Exhibit 1.2
COMMON STOCK PURCHASE AGREEMENT
Dated as of August 15, 2001
by and between
BIOMARIN PHARMACEUTICAL INC.
and
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
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TABLE OF CONTENTS
Page
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ARTICLE I Definitions..............................................................................1
Section 1.1 Definitions............................................................................1
ARTICLE II Purchase and Sale of Common Stock........................................................3
Section 2.1 Purchase and Sale of Stock.............................................................3
Section 2.2 The Shares.............................................................................3
Section 2.3 Closing................................................................................4
ARTICLE III Representations and Warranties...........................................................4
Section 3.1 Representations and Warranties of the Company..........................................4
Section 3.2 Representations and Warranties of the Purchaser.......................................11
ARTICLE IV Covenants...............................................................................13
Section 4.1 Securities Compliance.................................................................13
Section 4.2 Registration and Listing..............................................................13
Section 4.3 Registration Statement................................................................13
Section 4.4 Compliance with Laws..................................................................13
Section 4.5 Keeping of Records and Books of Account...............................................13
Section 4.6 Reporting Requirements................................................................14
Section 4.7 Non-public Information................................................................14
Section 4.8 Effective Registration Statement......................................................14
Section 4.9 No Stop Orders........................................................................14
Section 4.10 Amendments to the Registration Statement..............................................15
Section 4.11 Prospectus Delivery...................................................................15
Section 4.12 Other Financing.......................................................................15
Section 4.13 Notice................................................................................16
ARTICLE V Conditions to Closing, Draw Downs and Call Options......................................16
Section 5.1 Conditions Precedent to the Obligation of the Company to
Issue a Draw Down Notice or Grant a Call Option and
Sell the Shares.......................................................................16
Section 5.2 Conditions Precedent to the Obligation of the Purchaser
to Close..............................................................................17
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Call Option Grant and Purchase
the Shares............................................................................18
ARTICLE VI Draw Down Terms; Call Option............................................................19
Section 6.1 Draw Down Terms.......................................................................19
Section 6.2 Purchaser's Call Option...............................................................23
Section 6.3 Aggregate Limit.......................................................................23
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ARTICLE VII Termination.............................................................................24
Section 7.1 Termination by Mutual Consent.........................................................24
Section 7.2 Other Termination.....................................................................24
Section 7.3 Termination by Company................................................................24
Section 7.4 Effect of Termination.................................................................24
ARTICLE VIII Indemnification.........................................................................25
Section 8.1 General Indemnity.....................................................................25
Section 8.2 Indemnification Procedures............................................................26
ARTICLE IX Miscellaneous...........................................................................27
Section 9.1 Fees and Expenses.....................................................................27
Section 9.2 Specific Enforcement, Consent to Jurisdiction.........................................28
Section 9.3 Entire Agreement; Amendment...........................................................28
Section 9.4 Notices...............................................................................28
Section 9.5 Waivers...............................................................................29
Section 9.6 Headings..............................................................................30
Section 9.7 Successors and Assigns................................................................30
Section 9.8 Governing Law.........................................................................30
Section 9.9 Survival..............................................................................30
Section 9.10 Counterparts..........................................................................30
Section 9.11 Publicity.............................................................................30
Section 9.12 Severability..........................................................................30
Section 9.13 Further Assurances....................................................................31
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
August 15, 2001 by and between BioMarin Pharmaceutical Inc., a Delaware
corporation (the "Company"), and Acqua Wellington North American Equities Fund,
Ltd., a limited liability company organized under the laws of the Commonwealth
of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions.
(a) "Aggregate Limit" shall have the meaning assigned to such term
in Section 2.1 hereof.
(b) "Alternate Market" shall mean the Nasdaq Small Cap Market, the
American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board,
whichever is at the time the principal trading exchange or market for the Common
Stock.
(c) "Call Option" shall have the meaning assigned to such term in
Section 6.2(a) hereof.
(d) "Commission" shall mean the Securities and Exchange Commission.
(e) "Commission Documents" shall have the meaning assigned to such
term in Section 3.1(f) hereof.
(f) "Commission Filings" means the Company's Form 10-K for the
fiscal year ended December 31, 2000, Form 10-Q for the periods ended March 31,
2001 and June 30, 2001, Registration Statement on Form S-3, No. 333-48800,
Registration Statement on Form S-3, No. 333-61322, Form 8-K as filed on November
7, 2000, Form 8-K as filed on May 18, 2001, Form 8-K as filed on June 25, 2001
and all other filings made by the Company after the date hereof pursuant to the
Securities Exchange Act of 1934, as such filings may be amended from time to
time.
(g) "Common Stock" shall have the meaning assigned to such term in
Section 2.1 hereof.
(h) "Draw Down" means the exercise by the Company of its right to
request the purchase of shares of Common Stock by the Purchaser.
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(i) "Draw Down Amount" means the actual amount of a Draw Down up to
$4,000,000 or such other amount mutually agreed upon by the Purchaser and the
Company.
(j) "Draw Down Discount Percentage" means 95% if the Threshold
Price is equal to or greater than $7.00 but less than $12.00; 95.42% if the
Threshold Price is equal to or greater than $12.00 but less than $17.00; 95.83%
if the Threshold Price is equal to or greater than $17.00 but less than $22.00;
96.25% if the Threshold Price is equal to or greater than $22.00 but less than
$27.00; and 96.67% if the Threshold Price is equal to or greater than $27.00.
k) "Draw Down Exercise Date" shall mean the date on which the
Company issues a Draw Down Notice.
(l) "Draw Down Notice" shall have the meaning assigned to such term
in Section 6.1(i) hereof.
(m) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive Trading Days following a Draw Down Notice, or such other period
mutually agreed upon by the Purchaser and the Company.
(n) "Investment Period " shall have the meaning assigned to
such term in Section 7.1 hereof.
(o) "Material Adverse Effect" shall mean any effect on the
business, results of operations, prospects, assets or financial condition of
the Company that is material and adverse to the Company and its subsidiaries,
taken as a whole and/or any condition, circumstance, or situation that would
prohibit the Company from entering into and performing any of its
obligations under this Agreement in any material respect.
(p) "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, as supplemented
by any prospectus supplement filed with the Commission pursuant to Rule 424(b).
(q) "Prospectus Supplement" shall mean any prospectus supplement to
the Registration Statement filed with the Commission pursuant to Rule 424(b).
(r) "Registration Statement" shall mean the registration statement
on Form S-3, Commission File Number 333-48800 under the Securities Act, filed
with the Commission for the registration of the Shares, as such Registration
Statement may be amended from time to time.
(s) "Section 6.1(m) Notice" shall have the meaning assigned to such
term in Section 6.1(m) hereof.
(t) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
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(u) "Settlement Date" shall have the meaning assigned to such term
in Section 6.1(d) hereof.
(v) "Shares" shall mean the shares of Common Stock of the Company
that may be purchased hereunder.
(w) "Threshold Price" is the lowest price at which the Company is
willing to sell Shares during a Draw Down Pricing Period (not taking into
account the Draw Down Discount Percentage during such Draw Down Pricing Period)
as set forth by the Company in each Draw Down Notice.
