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EXHIBIT 1.1
NEOTHERAPEUTICS, INC.
COMMON STOCK
SALES AGREEMENT
JUNE 12, 2001
CANTOR FITZGERALD & CO.
One World Trade Center
New York, New York 10048
Dear Sirs/Ladies:
NeoTherapeutics, Inc., a Delaware corporation (the "Company"), confirms
its agreement ("Agreement") with Cantor Fitzgerald & Co. ("CF&Co"), as follows:
1. Issuance and Sale of Shares. The Company agrees that, from time to
time during the term of this Agreement, on the terms and subject to the
conditions set forth herein, it will issue and sell through CF&Co, acting as
agent and/or principal, shares (the "Shares") of the Company's common stock, par
value $.001 per share ("Common Stock") having an aggregate sale price of up to
$8,400,000; provided, however, that unless and until the Company obtains the
approval of the holders of its Common Stock in accordance with the laws of the
State of Delaware, in no event shall the number of shares issued hereunder
exceed 19.99% of the number of shares of Common Stock outstanding on the date
hereof (the "Maximum Amount"). Notwithstanding anything to the contrary
contained herein, the parties hereto agree that compliance with the limitations
set forth in this Section 1 on the number and aggregate sale price of Shares
issued and sold under this Agreement shall be the sole responsibility of the
Company, and CF&Co shall have no obligation in connection with such compliance.
The issuance and sale of Shares through CF&Co will be effected pursuant to a
registration statement on Form S-3 filed by the Company and declared effective
by the Securities and Exchange Commission (the "Commission").
2. Placements. Each time that the Company wishes to issue and sell
Shares hereunder (each, a "Placement"), it will notify CF&Co of the proposed
terms of such Placement. If CF&Co wishes to accept such proposed terms (which it
may decline to do for any reason in its sole discretion) or, following
discussions with the Company, wishes to accept amended terms, CF&Co will issue
to the Company a written notice setting forth the terms that CF&Co is willing to
accept, including without limitation the number of Shares ("Placement Shares")
to be issued, the date or dates on which such sales are anticipated to be made,
any minimum price below which sales may not be made, and the capacity in which
CF&Co may act in selling Shares hereunder (as principal, agent or both) (a
"Placement Notice"). The amount of any discount, commission or other
compensation to be paid by the Company to CF&Co for effecting such sales shall
be as set forth in Schedule 1 attached hereto, as such Schedule may be amended
pursuant to the written agreement of the Company and CF&Co. The terms set forth
in a
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Placement Notice will not be binding on the Company or CF&Co unless and until
the Company delivers written notice of its acceptance of all of the terms of
such Placement Notice (an "Acceptance"); provided, however, that neither the
Company nor CF&Co will be bound by the terms of a Placement Notice unless the
Company delivers to CF&Co an Acceptance with respect thereto prior to 4:30 p.m.
(eastern time) on the Business Day following the Business Day on which such
Placement Notice is delivered to the Company. It is expressly acknowledged and
agreed that neither the Company nor CF&Co will have any obligation whatsoever
with respect to a Placement or any Placement Shares unless and until CF&Co
delivers a Placement Notice to the Company, and then only upon the terms
specified therein and herein. In the event of a conflict between the terms of
this Agreement and the terms of a Placement Notice, the terms of the Placement
Notice will control.
3. Sale of Placement Shares by CF&Co. Subject to the terms and
conditions of this Agreement, upon the Acceptance of a Placement Notice, and
unless the sale of the Placement Shares described therein has been suspended or
otherwise terminated in accordance with the terms of this Agreement, CF&Co will
use its commercially reasonable efforts consistent with its normal trading and
sales practices to sell such Placement Shares up to the amount specified, and
otherwise in accordance with the terms of such Placement Notice. CF&Co will
provide written confirmation to the Company no later than the opening of the
Trading Day next following the Trading Day on which it has made sales of
Placement Shares hereunder setting forth the number of Placement Shares sold on
such day, the compensation payable by the Company to CF&Co with respect to such
sales, and the Net Proceeds (as defined below) payable to the Company. CF&Co may
sell any Placement Shares into an existing trading market for the Company's
Common Stock on or through the facilities of a national securities exchange or
to or through a market maker, subject to the volume limitations set forth in
Rule 415(a)(4)(ii) of the Securities Act of 1933, as amended (the "Act"). The
Company acknowledges and agrees that (i) there can be no assurance that CF&Co
will be successful in selling Placement Shares, and (ii) CF&Co will incur no
liability or obligation to the Company or any other person or entity if it does
not sell Placement Shares for any reason other than a failure by CF&Co to use
its commercially reasonable efforts consistent with its normal trading and sales
practices to sell such Placement Shares as required under this Section 3. For
the purposes hereof, "Trading Day" means any day on which Common Stock is
purchased and sold on the principal market on which the Common Stock is listed
or quoted.
