. Neither the Borrower, nor any of its
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 under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Borrower for purposes of the Securities Act which would prevent the Borrower
from selling the Securities pursuant to Rule 506 under the Securities Act, or
C-10
any applicable exchange-related stockholder approval provisions, nor will the
Borrower or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
4.24 Stop Transfer. The Securities are restricted securities as of
the date of this Agreement. The Company will not issue any stop transfer order
or other order impeding the sale and delivery of any of the Securities at such
time as the Securities are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
4.26 Collateral Representations, Warranties and Covenants. The
Borrower hereby jointly and severally represents and warrants to Purchaser that
Units 1-3, 5-11 and sites 12, 13 and 18 Arkwright Road, Astmoor Industrial
Estates, Runcorn, Cheshire, England (the "Real Estate") as of the date hereof,
the Real Estate has an appraised liquidation value of at least five million
dollars ($5,000,000) and further that, a real property valuation of the Real
Estate has been conducted within sixty days of the day hereof. The Company has
submitted to Purchaser a true, correct and complete copy of such valuation.
4.27 All of the Collateral (i) is owned by the Company and the
Subsidiary respectively free and clear of all Liens (including any claims of
infringement) except those in Purchaser's favor and Permitted Liens and (ii) is
not subject to any agreement prohibiting the granting of a lien or requiring
notice of or consent to the granting of a Lien.
4.28 The liens granted pursuant to the UK Security Agreements, upon
completion of the filings and other actions (which, in the case of all filings
and other documents have been delivered to Purchaser in duly executed form)
constitute valid perfected security interests in all of the Collateral in favor
of Purchaser as security for the prompt and complete payment and performance of
the all of the obligations of the Company and the Subsidiary to the Purchaser
hereunder, pursuant to the Note and the Related Agreements (the "Obligations") ,
enforceable in accordance with the terms hereof against any and all creditors of
and any purchasers from the Company and the Subsidiary, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable or legal
remedies, and such security interest is prior to all other Permitted Liens in
existence on the date hereof.
To the Company's knowledge, except for liens held by ABN AMRO/Venture Finance,
no effective security agreement, mortgage, deed of trust, financing statement,
equivalent security or lien instrument or continuation statement covering all or
any part of the Collateral is or will be on file or of record in any public
office, except those relating to Permitted Liens or those that would fail to
have a material adverse effect.
C-11
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Borrower as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and
investment partners will not and will not cause any person or entity, directly
or indirectly, to engage in "short sales" of the Company's Common Stock for so
long as the Note shall be outstanding or such persons hold more than two and one
half percent (2.5%) of the then outstanding Common Stock of the Company.
5.2 Requisite Power and Authority. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except (a)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights,
and (b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant, respectively. The Purchaser further confirms that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Company's business, management and financial affairs and the terms
and conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access.
5.4 Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment until the Securities are sold pursuant to (i) an effective
registration statement under the Securities Act, or (ii) an exemption from
registration is available with respect to such sale.
C-12
5.5 Acquisition for Own Account. Purchaser is acquiring the Note
and Warrant and the Note Shares and the Warrant Shares for Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
5.6 Purchaser Can Protect Its Interest. Purchaser represents that
by reason of its, or of its management's, business and financial experience,
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Note, the Warrant and the Securities and to protect its own interests in
connection with the transactions contemplated in this Agreement, and the Related
Agreements. Further, Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in the Agreement or the Related
Agreements.
5.7 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO INYX, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by
DWAC system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an effective
registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO INYX, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
C-13
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO INYX, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
6. COVENANTS OF THE COMPANY. The Company and the Subsidiary jointly and
severally covenants and agrees, as applicable with the Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. If applicable, the Company shall promptly secure the
listing of the shares of Common Stock issuable upon conversion of the Note and
upon the exercise of the Warrant on the OTCBB or other exchange upon which the
Common Stock is traded (the "Principal Market") upon which shares of Common
Stock are traded (subject to official notice of issuance) and shall maintain
such listing so long as any other shares of Common Stock shall be so listed. The
Company will maintain the trading of its Common Stock on the Principal Market,
and will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.
6.4 Reporting Requirements. The Company will timely file with the
SEC all reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act to file
reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
C-14
6.5 Use of Funds. The Borrower agrees that it will use the
proceeds of the sale of the Note and Warrant for general corporate purposes
only.