(x) "Trading Day" shall mean a day on which the Common Stock is
the Nasdaq National Market or an Alternate Market.
(y) "Trading Day Number" shall have the meaning assigned to such
term in Section 6.1(m) hereof.
(z) "Truncated Pricing Period" shall have the meaning assigned to
such term in Section 6.1(m) hereof.
(aa) "VWAP" shall mean the daily volume weighted average price
(based on a Trading Day from 9:30 a.m. to 4:00 p.m., eastern time) of the
Common Stock of the Company on the NASDAQ National Market or an Alternate
Market as reported by Bloomberg Financial LP using the AQR function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to a maximum of
$27,700,000 (the "Aggregate Limit") of the Company's common stock, $0.001 par
value per share (the "Common Stock"), based on Draw Downs, subject to Section
6.1 hereof, of up to $4,000,000 per Draw Down and Call Options, subject to
Section 6.2 hereof, of an additional amount up to the Draw Down Amount for each
applicable Draw Down Pricing Period that the Company may grant to the Purchaser
in the Company's sole discretion.
Section 2.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call
Options.
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Section 2.3 Closing. The closing of the execution and delivery of this
Agreement shall occur upon delivery by facsimile of executed signature pages to
this Agreement and all other documents, instruments and writings required to be
delivered pursuant to this Agreement to the offices of Jenkens & Gilchrist
Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, NY
10174 (the "Closing") at 10:00 a.m., eastern time, on (i) August 15, 2001, or
(ii) such other time and place or on such date as the Purchaser and the Company
may agree upon (the "Closing Date"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial
statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the
"Form 10-Q"), or on Schedule 3.1(g) attached hereto. Except as set forth on
Schedule 3.1(a) attached herto, the Company and each such subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction in
which the failure to be so qualified will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Sections 4.4(b) and 4.4(c), no further consent or authorization of the Company
or its Board of Directors or stockholders is required. This Agreement has been
duly executed and delivered by the Company. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth on
Schedule 3.1(c) attached hereto. All of the outstanding shares of the Company's
Common Stock have been duly and validly authorized, and are fully paid and
non-assessable. Except as set forth in this Agreement including Schedule 3.1(c),
as of the date hereof no shares of Common Stock are entitled to preemptive
rights or registration rights and there are no outstanding options, warrants,
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scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement
including Schedule 3.1(c), as of the date hereof there are no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. Except for customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted securities or as set
forth in Schedule 3.1(c), as of the date hereof, the Company is not a party to
any agreement granting registration rights to any person with respect to any of
its equity or debt securities and the Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable federal and state securities laws,
and no stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect. The Company has furnished or made
available to the Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof (the "Charter"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid for
and issued in accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid and non-assessable, and the Purchaser shall
be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases (other than violations
pursuant to clauses (i) and (iv) (to the extent of federal securities law)), for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission, or
the Nasdaq National Market subsequent to the Closing, and, any registration
statement which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.
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(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and since March 31, 2001
the Company has timely 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 Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since March 31, 2001 and prior to the Closing Date. The Company has
not provided to the Purchaser any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. The Form 10-K for the year ended December 31,
2000 complied in all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and the said Form 10-K did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the Commission Documents comply in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. Except as set forth in the Commission
Documents or the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Effect. Except as disclosed in the
Registration Statement or the Commission Documents, since March 31, 2001, the
Company has not experienced or suffered any Material Adverse Effect.
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(i) No Undisclosed Liabilities. The Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries respective businesses since March 31, 2001 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.
(k) Indebtedness. Schedule 3.1(k) sets forth as of March 31, 2001
all outstanding secured and unsecured Indebtedness of the Company, or for which
the Company or any subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $100,000 (other than trade accounts payable incurred
in the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $100,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
or any subsidiary is in default with respect to any Indebtedness, except to the
extent that any such default would not individually or in the aggregate be
expected to cause a Material Adverse Effect.
(l) Title to Assets. Each of the Company and its subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the
Commission Documents or the Commission Filings or such that could not reasonably
be expected to cause a Material Adverse Effect. All said leases of the Company
and each of its subsidiaries are valid and subsisting and in full force and
effect in all material respects.
(m) Actions Pending. There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened against
the Company which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or
thereto. There is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened, against or involving the
Company or any subsidiary, or any of their respective properties or assets
which, if adversely determined, is reasonably likely to result in a Material
Adverse Effect.
(n) Compliance with Law. The business of the Company has been
and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
such that do not cause a Material Adverse Effect. Each of the Company and its
subsidiaries has all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted unless the failure to possess
such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
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(o) Certain Fees. No brokers, finders or financial advisory fees or
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement. (p) Disclosure. To the Company's knowledge,
neither this Agreement or the Schedules hereto nor any other documents,
certificates or instruments furnished to the Purchaser by or on behalf of the
Company in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(q) Operation of Business. To the Company's knowledge, the Company
or its subsidiary owns or has a valid right to use all patents, trademarks,
service marks, trade names, copyrights, licenses and authorizations as set forth
in the Commission Documents or the Commission Filings and all rights with
respect to the foregoing, which are necessary for the conduct of its business as
now conducted without any conflict with the rights of others, except to the
extent set forth in the Commission Documents or the Commission Filings or to the
extent that a Material Adverse Effect could not reasonably be expected to result
from such conflict.
(r) Environmental Compliance. Except as disclosed in the
Commission Filings, the Company has obtained all approvals, authorization,
certificates, consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other person, that
are required under any Environmental Laws except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect.
"Environmental Laws" shall mean all applicable laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, to the best of the Company's knowledge, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company that violate or could reasonably be expected
to violate any Environmental Law after the Closing or that could reasonably be
expected to give rise to any environmental liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance.
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(s) Material Agreements. Except as set forth in the Commission
Documents and this Agreement, the Company is not a party to any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement, a
copy of which would be required to be filed with the Commission as an exhibit to
a registration statement on Form S-3 or applicable form (collectively, "Material
Agreements") if the Company was registering securities under the Securities Act.
The Company has in all material respects performed all the obligations required
to be performed by it to date under the foregoing agreements, has received no
notice of default and, to the best of the Company's knowledge is not in default
under any Material Agreement now in effect, the result of which could reasonably
be expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as disclosed in the
Registration Statement or the Commission Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, or
any of its customers (excluding agreements related to the purchase or lease of
the Company's products) or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any person who
would be covered by Item 404(a) of Regulation S-K or any corporation or other
entity controlled by such officer, employee, consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or suspending the use of any
Prospectus.
(ii) The Company meets the requirements for the use of Form
S-3 under the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be when any post-effective
amendment thereto became effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Securities Act, complied in all material respects with the provisions of the
Securities Act and did not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they made) not misleading, except that
this representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to the Purchaser furnished to the Company
in writing by or on behalf of the Purchaser expressly for use therein.
(iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, the Prospectus or other materials, if any,
permitted by the Securities Act.