4. Suspension of Sales. The Company or CF&Co may, upon notice to the
other party in writing or by telephone (confirmed immediately by verifiable
facsimile transmission), suspend any sale of Placement Shares; provided,
however, that such suspension shall not affect or impair either party's
obligations with respect to any Placement Shares sold hereunder prior to the
receipt of such notice. The Company agrees that no such notice shall be
effective against CF&Co unless it is made to one of the individuals named on
Schedule 4 hereto, as such Schedule may be amended from time to time.
5. Settlement.
(a) Settlement of Placement Shares. Unless otherwise specified in the
applicable Placement Notice, settlement for sales of Placement Shares will occur
on the third (3rd) Business Day (or such earlier day as is industry practice for
regular-way trading) following the date on
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which such sales are made (each a "Settlement Date"). The amount of proceeds to
be delivered to the Company on a Settlement Date against the receipt of the
Placement Shares sold ("Net Proceeds") will be equal to the aggregate sales
price at which such Shares were sold, after deduction for (i) CF&Co's
commission, discount, or other compensation for such sales payable by the
Company, (ii) any other amounts due and payable by the Company to CF&Co
hereunder, and (iii) any transaction fees imposed by any governmental or
self-regulatory organization in respect of such sales.
(b) Delivery of Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement
Shares being sold by crediting CF&Co's or its designee's account at The
Depository Trust Company through its Deposit Withdrawal Agent Commission System
or by such other means of delivery as may be mutually agreed upon by the parties
hereto and, upon receipt of such Shares, which in all cases shall be freely
tradeable, transferable, registered shares in good deliverable form, CF&Co will
deliver the related Net Proceeds in same day funds delivered to an account
designated by the Company prior to the Settlement Date. If the Company defaults
in its obligation to deliver Shares on a Settlement Date, the Company agrees
that in addition to and in no way limiting the rights and obligations set forth
in Section 9(a) hereto, it will (i) hold CF&Co harmless against any loss, claim,
damage, or expense (including reasonable legal fees and expenses), as incurred,
arising out of or in connection with such default by the Company and (ii) pay to
CF&Co any commission, discount, or other compensation to which it would
otherwise have been entitled absent such default.
6. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, CF&Co that:
(a) The Company meets the requirements of Form S-3 under the Act and the
rules and regulations thereunder ("Rules and Regulations"). A registration
statement on Form S-3 with respect to the Shares (as amended or supplemented,
the "Registration Statement"), including the form of prospectus contained
therein (as amended or supplemented, the "Prospectus"), will be prepared by the
Company in conformity with the requirements of the Act and the Rules and
Regulations and will be filed with the Commission, and the Company will use its
best efforts to cause it to become effective as soon as reasonably practicable.
Any amendment or supplement to the Registration Statement or Prospectus required
by this Agreement will be so prepared and filed by the Company, and the Company
will use its best efforts to cause it to become effective as soon as reasonably
practicable. No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
instituted or threatened by the Commission. Copies of the Registration Statement
and Prospectus, any such amendment or supplement and all documents incorporated
by reference therein that were filed with the Commission on or prior to the date
of this Agreement have been delivered to CF&Co. Any reference herein to the
Registration Statement, the Prospectus, or any amendment or supplement thereto
shall be deemed to refer to and include the documents incorporated (or deemed to
be incorporated) by reference therein, and any reference herein to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.