6.6 Access to Facilities. The Borrower will permit any
representatives designated by the Purchaser (or any successor of the Purchaser),
upon reasonable notice and during normal business hours, at such person's
expense and accompanied by a representative of the Borrower , to (a) visit and
inspect any of the properties of the Borrower, (b) examine the corporate and
financial records of the Borrower (unless such examination is not permitted by
federal, state or local law or by contract) and make copies thereof or extracts
therefrom and (c) discuss the affairs, finances and accounts of the Borrower
with the directors, officers and independent accountants of the Borrower.
Notwithstanding the foregoing, the Borrower will not provide any material,
non-public information to the Purchaser unless the Purchaser signs a
confidentiality agreement and otherwise complies with Regulation FD, under the
federal securities laws.
6.7 Taxes. The Borrower will promptly pay and discharge, or cause
to be paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon the income, profits, property or
business of the Borrower; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Borrower shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Borrower will pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to foreclose
any lien which may have attached as security therefor.
6.8 Insurance. The Borrower will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in similar business similarly situated as the Borrower; and the
Borrower will maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner which the Borrower reasonably believes is customary for
companies in similar business similarly situated as the Borrower and to the
extent available on commercially reasonable terms.
6.9 Intellectual Property. The Borrower shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
6.10 Properties. The Borrower will keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Borrower will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could reasonably be expected
to have a material adverse effect.
C-15
6.11 Confidentiality. The Borrower agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
6.12 Required Approvals. For so long as 25% of the principal amount
of the Note is outstanding, the Borrower, without the prior written consent of
the Purchaser, shall not:
(a) directly or indirectly declare or pay any dividends, other
than dividends with respect to its preferred stock;
(b) liquidate, dissolve or effect a material reorganization;
(c) become subject to (including, without limitation, by way
of amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) restrict the Borrower's right to perform
the provisions of this Agreement or any of the agreements contemplated thereby;
or
(d) materially alter or change the scope of the business of
the Borrower.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as (a) the holder thereof is permitted to dispose
of such Securities pursuant to Rule 144(k) under the Securities Act, or (b) upon
resale subject to an effective registration statement after such Securities are
registered under the Securities Act. The Company agrees to cooperate with the
Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k)
and provide legal opinions necessary to allow such resales provided the Company
and its counsel receive reasonably requested representations from the selling
Purchaser and broker, if any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's legal
counsel. The Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the conversion of the
Note and exercise of the Warrant.
6.15 Neither the Company nor the Subsidiary shall encumber,
mortgage, pledge, assign or grant any lien in any Collateral of the Company or
the Subsidiary any of the Company's or the Subsidiary's other assets to anyone
other than Purchaser and except for Permitted Liens.
6.16 Neither the Company nor the Subsidiary shall dispose of any of
the Collateral whether by sale, lease or otherwise except in the ordinary course
of business and for the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out Equipment having an
aggregate fair market value of not more than $75,000 and only to the extent that
(i) the proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Purchaser's first priority security interest or
equivalent or (ii) the proceeds of which are remitted to Purchaser in reduction
of the Obligations.
C-16
6.17 Each of the Company and the Subsidiary shall defend the right,
title and interest of Purchaser in and to the Collateral against the claims and
demands of all persons whomsoever, and take such actions, including (i) all
actions necessary to grant Purchaser "control" of the Collateral, with any
agreements establishing control to be in form and substance satisfactory to
Purchaser, (ii) the prompt (but in no event later than five (5) Business Days
following Purchaser's request therefor) delivery to Purchaser of all original
instruments, chattel paper, and negotiable documents which are part of the
Collateral and owned by the Company or the Subsidiary (in each case, accompanied
by stock powers, allonges or other instruments of transfer executed in blank),
(iii) notification of Purchaser's interest in Collateral at Purchaser's request,
and (iv) the institution of litigation against third parties as shall be prudent
in order to protect and preserve the Company's, the Subsidiary's and Purchaser's
respective and several interests in the Collateral.