9
(v) Employees. As of the date hereof, the Company has no collective
bargaining arrangements or agreements covering any of its employees. Except as
disclosed in the Commission Documents or as set forth on Schedule 3.1(v)
attached hereto, as of the date hereof the Company has no employment contract or
any other similar contract or restrictive covenant, relating to the right of any
officer, employee or consultant to be employed or engaged by the Company. Each
of the Company and its subsidiaries requires its officers, technical employees
and certain consultants to enter into agreements regarding proprietary
information and assignment of inventions, or other similar agreements containing
restrictive covenants. Except as disclosed in the Registration Statement or the
Commission Documents, as of the date hereof, since March 31, 2001, no officer,
consultant or key employee of the Company whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares will
be used by the Company and its subsidiaries for the purposes set forth in the
Registration Statement or Prospectus.
(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan (as defined below) by the Company
which is or would have a Material Adverse Effect. The execution and delivery of
this Agreement and the issue and sale of the Shares will not involve any
transaction which would violate the prohibitions of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended ("IRC") or in
connection with which a penalty could be imposed pursuant to Section 502 of
ERISA or Section 4975 of the IRC, provided that, if the Purchaser, or any person
or entity that owns a beneficial interest in the Purchaser, is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a "party in interest" (within the meaning of Section
3(14) of ERISA), the requirements of Sections 407 and 408(e) of ERISA (or their
IRC counterparts), if applicable, are met. As used in this Section 3.1(y), the
term "Plan" shall mean an "employee benefit plan" (as defined in Section 3(2) of
ERISA) which is or has been established or maintained, or to which contributions
are or have been made, by the Company or by any trade or business, whether or
not incorporated, which, together with the Company, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
10
Section 3.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company, and the Purchaser hereby makes the covenants with the Company set forth
in subsections (e), (f) and (g) below:
(a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership, or similar laws relating to, or affecting generally the
enforcement of, creditor's rights and remedies or by other equitable principles
of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
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(d) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) Selling Restriction. The Purchaser has the right to sell shares
of the Company's Common Stock during the Investment Period. The Purchaser
covenants, however, that prior to and during the Investment Period, neither the
Purchaser nor any of its affiliates nor any entity managed by the Purchaser will
ever sell shares of Common Stock of the Company other than what the Purchaser
has accumulated under the terms of this Agreement or in any accounts directly or
indirectly managed by the Purchaser or any affiliate of the Purchaser or any
entity managed by the Purchaser.
(f) Compliance with Laws. The Purchaser shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
reasonably be expected to have a Material Adverse Effect. Without limiting the
foregoing, the Purchaser shall comply with the requirements of the Securities
Act and the Exchange Act, including without limitation Rule 415(a)(4) under the
Securities Act and and Rule 10b-5 and Regulation M under the Exchange Act.
(g) Broker. The Purchaser agrees to use a registered broker-dealer
as its broker-dealer to effect all sales of the shares of the Company's Common
Stock that the Purchaser may purchase from the Company. The Purchaser intends to
use Carlin Equities Corp. (the "Broker") as its broker-dealer to effectuate all
sales of the shares of the Companys Common Stock that the Purchaser may purchase
from the Company. If the Purchaser determines not to use the Broker to
effectuate a sale of the shares of the Companys Common Stock, then the Purchaser
shall provide written notice to the Company of such determination and the
identity of another registered broker-dealer which it will use to effectuate
such sale in advance of such sale so that the Company can modify any disclosure
in the Registration Statement that the Company deems appropriate. Neither the
Broker nor any other registered broker-dealer that the Purchaser will use as its
broker-dealer to effectuate sales of shares of the Companys Common Stock is or
shall be an affiliate of the Purchaser, and the Broker and any other such
registered broker-dealer will receive commissions from the Purchaser which will
not exceed customary brokerage commissions. The Purchaser has used and will use
the Broker as its broker-dealer to effectuate all sales, if any, of the shares
of the Companys Common Stock purchased from the Company pursuant to this
Agreement or other similar agreements.
12
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows, which covenants
are for the benefit of the Purchaser and its permitted assignees, that during
the term of this Agreement:
Section 4.1 Securities Compliance. The Company shall notify the
Commission and the Nasdaq National Market or an Alternate Market, if applicable,
in accordance with their rules and regulations, 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 Shares to the Purchaser.
Section 4.2 Registration and Listing. The Company will (i) take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects with
its reporting and filing obligations under the Exchange Act, and (iii) not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will use
its best efforts to take all action necessary to continue the listing or trading
of its Common Stock and the listing of the Shares purchased by Purchaser
hereunder on the Nasdaq National Market or an Alternate Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Nasdaq National Market or an Alternate Market.
Section 4.3 Registration Statement. Before the Company shall issue a
Draw Down Notice, the Company shall have caused a sufficient number of shares of
Common Stock to be authorized and registered to cover the Shares to be issued in
connection with this Agreement.
Section 4.4 Compliance with Laws.
(a) The Company shall comply with all applicable laws, rules,
regulations and orders (including without limitation Rule 415(a)(4) under the
Securities Act), noncompliance with which could reasonably be expected to have a
Material Adverse Effect.
(b) The Company will not be obligated to issue and the Purchaser
will not be obligated to purchase any shares of the Company's Common Stock which
would result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued and outstanding shares of the
Company's Common Stock.
(c) Prior to issuing each Draw Down Notice, the Company shall take
all necessary corporate action to authorize the issuance of the Shares issuable
pursuant to such Draw Down Notice by reason of the Draw Down or upon Purchaser
exercising a Call Option.
Section 4.5 Keeping of Records and Books of Account. The Company
shall keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
13
Section 4.6 Reporting Requirements. Upon request, the Company shall
furnish or make available the following to the Purchaser so long as such
Purchaser shall be obligated hereunder to purchase Shares:
(a) Quarterly reports filed with the Commission on Form 10-Q as soon
as filed, and in any event withinforty-five (45) days after the end of each of
the first three fiscal quarters of the Company; and
(b) Annual reports filed with the Commission on Form 10-K as
soon as filed, and in any event within ninety (90) days after the end of each
fiscal year of the Company.
Section 4.7 Non-public Information. Notwithstanding any other provision
of this Agreement to the contrary, neither the Company nor any of its officers
or agents shall disclose any material non-public information about the Company
to the Purchaser and neither the Purchaser nor any of its affiliates, officers
or agents will solicit any material non-public information from the Company.
Section 4.8 Effective Registration Statement. If it is necessary for
the Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such post-effective amendment to
become effective as soon as reasonably practicable and will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing, when it receives notice that the Registration Statement or such
post-effective amendment has become effective.
Section 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make all reasonable efforts to obtain
the withdrawal of such order at the earliest possible time.
14
Section 4.10 Amendments to the Registration Statement. The Company will
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus which amends or supplements any information
regarding the Purchaser of which the Purchaser shall not previously have been
advised or to which the Purchaser shall reasonably object after being so
advised; provided, that, if there is any delay in the filing of any amendment to
the Registration Statement or any amendment or supplement to the Prospectus in
accordance with this clause (i), such delay shall not constitute a breach of
this Agreement, or (ii) so long as, in the reasonable opinion of counsel for the
Purchaser, a Prospectus is required to be delivered in connection with sales by
any Purchaser or dealer, file any information, documents or reports pursuant to
the Exchange Act without delivering a copy of such information, documents or
reports to the Purchaser, promptly following such filing.