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(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus, on the date of filing thereof with the
Commission and at each Settlement Date, conformed or will conform with the
requirements of the Act and the Rules and Regulations; each part of the
Registration Statement, when such part became or becomes effective, did not or
will not 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 not misleading; and the Prospectus, on the date of filing thereof with
the Commission and at each Settlement Date, did not or will not include an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; except that the foregoing shall not apply to
statements or omissions in any such document made in reliance on information
furnished to the Company by CF&Co specifically stating that it is intended for
use in the Registration Statement, the Prospectus, or any amendment or
supplement thereto.
(c) The documents incorporated by reference in the Registration
Statement or the Prospectus, or any amendment or supplement thereto (the
"Disclosure Documents"), when they became effective under the Act or were filed
with the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, conformed with the requirements of the Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the Prospectus or
any further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will conform to
the requirements of the Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder and will not 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 not misleading;
except that the foregoing will not apply to statements or omissions in any such
document made in reliance on information furnished to the Company by CF&Co
specifically stating that it is intended for use in any such document.
(d) The consolidated financial statements and financial schedules of the
Company and its subsidiaries, together with the related notes set forth or
incorporated by reference in the Registration Statement and Prospectus, have
been and will be prepared in accordance with Regulation S-X under the Act and
with generally accepted accounting principles consistently applied at the times
and 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 exclude footnotes or may be condensed
or summary statements) and fairly present and will fairly present the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments).
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware with full
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and Prospectus; and the
Company is duly qualified as a foreign entity to transact business and is in
good standing in each jurisdiction in which such qualification is required,
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whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure, individually or in the aggregate, to be so
qualified and be in good standing would not have a material adverse effect on
(i) the consolidated business, operations, properties, financial condition,
reputation, prospects or results of operations of the Company and its
subsidiaries taken as a whole, (ii) the transactions contemplated hereby, (iii)
the Shares or (iv) the ability of the Company to perform its obligations under
this Agreement (collectively, a "Material Adverse Effect").
(f) Each subsidiary of the Company, if any, has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to own,
lease and operate its properties and conduct its business as described in the
Registration Statement and Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to be
so qualified would not have a Material Adverse Effect.
(g) Each of the Company and its subsidiaries has (i) good and marketable
title to all of the properties and assets owned by it, free and clear of all
liens, charges, claims, security interests or encumbrances (collectively,
"Encumbrances"), other than Encumbrances that would not have a Material Adverse
Effect, and (ii) possession under all leases to which it is party as lessee. All
leases to which the Company or any of its subsidiaries is a party are valid and
binding and no material default has occurred and is continuing thereunder, and
no event or circumstance that with the passage of time or giving of notice, or
both, would constitute such a material default has occurred and is continuing,
and, to the best knowledge of the Company, no defaults by the landlord exist
under any such leases.
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable and have been issued in compliance with all applicable federal
and state securities laws; and all of the issued shares of capital stock of each
subsidiary, if any, of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable and the shares of such subsidiary
are owned directly or indirectly by the Company, are held free and clear of all
Encumbrances. The Common Stock is currently listed on the Nasdaq National Market
under the symbol "NEOT".
(i) The Shares have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will be validly issued and fully paid and
non-assessable, free and clear of all Encumbrances and will be issued in
compliance with all applicable federal and state securities laws; the capital
stock of the Company, including the Shares, conforms to the description thereof
contained in the Registration Statement and the Shares will conform to the
description thereof contained in the Prospectus as amended or supplemented.
Other than as set forth on Schedule 6(i), as such Schedule may be amended from
time to time upon written notice to such effect delivered to CF&Co, neither the
stockholders of the Company, nor any other person or entity have any preemptive
rights or rights of first refusal with respect to the Shares or other rights to
purchase or receive any of the Shares or any other securities or assets of the
Company, and no person has the right, contractual or otherwise, to cause the
Company to issue
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to it, or register pursuant to the Act, any shares of capital stock or other
securities or assets of the Company upon the issuance or sale of the Shares.