6.18 Each of the Company and the Subsidiary shall promptly, and in
any event within four (4) Business Days after the same is acquired by it, notify
Purchaser of any commercial tort claim (as defined in the UCC), directly related
to the Collateral, acquired by it and unless otherwise consented by Purchaser,
the Company and or the Subsidiary shall enter into a supplement to this
Agreement granting to Purchaser a lien in such commercial tort claim.
6.19 The Company and the Subsidiary shall place notations upon
their books and records and any consolidated or consolidating financial
statement of Company to disclose Purchaser's lien on the Collateral.
6.20 The Company and the Subsidiary shall perform in a reasonable
time all other steps requested by Purchaser to obtain termination of the ABN
AMRO/Venture Finance liens, and create and maintain in Purchaser's favor a valid
perfected first lien (or equivalent thereof) in all Collateral subject only to
Permitted Liens.
6.21 The Company and/or the Subsidiary Guarantor shall notify
Purchaser promptly and in any event within five (5) Business Days after
obtaining actual knowledge of any loss, damage or destruction of any of the
Collateral.
6.22 Each of the Company and the Subsidiary shall keep and maintain
its equipment in good operating condition, except for ordinary wear and tear,
and shall make all necessary repairs and replacements thereof so that the value
and operating efficiency shall, consistent with industry practices, at all times
be maintained and preserved. Each of the Company the Subsidiary shall use its
best efforts to avoid having any such items become a fixture to real estate or
accessions to other personal property.
6.23 The Company hereby grants to Purchaser a first priority
security interest in its trademarks and will deliver an appropriate financing
statement to Purchaser to perfect such security interest.
6.24 The Company and the Subsidiary will bear the full risk of loss
from any loss of any nature whatsoever with respect to the Collateral. At the
Company's own cost and expense in amounts and with carriers reasonably
C-17
acceptable to Purchaser, the Company and the Subsidiary Guarantor shall (i) keep
all its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to the
Company's or the Subsidiary's including business interruption insurance; (ii)
maintain a bond in such amounts as is customary in the case of companies engaged
in businesses similar to the Company's or the Subsidiary's insuring against
larceny, embezzlement or other criminal misappropriation of insured's officers
and employees who may either singly or jointly with others at any time have
access to the assets or funds of the Company either directly or through
governmental authority to draw upon such funds or to direct generally the
disposition of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or property damage suffered
by others; (iv) maintain all such worker's compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which the Company
or the Subsidiary is engaged in business; and (v) furnish Purchaser with (x)
copies of all policies and evidence of the maintenance of such policies at least
thirty (30) days before any expiration date, (y) excepting the Company's
workers' compensation policy, endorsements to such policies naming Purchaser as
"co-insured" or "additional insured" and appropriate loss payable endorsements
in form and substance satisfactory to Purchaser, naming Purchaser as loss payee,
and (z) evidence that as to Purchaser the insurance coverage shall not be
impaired or invalidated by any act or neglect of the Company or the Subsidiary
Guarantor and the insurer will provide Purchaser with at least thirty (30) days
notice prior to cancellation. The Company and the Subsidiary shall instruct the
insurance carriers that in the event of any loss thereunder, the carriers shall
make payment for such loss to the Company and/or the Subsidiary and Purchaser
jointly. All loss recoveries received by Purchaser upon any such insurance may
be applied to the Obligations, in such order as per the terms of this Agreement.
Any surplus shall be paid by Purchaser to the Company or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by the Company
or the Subsidiary, as applicable, to Purchaser, on demand.
7. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not
disclose, and will not include in any public announcement, the name of the
Company, unless expressly agreed to by the Company or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
7.2 Non-Public Information. . The Purchaser agrees not to effect
any sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.
8.1 Borrower Indemnification. The Borrower agrees to indemnify,
hold harmless, reimburse and defend Purchaser, each of Purchaser's officers,
C-18
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon (i) any
misrepresentation by Borrower or breach of any warranty by Borrower in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement, or (ii) any breach or default in performance by Borrower of any
covenant or undertaking to be performed by Borrower hereunder, or any other
agreement entered into by the Borrower and Purchaser relating hereto.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify,
hold harmless, reimburse and defend the Borrower and each of the Borrower's
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Borrower which results, arises out of or is
based upon (i) any misrepresentation by Purchaser or breach of any warranty by
Purchaser in this Agreement or in any exhibits or schedules attached hereto or
any Related Agreement; or (ii) any breach or default in performance by Purchaser
of any covenant or undertaking to be performed by Purchaser hereunder, or any
other agreement entered into by the Borrower and Purchaser relating hereto.