Section 4.11 Prospectus Delivery. The Company shall file a prospectus
supplement to its Registration Statement on the first business day immediately
following the end of each Draw Down Pricing Period, and will deliver to the
Purchaser, without charge, in such quantities as reasonably requested by the
Purchaser, copies of each form of Prospectus and prospectus supplement on each
Settlement Date. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and, subject to the
provisions of Section 4.10 above, file with the Commission an appropriate
supplement or amendment thereto, and will expeditiously furnish to the Purchaser
a reasonable number of copies thereof.
Section 4.12 Other Financing. If the Company enters into any other
financing agreement, the primary purpose of which would be to obtain equity
financing for the Company (an "Other Financing"), during a Draw Down Pricing
Period, the Company shall promptly notify the Purchaser of such Other Financing
and the Purchaser shall have the options set forth in Section 6.1(k) hereof. If
the Company enters into the Other Financing between Draw Down Pricing Periods,
the Company shall promptly notify the Purchaser of such Other Financing and the
Purchaser shall have the option, which option shall be exercised no later than
five (5) Trading Days after receipt by the Purchaser of the notice of the Other
Financing, to purchase up to the maximum Draw Down Amount that would be
applicable under this Agreement if the Threshold Price were equal to the price
per share to be paid for the Common Stock in the Other Financing on the same,
absolute terms and conditions contemplated in the Other Financing. If the
Purchaser does not exercise its purchase option in writing before 8:00 p.m.
15
(eastern time), the Company shall have the right to close the Other Financing on
the scheduled closing date with a third party, provided that all of the terms
and conditions of such closing are similar in all material respects to those
offered to the Purchaser. As used herein, "Other Financing" shall not include
the Company (i) entering into a loan, credit or lease facility with a bank or
financing institution (including any equity component thereof), (ii)
establishing an employee stock option plan or agreement or finance the
acquisition of other companies, equipment, technologies or lines of business,
(iii) issuing shares of Common Stock in connection with the Company's current
option plans (as the same may be amended from time to time), stock purchase
plans, rights plans, currently outstanding warrants or options, or increase the
number of shares available under any such plans (the primary purpose of which is
not to raise equity), and (iv) issuing shares of Common Stock and/or preferred
stock in connection with the formation and maintenance of strategic
partnerships, alliances or joint ventures and the acquisition of products,
licenses or other assets (each a "Permitted Transaction"). The Company shall not
be required to obtain the Purchaser's consent to an Other Financing. If the
Company does not obtain the Purchaser's consent in accordance with Section 7.2
hereof, the provisions of Article VII shall apply.
Section 4.13 Notices. The Company shall immediately notify the Purchaser
that (i) a Material Adverse Effect has occurred or (ii) the Company has entered
into an Other Financing (as defined in Section 4.12 hereof).
Section 4.14 Placement Agents. The Company has engaged Reedland
Capital Partners, a division of Financial West Group (the "Placement Agent"), as
its placement agent to effectuate all sales of the shares of the Company's
Common Stock that the Company may sell to the Purchaser. The Company shall pay
the Placement Agent a fee equal to the product of (A) the dollar amount
purchased on the applicable Settlement Date and (B) twenty percent (20%) of the
difference between one (1) minus the applicable Draw Down Discount Percentage
for such settlement.
ARTICLE V
Conditions to Closing, Draw Downs and Call Options
Section 5.1 Conditions Precedent to the Obligation of the Company to
Issue a Draw Down Notice or Grant a Call Option and Sell the Shares. The
obligation hereunder of the Company to issue a Draw Down Notice or grant a Call
Option and sell the Shares to the Purchaser is subject to the satisfaction or
waiver, at or before each Draw Down Exercise Date and each Settlement Date, as
applicable, of each of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of each
Draw Down Exercise Date and each Settlement Date, as applicable, as though made
at that time, except for representations and warranties that are expressly made
as of a particular date.
16
(b) Registration Statement. The Company shall have Shares registered
under the Registration Statement equal to or in excess of the number of Shares
issuable pursuant to such Draw Down Notice. The Registration Statement
registering the offer and sale of the Shares shall have been declared effective
by the Commission and shall have been amended or supplemented, as required, to
disclose the sale of the Shares prior to each Draw Down Exercise Date and
Settlement Date, as applicable, and there shall be no stop order suspending the
effectiveness of the Registration Statement.
(c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to each Draw Down Exercise Date
and Settlement Date, as applicable.
(d) No Injunction. No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Suspension, Etc. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq National Market or an
Alternate Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to such
Draw Down Exercise Date or Settlement Date, as applicable).
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing Date, as
though made at that time, except for representations and warranties that speak
as of a particular date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
17
(c) Effective Registration Statement. The Registration Statement
registering the offer and sale of the Shares shall have been declared effective
by the Commission and there shall be no stop order suspending the effectiveness
of the Registration Statement.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.
f) Opinion of Counsel, Etc. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit A hereto, a secretary's certificate, dated the date of
Closing, substantially in the form of Exhibit B hereto, and such other
certificates and documents as the Purchaser or its counsel shall reasonably
require incident to the Closing.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Call Option Grant and Purchase the Shares. The obligation
hereunder of the Purchaser to accept a Draw Down or Call Option grant and to
acquire and pay for the Shares on the Settlement Date is subject to the
satisfaction or waiver, at or before each Draw Down Exercise Date and each
Settlement Date, as applicable, of each of the conditions set forth below. The
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Draw Down
Exercise Date and Settlement Date, as applicable, as though made at that time,
except for representations and warranties that speak as of a particular date.
(b) Registration Statement. The Company shall have Shares registered
under the Registration Statement equal to or in excess of the number of Shares
issuable pursuant to such Draw Down Notice or Call Option. The Registration
Statement registering the offer and sale of the Shares shall have been declared
effective by the Commission and shall have been amended or supplemented, as
required, to disclose the sale of the Shares prior to each Draw Down Exercise
Date or each Settlement Date, as applicable, and there shall be no stop order
suspending the effectiveness of the Registration Statement.
18
(c) No Suspension, Etc. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq National Market or an
Alternate Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to each
Draw Down Exercise Date), and, at any time prior to such Draw Down Exercise Date
or applicable Settlement Date, trading in securities generally as reported by
the Nasdaq National Market or an Alternate Market shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by the Nasdaq National Market or an Alternate Market,
nor shall a banking moratorium have been declared either by the United States or
New York State authorities, nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international calamity or
crisis of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the judgment of the Purchaser, makes it
impracticable or inadvisable to purchase the Shares. The Common Stock shall be
listed on Nasdaq or an Alternate Market.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit C.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.
(g) No Material Adverse Effect. No Material Adverse Effect shall
have occurred.
(h) Board Authorization. The Company shall have taken all
necessary corporate action to authorize the issuance of the Shares issuable
pursuant to each Draw Down Notice.