(j) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included or incorporated by
reference in the Prospectus any material loss (other than operating losses
incurred in the ordinary course of the Company's business and which have been
disclosed in writing to CF&Co or specifically described in a Disclosure
Document) or interference with the business of the Company and its subsidiaries,
taken as a whole, including without limitation, from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth in
the Prospectus; subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) neither the Company
nor any of its subsidiaries has incurred any liabilities or obligations, direct
or contingent, or entered into any transactions, not in the ordinary course of
business, that are material to the Company and its subsidiaries taken as a
whole, and (ii) except as set forth on Schedule 6(j), as such Schedule may be
amended from time to time upon written notice to such effect delivered to CF&Co,
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus there has not been any material
change, on a consolidated basis, in the authorized capital stock of the Company
and its subsidiaries, any material increase in the short-term debt or long-term
debt of the Company and its subsidiaries, on a consolidated basis, or any
material adverse change, or any development involving a prospective material
adverse change, in the consolidated business, operations, properties, financial
condition, reputation, prospects or results of operations of the Company and its
subsidiaries taken as a whole.
(k) Except as set forth in the Prospectus, there is no claim, litigation
or administrative proceeding or inquiry pending, or, to the Company's knowledge,
threatened against the Company or any of its subsidiaries, or, to the Company's
knowledge, against any officer, director or employee of the Company or any such
subsidiary in connection with such person's employment therewith that,
individually or in the aggregate, could have a Material Adverse Effect. Neither
the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could have a Material Adverse Effect.
(l) There are no legal or governmental proceedings, contracts or
documents of the Company or any of its subsidiaries that are required to be
described in or filed as exhibits to the Registration Statement or any of the
documents incorporated by reference therein by the Act or the Exchange Act or by
the rules and regulations of the Commission thereunder that have not been so
described or filed as required.
(m) Subject to approval of the terms of each Placement Notice by the
Company's Board of Directors, all necessary action has been duly and validly
taken by the Company to authorize the execution, delivery and performance of
this Agreement. This Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency,
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reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether applied
in a proceeding in law or equity).
(n) Neither the Company nor any of its subsidiaries is in violation of
any provisions of its charter, bylaws or any other governing document as amended
and in effect on and as of the date hereof or in default (and no event has
occurred which, with notice or lapse of time or both, would constitute a
default) under any indenture, mortgage, deed of trust, loan or credit agreement
or any provision of any instrument or contract to which it is a party or by
which it is bound.
(o) Executing and delivering this Agreement and the issuance and sale of
the Shares and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions contemplated herein will not
result in (i) a breach or violation of any of the terms and provisions of, or
constitute a default under, any obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan or credit agreement or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which any of them is bound or to which any of the property of the
Company or any of its subsidiaries is subject, (ii) a violation of the Company's
charter or by-laws, or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of its properties or (iii) the creation of any
Encumbrance upon any assets of the Company or of any of its subsidiaries or the
triggering of any preemptive or anti-dilution rights or rights of first refusal
or first offer, or any similar rights (whether pursuant to a "poison pill"
provision or otherwise), on the part of holders of the Company's securities or
any other person, other than the right of first refusal granted to Montrose
Investments Ltd. and Strong River Investments, Inc. pursuant to that certain
letter agreement dated as of April 17, 2001, by and among the Company, Montrose
Investments Ltd., HBK Master Fund L.P. and Strong River Investments, Inc. (the
"April 17 Letter"). Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, has issued or sold any
shares of Common Stock or securities or instruments convertible into,
exchangeable for and/or otherwise entitling the holder thereof to acquire shares
of Common Stock which would be integrated with the offer and sale of the Shares
hereunder, including, without limitation, for purposes of any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated.
(p) The Company and its subsidiaries have not violated and are in
compliance with all laws, statutes, ordinances, regulations, rules and orders of
any foreign, federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
or governmental agency, department or authority, except for such violations or
noncompliance which, individually or in the aggregate, would not have a Material
Adverse Effect.
(q) The Company and its subsidiaries possess such licenses, permits,
consents, orders, certificates or authorizations issued by the appropriate
federal, state, foreign or local regulatory agencies or bodies necessary to
conduct their business as described in the Prospectus except for licenses,
permits, consents, orders, certificates, authorizations, approvals, franchises
or rights, the absence of which, individually or in the aggregate, would not
have a Material Adverse Effect; the Company and its subsidiaries have not
received any notice of proceedings or investigations
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relating to the revocation or modification of any such licenses, permits,
consents, orders, certificates, authorizations, approvals, franchises or rights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect. No consent, approval,
authorization or order of, or filing with, any court or governmental agency or
body is required for the issue and sale of the Shares and the consummation by
the Company of the transactions contemplated by this Agreement, except the
filing with the Commission of Prospectus Supplements or amendments to the
Registration Statement related to the issue and sale of the Shares and such
consents, approvals, authorizations, registrations or qualifications as have
already been obtained or made or as may be required under state securities or
Blue Sky laws.