8.3 Procedures. The procedures and limitations set forth in
Section 10.2(c) and (d) shall apply to the indemnifications set forth in
Sections 8.1 and 8.2 above.
9. CONVERSION OF CONVERTIBLE NOTE.
9.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are included
in an effective registration statement or are otherwise exempt from registration
when sold: (i) Upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue shares of the Company's Common Stock in the name of the Purchaser
(or its nominee) or such other persons as designated by the Purchaser in
accordance with Section 9.1(b) hereof and in such denominations to be specified
representing the number of Note Shares issuable upon such conversion; and (ii)
the Company warrants that no instructions other than these instructions have
been or will be given to the transfer agent of the Company's Common Stock and
that after the Effective Date (as hereinafter defined) the Note Shares issued
will be freely transferable subject to the prospectus delivery requirements of
the Securities Act and the provisions of this Agreement, and will not contain a
legend restricting the resale or transferability of the Note Shares.
(b) The Company shall upon the earlier to occur of (i) ninety (90)
days of the date hereof and (ii) the date that the registration statement
required to be filed by the Company pursuant to the Registration Rights
Agreement is declared effective by the Securities Exchange Commission become
eligible to electronically transfer shares of its Common Stock via the DWAC
system (as defined below). Purchaser will give notice of its decision to
exercise its right to convert the Note or part thereof by telecopying or
otherwise delivering an executed and completed notice of the number of shares to
be converted to the Company (the "Notice of Conversion"). The Purchaser will not
C-19
be required to surrender the Note until the Purchaser receives a credit to the
account of the Purchaser's prime broker through the DWAC system (as defined
below), representing the Note Shares or until the Note has been fully satisfied.
Each date on which a Notice of Conversion is telecopied or delivered to the
Company in accordance with the provisions hereof shall be deemed a "Conversion
Date." Pursuant to the terms of the Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion of counsel
within one (1) business day of the date of the delivery to Borrower of the
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Purchaser's prime broker with the Depository Trust Company
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Company of the Notice of Conversion
(the "Delivery Date").
(c) The Company understands that a delay in the delivery of
the Note Shares in the form required pursuant to Section 9 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the event that
the Company fails to direct its transfer agent to deliver the Note Shares to the
Purchaser via the DWAC system within the time frame set forth in Section 9.1(b)
above and the Note Shares are not delivered to the Purchaser by the Delivery
Date, as compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Note Shares in the form
required pursuant to Section 9 hereof upon conversion of the Note in the amount
equal to the greater of (i) $500 per business day after the Delivery Date or
(ii) the Purchaser's actual damages from such delayed delivery. Notwithstanding
the foregoing, the Company will not owe the Purchaser any late payments if the
delay in the delivery of the Note Shares beyond the Delivery Date is solely out
of the control of the Company and the Company is actively trying to cure the
cause of the delay. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand and, in the case of actual
damages, accompanied by reasonable documentation of the amount of such damages.
Such documentation shall show the number of shares of Common Stock the Purchaser
is forced to purchase (in an open market transaction) which the Purchaser
anticipated receiving upon such conversion, and shall be calculated as the
amount by which (A) the Purchaser's total purchase price (including customary
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note, for
which such Conversion Notice was not timely honored.
Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum amount
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to a Purchaser and thus refunded to the
Company.
9.2 Maximum Conversion. The Purchaser shall not be entitled to
convert on a Conversion Date, nor shall the Company be permitted to require the
Purchaser to accept, that amount of a Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Purchaser on a Conversion Date,
and (ii) the number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this proviso is being made
C-20
on a Conversion Date, which would result in beneficial ownership by the
Purchaser of more than 4.99% of the outstanding shares of Common Stock of the
Company on such Conversion Date. For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3 thereunder. Upon an Event of
Default under the Note, the conversion limitation in this Section 9.2 shall
become null and void.
10. REGISTRATION RIGHTS.
10.1 Registration Rights Granted. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration Rights Agreement
dated as of even date herewith between the Company and the Purchaser.