ARTICLE VI
Draw Down Terms; Call Option
Section 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement and subject to Section 6.3 below, the
parties agree as follows:
(a) The Company, may, from time to time during the term of this
Agreement and in its sole discretion, issue a Draw Down Notice with respect to a
Draw Down during each Draw Down Pricing Period of up to (i) $500,000 if the
Threshold Price is equal to or greater than $7.00 but less than $12.00 and (ii)
19
up to an additional $500,000 for every $5.00 increase in the Threshold Price
from $7.00 up to and including $42.00, for a maximum Draw Down Amount during
each Draw Down Pricing Period of $4,000,000; provided, that the Company may, in
its sole discretion, issue a Draw Down Notice with respect to any Draw Down
Amount at any Threshold Price or any Draw Down Discount Percentage pursuant to
terms mutually agreed upon by the Purchaser and the Company, which Draw Down the
Purchaser will be obligated to accept. Prior to issuing any Draw Down Notice,
the Company shall have Shares registered under the Registration Statement which
are equal to or in excess of the number of Shares issuable pursuant to the Draw
Down Notice.
(b) The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each Trading Day of the
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction the denominator of which equals the
number of Trading Days during the Draw Down Pricing Period) of the Draw Down
Amount divided by (y) the applicable Draw Down Discount Percentage multiplied by
the VWAP of the Common Stock for such Trading Day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period.
(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of such
Draw Down Pricing Period (the "Settlement Date").
(e) There shall be a minimum of five (5) Trading Days between Draw
Downs, unless otherwise mutually agreed upon between the Purchaser and the
Company.
(f) There shall be a maximum of fourteen (14) Draw Downs during the
term of this Agreement.
(g) Each Draw Down will commence on the first Trading Day of the
Draw Down Pricing Period and will expire on the end of the last Trading Day of
each Draw Down Pricing Period.
(h) If the VWAP on a given Trading Day is less than the Threshold
Price, then the total amount of the Draw Down for the relevant Draw Down Pricing
Period will be reduced by 1/20th (or such other fraction based on the
denominator of which equals the number of Trading Days during the Draw Down
Pricing Period). At no time shall the Threshold Price be set below $7.00, unless
mutually agreed upon by the Company and the Purchaser. If trading in the
Company's Common Stock is suspended for any reason for more than three (3) hours
in any Trading Day, at the Purchaser's option, the VWAP shall be deemed to be
below the Threshold Price for that Trading Day and the Draw Down for the
relevant Draw Down Pricing Period shall be reduced by 1/20th (or such other
fraction the denominator of which equals the number of Trading Days during the
Draw Down Pricing Period). Notwithstanding anything in the foregoing to the
contrary, for each Trading Day during the Draw Down Pricing Period that the VWAP
is less than the Threshold Price or is deemed to be below the Threshold Price
pursuant to the immediately preceding sentence, the Purchaser may elect in its
20
sole discretion to purchase Shares at a price equal to the Threshold Price
multiplied by the Draw Down Discount Percentage at the end of such Draw Down
Pricing Period. The Purchaser will inform the Company via facsimile transmission
no later than 8:00 p.m. (eastern time) on the last Trading Day of such Draw Down
Pricing Period as to the number of Shares, if any, the Purchaser chooses to
purchase under such circumstances set forth in this Section 6.1(h).
(i) The Company must inform the Purchaser via facsimile transmission
as to the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first Trading Day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit D. In addition to
the Draw Down Amount, the Company shall set the Threshold Price with each Draw
Down Notice and shall designate the first Trading Day of the Draw Down Pricing
Period. Notwithstanding anything in the foregoing to the contrary, if the
Company wishes the date of the Draw Down Notice to be the first day of the Draw
Down Pricing Period, the Draw Down Notice must be delivered to the Purchaser and
receipt of such Draw Down Notice confirmed by the Purchaser prior to the
commencement of trading on the date of such Draw Down Notice.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the account designated by the Company by wire
transfer of immediately available funds provided that the Shares are received no
later than 1:00 p.m., eastern time, or next day available funds if the Shares
are received thereafter.
(k) If during any Draw Down Pricing Period the Company shall enter
into an Other Financing (other than shares of Common Stock issued under this
Agreement or pursuant to a Permitted Transaction), the Purchaser may in its sole
discretion (i) purchase the Draw Down Amount of shares of Common Stock and/or
exercise Call Options granted during such Draw Down Pricing Period on the terms
at which the Company issued shares of Common Stock in the Other Financing during
such Draw Down Pricing Period, net of any third party's discount and fees, (ii)
purchase the Draw Down Amount of shares of Common Stock and/or exercise Call
Options granted during such Draw Down Pricing Period at the applicable Draw Down
Discount Percentage times the VWAP for such Draw Down Pricing Period, or (iii)
elect not to purchase any Shares during such Draw Down Pricing Period. The
Purchaser shall notify the Company of its election on the business day preceding
the Settlement Date.
(l) If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser as required hereunder, and such failure
continues for ten (10) Trading Days, the Company shall pay, in cash or
restricted shares of Common Stock, at the option of the Purchaser, as liquidated
damages and not as a penalty to the Purchaser an amount equal to two percent
(2%) of the Draw Down Amount for the initial thirty (30) days and each
additional thirty (30) day period thereafter until such failure has been cured,
which shall be pro rated for such periods less than thirty (30) days (the
"Periodic Amount"). Cash payments to be made pursuant to this clause (1) shall
be due and payable immediately upon demand in immediately available cash funds.
Certificates evidencing the restricted shares of Common Stock shall be delivered
21
immediately upon demand. The parties agree that the Periodic Amount represents a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of damages that may be incurred by the Purchaser if the
Company fails to deliver the Shares on the Settlement Date. If the Purchaser
elects to receive shares of Common Stock instead of cash, the Purchaser shall
have the right to demand registration once within twelve (12) months of the date
of issuance of such shares of Common Stock and piggyback registration rights if
the Company files a separate registration statement.
(m) If during any Draw Down Pricing Period the Company reasonably
believes an event may occur which would result in or require the suspension of
the effectiveness of the Registration Statement, the Company shall notify the
Purchaser before 9:30 a.m. (eastern time) on any Trading Day (a "Section 6.1(m)
Notice") and reduce the number of Trading Days in such Draw Down Pricing Period
(a "Truncated Pricing Period"). If the Company delivers the Section 6.1(m)
Notice (i) before 9:30 a.m. (eastern time) on a Trading Day, the last Trading
Day of such Truncated Pricing Period shall be the Trading Day preceding the
receipt of the Section 6.1(m) Notice or (ii) between 9:30 a.m. and 4:00 p.m.
(eastern time) on a Trading Day, then the last Trading Day of such Truncated
Pricing Period shall be the Trading Day on which the Section 6.1(m) Notice was
received by the Purchaser.
The Purchaser will purchase Shares in an aggregate dollar amount
(the "Truncated Draw Down Allocation Amount") equal to the product of the
Draw Down Amount times a fraction the numerator of which equals the number of
Trading Days in the Truncated Pricing Period and the denominator of which equals
twenty (20) or such other number of Trading Days in such Draw Down Pricing
Period as the parties may have mutually agreed upon with respect to such Draw
Down Pricing Period (such number of days referred to herein as the "Trading Day
Number") in an amount and price for each of the Trading Days in a Truncated
Pricing Period as determined in accordance with Section 6.1(b) and Section
6.1(h).