(r) Other than as set forth in the Prospectus, to the best of the
Company's knowledge, the Company carries, or is covered by, insurance in such
amounts and covering such risks as is prudent, reasonable and customary for
companies engaged in similar businesses in similar industries.
(s) Other than as set forth in the Prospectus, the Company and each of
its subsidiaries have obtained all material environmental permits, licenses and
other authorizations required by federal, state, foreign and local law in order
to conduct their businesses as described in the Prospectus; the Company and each
of its subsidiaries are conducting their businesses in substantial compliance
with such permits, licenses and authorizations and with applicable environmental
laws, except where the failure to be in compliance would not have a Material
Adverse Effect; and, except as described in the Prospectus, the Company is not
in violation of any federal, state, foreign or local law or regulation relating
to the storage, handling, disposal, release or transportation of hazardous or
toxic materials except for such violations or noncompliance which, individually
or in the aggregate, would not have a Material Adverse Effect.
(t) Arthur Andersen, which has audited the financial statements of the
Company and its subsidiaries included in the Prospectus, is an independent
public accountant as required by the Act and the Rules and Regulations.
(u) No forward looking statement within the meaning of Section 27A of
the Act and Section 21E of the Exchange Act contained in the Registration
Statement has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
(v) The Company and each of its subsidiaries owns or possesses
sufficient legal rights to all patents, trademarks, service marks, tradenames,
copyrights, trade secrets, licenses, information and proprietary rights and
processes necessary for its business as now conducted (collectively, the
"Company Intellectual Property Rights") without any conflict with, or
infringement of, the rights of others. Neither Company nor any of its
subsidiaries has received any written communications alleging that the Company
or any of its subsidiaries has violated or, by conducting its business, would
violate any of the patents, trademarks, service marks, tradenames, copyrights,
trade secrets or other proprietary rights or processes of any other person or
entity. To the Company's and each of its subsidiary's knowledge, all Company
Intellectual Property Rights are enforceable and there is no existing
infringement by any person of such Company Intellectual Property Rights. All
patent applications that have been filed by the
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Company or any of its subsidiaries with the Patent and Trademark Office have
been duly filed by the Company or such subsidiary, as applicable, and the
Company or such subsidiary, as applicable, has taken all actions reasonably
necessary to maintain the prosecution of such patent applications.
(w) The Company, on behalf of Dr. Alvin Glasky, represents and warrants
that at all times since the respective dates of application of the Re-Assigned
Patents (as defined below) until their assignment to Advanced
Immunotherapeutics, Inc., a California corporation, pursuant to the Assignment
dated April 12, 2001, by and between Dr. Glasky and Advanced Immunotherapeutics,
Inc., Dr. Glasky, in his individual capacity, has been and will be the sole and
exclusive legal and beneficial owner of the Re-Assigned Patents and at all times
has held and will hold good and marketable title to the Re-Assigned Patents,
free and clear of all liens, claims, charges, defenses, counterclaims, offsets,
encumbrances and security interests of any kind or nature. Prior to such
assignment to Advanced Immunotherapeutics, Inc., Dr. Glasky has not sold,
assigned, transferred, pledged or otherwise encumbered or disposed of, and will
not sell, assign, transfer, pledge or otherwise encumber or dispose of, the
Re-Assigned Patents or any interest therein. Dr. Glasky owns and has the full
right and authority to assign the Re-Assigned Patents. For the purposes of this
Agreement, "Re-Assigned Patents" means, individually and collectively, the
following patents and the inventions included therein, together with the
applications to the United States Patent and Trademark Office therefor and any
continuations, continuations in part, divisions, reissues, extensions,
revisions, substitutions, re-registrations, examinations, reexamination
certificates, re-validations and patents of additions with respect thereto, as
well as any foreign patents covering any claims described in the patents: (i)
U.S. Patent No. 5,091,432, entitled "9-Substituted Hypoxanthine Bi-Functional
Compounds and Their Neuroimmunological Methods of Use," issued February 25, 1992
and (ii) U.S. Patent No. 5,447,939, entitled "Carbon Monoxide Dependent Guanylyl
Cyclase Modifiers and Methods of Use," issued September 5, 1995.