10.2 Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the Securities Act pursuant to the Registration Rights
Agreement, the Company will indemnify and hold harmless the Purchaser, and its
officers, directors and each other person, if any, who controls the Purchaser
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser, or such persons may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Registrable
Securities were registered under the Securities Act pursuant to the Registration
Rights Agreement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Purchaser, and each such person for any reasonable legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of the Purchaser or any
such person in writing specifically for use in any such document.
(b) In the event of a registration of the Registrable
Securities under the Securities Act pursuant to the Registration Rights
Agreement, the Purchaser will indemnify and hold harmless the Company, and its
officers, directors and each other person, if any, who controls the Company
within the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Registrable Securities
were registered under the Securities Act pursuant to the Registration Rights
Agreement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
C-21
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action, provided, however, that the
Purchaser will be liable in any such case if and only to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing to the Company by or on behalf
of the Purchaser specifically for use in any such document.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.2(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.2(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10.2(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof; if the
indemnified party retains its own counsel, then the indemnified party shall pay
all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in
the event of joint liability under the Securities Act in any case in which
either (i) the Purchaser, or any controlling person of the Purchaser, makes a
claim for indemnification pursuant to this Section 10.2 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10.2 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of the Purchaser or controlling person of the Purchaser in circumstances
for which indemnification is provided under this Section 10.2; then, and in each
such case, the Company and the Purchaser will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the Purchaser is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the registration statement bears to
C-22
the public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (A) the Purchaser will not
be required to contribute any amount in excess of the public offering price of
all such securities offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 10 of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
10.3 OFFERING RESTRICTIONS. Except as previously disclosed in the
SEC Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the Company; or shares of preferred stock issued to
pay dividends in respect of the Company's preferred stock; or equity or debt
issued in connection with an acquisition of a business or assets by the Company;
or the issuance by the Company of stock in connection with the establishment of
a joint venture partnership or licensing arrangement (these exceptions
hereinafter referred to as the "Excepted Issuances"), the Company will not issue
any securities with a continuously variable/floating conversion feature which
are or could be (by conversion or registration) free-trading securities (i.e.
common stock subject to a registration statement) prior to the full repayment or
conversion of the Note (the "Exclusion Period").
11. MISCELLANEOUS.
11.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST
THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT
AND OTHER AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
PROVISION OF THIS AGREEMENT OR ANY OTHER AGREEMENT DELIVERED IN CONNECTION
HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF
LAW, THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY
CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR
RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER
ANY LAW SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION
OF ANY AGREEMENT.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
C-23
11.3 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Securities from time to time, other than the holders of Common Stock
which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company.
11.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements 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 no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
11.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written consent of
the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written consent of the
Company.
11.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement, the Note or the
Related Agreements, by law or otherwise afforded to any party, shall be
cumulative and not alternative.
11.8 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) three (3) business days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof, to the
Purchaser at the address set forth on the signature page hereto for such
Purchaser, with a copy in the case of the Purchaser to John E. Tucker , Esq.,
825 Third Avenue, 14th Floor, New York, New York 10022, facsimile number (212)
541-4434, or at such other address as the Company or the Purchaser may designate
by written notice to the other parties hereto given in accordance herewith.
C-24
11.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
11.12 Broker's Fees. Except as set forth on Schedule 11.12 hereof,
Each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 11.12 being untrue.
11.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other.
C-25
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: SUBSIDIARY:
INYX, INC. INYX PHARMA, LTD.
By: /S/ Jack Kachkar By: /S/ Steven Handley
------------------------------------- -----------------------
Jack Kachkar, Chairman Steven Handley, President
Address: 801 Brickell Avenue 9th floor Address: 37 Parkland Drive
Miami, Florida 33131, and Elton, Chester
4141 Yonge Street, Suite 205 Cheshire, England CH2 4PG
Toronto, Ontario
Canada M2P2A8
PURCHASER:
LAURUS MASTER FUND, LTD.
By: /S/ Eugene Grin
-------------------------------------
Eugene Grin, Director
Address: c/o Ironshore Corporate Services Ltd.
P.O. Box 1234 G.T.,
Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Schedules are omitted and will be supplied
to the Securities and Exchange
Commission upon request
C-26