In addition, the Purchaser may, at its option, elect to purchase Shares
in an additional dollar amount equal to the product of the Draw Down Amount
requested in the applicable Draw Down Notice, first multiplied by (x) a
fraction, the numerator of which equals one (1) and the denominator of which
equals the Trading Day Number and next multiplied by (y) that number that is
equal to the Trading Day Number minus the number of Trading Days in the
Truncated Pricing Period. The price per share for such additional dollar amount
shall equal (i) the aggregate total of Truncated Draw Down Allocation Amounts
during the Truncated Pricing Period divided by (ii) the number of Shares to be
purchased during such Truncated Pricing Period.
Upon receipt of the Section 6.1(m) Notice, the Purchaser may (x) elect
to purchase Common Stock at the Threshold Price for any Trading Day that the
VWAP was below the Threshold Price during the Truncated Pricing Period in
accordance with Section 6.1(i) hereof, (y) elect to purchase Common Stock in the
additional amount as set forth in the preceding paragraph of this Section
6.1(m), and (z) elect to exercise any unexercised Call Options (for a Call
Option Amount not to exceed $1,000,000) by issuing a Call Option Notice to the
Company, in each such case, no later than 10:00 a.m. (eastern time) on the first
Trading Day after the end of the Truncated Pricing Period. The exercise price of
the Call Option shall be based on the VWAP on the last Trading Day of the
Truncated Pricing Period (in lieu of the VWAP as specified in clause (A) of
Section 6.2(b) hereof) and otherwise determined in accordance with Section
6.2(b) hereof.
22
(n) The Settlement Date for any Truncated Pricing Period shall be
the second Trading Day after receipt of the Section 6.1(m) Notice.
Section 6.2 Purchaser's Call Option. Subject to the satisfaction of the
conditions set forth in this Agreement and subject to Section 6.3 below, the
parties agree as follows:
(a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options of up to the applicable Draw Down Amount (a "Call Option"). The amount
of the Call Option shall be set forth in the Draw Down Notice. For each Trading
Day during a Draw Down Pricing Period, the Purchaser may exercise all or any
part of a Call Option by providing notice to the Company of such exercise (the
"Call Option Notice"), substantially in the form attached hereto as Exhibit E.
(b) The number of shares of Common Stock to be issued in connection
with each Call Option Notice shall equal (i) the dollar amount of the Call
Option exercised divided by (ii) the product of the applicable Draw Down
Discount Percentage and the greater of (A) the VWAP for the Common Stock on the
day the Purchaser issues its Call Option Notice or (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to each respective Call Option.
(e) For each Trading Day on which the Purchaser wishes to exercise
all or any portion of a Call Option pursuant to this Section 6.2, the Purchaser
must issue via facsimile a Call Option Notice to the Company no later than 8:00
p.m. (eastern time) on the day of such exercise. To the extent the Purchaser
does not exercise any portion of a Call Option by 8:00 p.m. (eastern time) on
the last day of the applicable Draw Down Pricing Period, the Purchaser's Call
Option with respect to that Draw Down Pricing Period shall terminate.
Section 6.3 Aggregate Limit. Notwithstanding anything to the contrary
herein, in no event may the Company issue a Draw Down Notice or grant a Call
Option to the extent that the sale of shares of Common Stock pursuant thereto
and pursuant to all prior Draw Down Notices or Call Options issued hereunder
would cause the Company to sell or the Purchaser to purchase shares of Common
Stock which in the aggregate are in a dollar amount in excess of the Aggregate
Limit. If the Company issues a Draw Down Notice or Call Option that otherwise
would permit the Purchaser to purchase shares of Common Stock which would cause
the aggregate purchases by Purchaser hereunder to exceed the Aggregate Limit,
such Draw Down Notice or Call Option shall be void ab initio to the extent of
the amount by which the value of the shares of Common Stock otherwise issuable
pursuant to such Draw Down Notice or Call Option together with the value of all
other Common Stock purchased by the Purchaser pursuant hereto would exceed the
Aggregate Limit.
23
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this Agreement
shall be the earlier of (i) fourteen (14) consecutive months from the date of
execution of this Agreement, (ii) the date that all of the shares of Common
Stock registered under the Registration Statement have been issued and sold and
(iii) the date that the Purchaser has purchased in the aggregate $27,700,000
of Shares pursuant to all Draw Downs issued and Call Options granted and
exercised (the "Investment Period"). This Agreement may be terminated at any
time by mutual consent of the parties.
Section 7.2 Other Termination. The Company shall inform the Purchaser,
and the Purchaser shall have the right to terminate this Agreement within the
subsequent thirty (30) days (the "Event Period"), if (x) the Company enters into
an Other Financing without the prior consent of the Purchaser, which consent
will not be unreasonably delayed, conditioned or withheld, which provides for
(i) the issuance of Common Stock or securities convertible, exercisable or
exchangeable into Common Stock at a discount to the then current market price of
the Common Stock, including equity lines of credit, (ii) a mechanism for the
reset of the purchase price of the Common Stock to below the then current market
price of the Common Stock, or (iii) the issuance of Common Stock with warrants,
which have an exercise price such that together with the price of the Common
Stock would result in the issuance of shares of Common Stock at a per share
price below the then current market price of the Common Stock, or (y) an event
resulting in a Material Adverse Effect has occurred. The Purchaser may terminate
this Agreement upon one (1) day's notice during the Event Period.
Section 7.3 Termination by Company. The Company may terminate this
Agreement at any time upon thirty (30) days notice to the Purchaser; provided,
that, (i) such termination shall not occur during a Draw Down Pricing Period and
the applicable Settlement Date and (ii) receipt by Purchaser of such notice
shall trigger an Event Period for purposes of Section 7.2 hereof.
Section 7.4 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1, 7.2 or 7.3 herein, this Agreement shall
be of no further force and effect, except as provided in Section 9.9 hereof.
Nothing in this Section 7.4 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
24
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and
hold harmless each of the Purchaser and the Broker, each of their directors,
fund managers and officers, and each person, if any, who controls the Purchaser
or the Broker within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act from and against any losses, claims, damages,
liabilities and expenses (including reasonable costs of defense and
investigation and all reasonable attorneys' fees) to which the Purchaser and the
Broker, each of their directors, fund managers and officers, and each person, if
any, who controls the Purchaser or the Broker may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement
relating to Common Stock being sold to the Purchaser (including the Prospectus
Supplement filed in connection with the transactions contemplated hereunder
which are a part of it), or any amendment or supplement to it, or (ii) the
omission or alleged omission to state in that Registration Statement or any
document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided that the Company shall not be liable under this Section
8.1(a) to the extent that a court of competent jurisdiction shall have
determined by a final judgment (with no appeals available) that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or the
Broker or such person through its bad faith or willful misconduct; provided,
however, that the foregoing indemnity shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Purchaser or the Broker expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further, that
with respect to the Prospectus, the foregoing indemnity shall not inure to the
benefit of the Purchaser or the Broker or any such person from whom the person
asserting any loss, claim, damage, liability or expense purchased Common Stock,
if copies of the Prospectus were timely delivered to the Purchaser pursuant
hereto and a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of the Purchaser or the Broker or any such person to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Common Stock to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.
The Company will reimburse the Purchaser, the Broker and each such
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by the Purchaser, the Broker or any controlling person in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding, except that the Company will not be liable to the
extent a claim or action which results in a loss, claim, damage, liability or
25
expense arises out of, or is based upon, an untrue statement, alleged untrue
statement, omission or alleged omission, included in any Registration Statement,
Prospectus or Prospectus Supplement or any amendment or supplement to the
thereto in reliance upon, and in conformity with, written information furnished
by either the Purchaser or the Broker to the Company for inclusion in the
Registration Statement, Prospectus or Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will indemnify
and hold harmless the Company, each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys' fees) to which the Company and each director, officer and person, if
any, who controls the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any Prospectus or Prospectus Supplement or any
amendment or supplement to it or (ii) the omission or alleged omission to state
in the Registration Statement or any Prospectus or Prospectus Supplement or any
amendment or supplement to it a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, the untrue statement, alleged untrue statement, omission or
alleged omission was made in reliance upon, and in conformity with, written
information furnished by the Purchaser to the Company for inclusion in the
Registration Statement, the Prospectus or Prospectus Supplement or an amendment
or supplement thereto, and the Purchaser will reimburse the Company and each
such director, officer or controlling person promptly upon demand for any legal
or other costs or expenses reasonably incurred by the Company or the other
person in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding.
Section 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party will pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Paragraph (a)
26
or (b) or Section 8.1, will cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
To the extent that either party reimburses the other as required by
Section 8.1 and it is later determined by a court of competent jurisdiction that
such party was not entitled to indemnification, such party shall promptly return
all such funds.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses.
The Company shall pay all reasonable fees and expenses related
to the transactions contemplated by this Agreement; provided, that the Company
shall pay, at the Closing, all reasonable attorneys fees and expenses (exclusive
of disbursements and out-of-pocket expenses) incurred by the Purchaser of up to
$15,000 in connection with the preparation, negotiation, execution and delivery
of this Agreement. In addition, the Company shall pay all reasonable fees and
expenses incurred by the Purchaser in connection with any amendments,
modifications or waivers of this Agreement or incurred in connection with the
successful enforcement of this Agreement, including, without limitation, all
reasonable attorneys' fees and expenses.
27
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
28
If to the Company: BioMarin Pharmaceutical Inc.
371 Bel Marin Keys Boulevard, Suite 210
Novato, California 94949
Tel. No.: (415) 884-6700
Fax No.: (415) 382-7889
Attention: Bill Anderson / Kim Tsuchimoto
With copies to: Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
Tel. No.: (213) 683-6000
Fax No.: (213) 627-0705
Attention: Siobhan McBreen Burke
If to the Purchaser: Acqua Wellington North American
Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Montague Sterling Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No: (242) 394-2700
Fax No.: (242) 394-9667
Attention: Anthony L.M. Inder Rieden
With copies to: Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Tel. No: (212) 704-6000
Fax No: (212)704-6288
Attention: Christopher S. Auguste
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
29
Section 9.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, provided,
however, that the Purchaser may assign this Agreement to any of its affiliated
funds, which consent shall not be unreasonably withheld. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. The parties hereto may not amend this Agreement or any rights or
obligations hereunder without the prior written consent of the Company and each
Purchaser to be affected by the amendment. After Closing, the assignment by a
party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement.
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article VIII of this Agreement shall survive the execution and delivery hereof
and the termination of this Agreement hereunder.
Section 9.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.11 Publicity. The Company shall not issue any press release or
otherwise make any public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchaser, which shall not be
unreasonably withheld. Notwithstanding the foregoing, in the event the Company
is required by law or regulation to issue a press release or otherwise make a
public statement or announcement with respect to this Agreement or the
transaction contemplated hereby prior to or after the Closing, the Company shall
consult with the Purchaser on the form and substance of such press release or
other disclosure.
Section 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
30
Section 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
[END OF PAGE]
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
BIOMARIN PHARMACEUTICAL INC.
By:__/s/_Fredric D. Price_______________
Name:_Fredric D. Price______________
Title:__CEO_________________________
ACQUA WELLINGTON NORTH AMERICAN
EQUITIES FUND, LTD.
By:_____________________________________
Name:_______________________________
Title:______________________________
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL
[LETTERHEAD OF _______________________]
[FORM OF COMPANY'S COUNSEL OPINION]
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. The Company has
the requisite corporate power to own and operate its properties and assets, and
to carry on its business as presently conducted. Each of the Company and each
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in the State of California.
2. The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Purchase Agreement and to issue
and sell the Shares. Except as contemplated in Sections 4.4(b) and 4.4(c) of the
Purchase Agreement, the execution, delivery and performance of the Purchase
Agreement by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action on the part of the Company and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. The Purchase Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. The Common Stock is not subject to preemptive rights under the Company's
Certificate of Incorporation as filed with the Delaware Secretary of State or
the Company's By-Laws as each is in effect as of the date hereof (the "Charter"
and "By-Laws" respectively).
3. The Shares have been duly authorized and, when delivered against
payment in full as provided in the Purchase Agreement, will be validly issued,
fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with
the terms of the Purchase Agreement and the consummation by the Company of the
transactions contemplated thereby (i) do not violate any provision of the
Company's Charter or By-Laws, (ii) do not cause the Company to violate, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party and which is listed on Exhibit A
hereto, (iii) do not create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party and which is listed on Exhibit A hereto, and (iv) do not
cause the Company to violate any New York state, California state or federal
statute, rule or regulation or order, judgment or decree known to us (excluding
federal and state securities laws, rules and regulations except as specifically
provided in paragraph 7 below) that is specifically applicable to the Company or
any of the Subsidiaries, except for such violations, defaults, terminations,
amendments, acceleration, cancellations, liens, charges, encumbrances and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
5. To our knowledge, there is no action, suit, claim,
investigation or proceeding pending or threatened against the Company or any
Subsidiary which questions the validity of the Purchase Agreement or the
transactions contemplated hereby. To our knowledge, there is no action, suit,
claim, investigation or proceeding pending or threatened against or by the
Company or any Subsidiary which, if adversely determined, is reasonably likely
to result in a Material Adverse Effect.
6. No consent, approval or authorization of or designation,
declaration or filing with any federal governmental authority on the part of the
Company is required in connection with the valid execution and delivery of the
Purchase Agreement, or the offer, sale or issuance of the Shares (other than any
filings which may be required to be made by the Company with the Commission, or
the Nasdaq Stock Market subsequent to the Closing, and any registration
statement which may be filed under the Securities Act pursuant to the Purchase
Agreement).
7. The Registration Statement has been declared effective under
the Securities Act, and, to our knowledge, no stop order suspending its
effectiveness has been issued and, to our knowledge, no proceedings for that
purpose have been instituted or are pending before or contemplated by the
Commission.
EXHIBIT B
TO THE COMMON STOCK PURCHASE AGREEMENT
SECRETARY'S CERTIFICATE
___________, 2001
The undersigned, ______________________, Secretary of BioMarin
Pharmaceutical Inc., a Delaware corporation (the "Company"), delivers this
certificate in connection with the issuance and sale of shares of common stock
of the Company in an aggregate amount of $__________ to Acqua Wellington North
American Equities Fund, Ltd. (the "Purchaser") pursuant to the Common Stock
Purchase Agreement, dated August 15, 2001 (the "Agreement"), by and among the
Company and the Purchaser, and hereby certifies on the date hereof, that
(capitalized terms used herein without definition have the meanings assigned to
them in the Agreement):
1. Attached hereto as Exhibit A is a true, complete and correct
copy of the Certificate of Incorporation of the Company as filed with the
Secretary of State of the State of Delaware. The Certificate of Incorporation of
the Company has not been further amended or restated, and no document with
respect to any amendment to the Certificate of Incorporation of the Company has
been filed in the office of the Secretary of State of the State of Delaware
since ______ __, 2001, the date shown on the face of the state certification
relating to the Company's Certificate of Incorporation, which is in full force
and effect on the date hereof, and no action has been taken by the Company in
contemplation of any such amendment or the dissolution, merger or consolidation
of the Company.
2. Attached hereto as Exhibit B is a true and complete copy of
the By-laws of the Company, as amended and restated through, and as in full
force and effect on, the date hereof, and no proposal for any amendment, repeal
or other modification to the By-laws of the Company has taken or is currently
pending before the Board of Directors or stockholders of the Company.
3. Attached hereto as Exhibit C is a true and correct copy of
all written actions and resolutions of the Board of Directors (including any
committees thereof) of the Company relating to the transactions contemplated by
the Agreement; said actions and resolutions have not been amended, rescinded or
modified since their adoption and remain in full force and effect as of the date
hereof; said actions and resolutions are the only resolutions adopted by the
Board of Directors of the Company, or any committee thereof, pertaining to (A)
the offering of the Common Stock to be sold by the Company pursuant to the
Agreement, (B) the execution and delivery of the Agreement and (C) all other
transactions in connection with the foregoing.
4. Each person who, as an officer of the Company, or as
attorney-in-fact of an officer of the Company, signed (A) the Agreement, (B) the
Registration Statement and (C) any other document delivered prior hereto or on
the date hereof in connection with the transactions contemplated by the
Agreement, was duly elected, qualified and acting as such officer or duly
appointed and acting as such attorney-in-fact, and the signature of each such
person appearing on any such document is his genuine signature.
5. The Agreement as executed and delivered on behalf of the
Company has been approved by the Company.
6. The actions, resolutions and other records of the Company
relating to all of the proceedings of the Stockholders of the Company, the Board
of Directors of the Company and any committees thereof made available to the
Purchasers and their counsel are the true, correct and complete copies thereof,
with respect to all proceedings of said Stockholders, Board of Directors and
committees thereof. Such records and other documents of the Company made
available to the Purchasers and their counsel were true and complete in all
respects. There have been no material changes, additions or alterations in said
records and other documents that have not been disclosed to the Purchasers.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
By:___________________________________
Name:_____________________________
Title: Secretary
I, __________________, Chief Executive Officer of ___________________
___________________., do hereby certify that ______________________ is the duly
elected, qualified and acting Secretary of the above mentioned company, and that
the signature set forth above is her true and genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.
By:___________________________________
Name:______________________________
Title: Chief Executive Officer
EXHIBIT C
TO THE COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of
BioMarin Pharmaceutical Inc. (the "Company") pursuant to the Draw Down Notice,
dated ___________ delivered by the Company to Acqua Wellington North American
Equities Fund, Ltd. (the "Purchaser") pursuant to Article VI of the Common Stock
Purchase Agreement dated August 15, 2001, by and between the Company and Acqua
Wellington North American Equities Fund, Ltd. (the "Agreement"), the undersigned
hereby certifies as follows:
1. The undersigned is the duly elected Chief [Executive/Financial]
Officer of the Company.
2. Except as set forth on Schedule A attached hereto, the
representations and warranties of the Company set forth in Section 3.1 of the
Agreement are true and correct in all material respects as though made on and as
of the date hereof, except for representations and warranties that speak as of a
particular date.
3. The Company has performed in all material respects all
covenants and agreements to be performed by the Company on or prior to the Draw
Down Exercise Date and the Settlement Date related to the Draw Down Notice and
has complied in all material respects with all obligations and conditions
contained in Section 5.3 of the Agreement.
Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this _____ day
of _________, 20__.
By:_________________________________
Name:_______________________________
Title:______________________________
EXHIBIT D
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
August 15, 2001 (the "Purchase Agreement") between BioMarin Pharmaceutical Inc.,
a Delaware corporation (the "Company"), and Acqua Wellington North American
Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement.
The Company has taken all necessary corporate action to authorize the
issuance of the Shares pursuant to this Draw Down Notice.
In accordance with and pursuant to Section 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.
Draw Down Amount:____________________________________________
Call Option Amount:__________________________________________
Draw Down Pricing Period start date:_________________________
Draw Down Pricing Period end date:___________________________
Settlement Dates:____________________________________________
Threshold Price:_____________________________________________
Minimum Threshold Price: $7.00
_____________________________________
Number of Shares
of Common Stock Currently Unissued
under the Registration Statement:____________________________
Dated:_______________________________
____________________________________
By:_________________________________
Name:
Title:
Address:____________________________
Facsimile No.:______________________
Wire Instructions:__________________
Contact Name:_______________________
Receipt Acknowledged:
Acqua Wellington North American Equities Fund, Ltd.
By:__________________________________
Name:
Title:
EXHIBIT E
TO THE COMMON STOCK PURCHASE AGREEMENT
FORM OF CALL OPTION NOTICE
To: ____________________________________________
Fax #:__________________________________________
Reference is made to the Common Stock Purchase Agreement dated as of
August 15, 2001 (the "Purchase Agreement") between BioMarin Pharmaceutical Inc.,
a Delaware corporation (the "Company"), and Acqua Wellington North American
Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 6.2 of the Purchase
Agreement, the Purchaser hereby issues this Call Option Notice to exercise a
Call Option for the Call Option Amount indicated below.
Call Option Amount Exercised:__________________________________________
Number of Shares to be purchased:______________________________________
VWAP on the date hereof:_______________________________________________
Draw Down Discount Percentage:_________________________________________
Settlement Date:_______________________________________________________
Threshold Price:_______________________________________________________
Minimum Threshold Price: $7.00
_______________________________________________
Dated:______________________
Acqua Wellington North American
Equities Fund, Ltd.
By:_________________________________
Name:___________________________
Title:__________________________
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF August 15, 2001
BETWEEN BIOMARIN PHARMACEUTICAL INC. AND
ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO
SUCH NUMBERS AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT
(THE "AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE
MODIFIED IN THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES
CONTAINED IN THESE DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL
THE DISCLOSURES SHALL BE READ TOGETHER.