(x) On each Settlement Date and each Filing Date (as defined in
paragraph 7(m) below), the Company shall be deemed to have confirmed (i) the
accuracy and completeness, as of such date, of each representation and warranty
made by it in this Agreement and (ii) that the Company has complied with all of
the agreements to be performed by it hereunder at or prior to such date.
7. Covenants of the Company. The Company covenants and agrees with CF&Co
that:
(a) During the period in which a prospectus relating to the Shares is
required to be delivered by CF&Co under the Act, the Company will notify CF&Co
promptly of the time when any subsequent amendment to the Registration Statement
has been filed with the Commission and has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission
for any amendment or supplement to the Registration Statement or Prospectus or
for additional information; it will prepare and file with the Commission,
promptly upon CF&Co's request, any amendments or supplements to the Registration
Statement or Prospectus that, in CF&Co's opinion, may be necessary or advisable
in connection with the distribution of the Shares by CF&Co (provided, however
that the failure of CF&Co to make such request shall not relieve the Company of
any obligation or liability hereunder, or affect CF&Co's
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right to rely on the representations and warranties made by the Company in this
Agreement); the Company will not file any amendment or supplement to the
Registration Statement or Prospectus unless a copy thereof has been submitted to
CF&Co a reasonable period of time before the filing and CF&Co has not reasonably
objected thereto (provided, however that the failure of CF&Co to make such
objection shall not relieve the Company of any obligation or liability
hereunder, or affect CF&Co's right to rely on the representations and warranties
made by the Company in this Agreement); and it will furnish to CF&Co at the time
of filing thereof a copy of any document that upon filing is deemed to be
incorporated by reference in the Registration Statement or Prospectus; and the
Company will cause each amendment or supplement to the Prospectus to be filed
with the Commission as required pursuant to the applicable paragraph of Rule
424(b) of the Rules and Regulations or, in the case of any document to be
incorporated therein by reference, to be filed with the Commission as required
pursuant to the Exchange Act, within the time period prescribed.
(b) The Company will advise CF&Co, promptly after it receives notice or
obtains knowledge thereof, of the issuance or threatened issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, or of the initiation or threatening of any proceeding
for any such purpose; and it will promptly use its commercially reasonable
efforts to prevent the issuance of any stop order or to obtain its withdrawal if
such a stop order should be issued.
(c) Within the time during which a prospectus relating to the Shares is
required to be delivered by CF&Co under the Act, the Company will comply with
all requirements imposed upon it by the Act and by the Rules and Regulations, as
from time to time in force, and will file on or before their respective due
dates all reports and any definitive proxy or information statements required to
be filed by the Company with the Commission pursuant to Sections 13(a), 13(c),
14, 15(d) or any other provision of or under the Exchange Act. If during such
period any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Registration Statement or Prospectus to
comply with the Act, the Company will promptly notify CF&Co to suspend the
offering of Shares during such period and the Company will promptly amend or
supplement the Registration Statement or Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such compliance.
(d) The Company will use its best efforts to cause the Shares to be
listed on the Nasdaq National Market and to qualify the Shares for sale under
the securities laws of such jurisdictions as CF&Co designates and to continue
such qualifications in effect so long as required for the distribution of the
Shares; provided that the Company shall not be required in connection therewith
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction.
(e) The Company will furnish to CF&Co and its counsel (at the expense of
the Company) copies of the Registration Statement, the Prospectus (including all
documents incorporated by reference therein) and all amendments and supplements
to the Registration
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Statement or Prospectus that are filed with the Commission during the period in
which a prospectus relating to the Shares is required to be delivered under the
Act (including all documents filed with the Commission during such period that
are deemed to be incorporated by reference therein), in each case as soon as
reasonably practicable and in such quantities as CF&Co may from time to time
reasonably request and, at CF&Co's request, will also furnish copies of the
Prospectus to each exchange or market on which sales of Shares may be made.
(f) The Company will furnish to CF&Co for a period of five years from
the date of this Agreement such information as reasonably requested by CF&Co
regarding the Company or its subsidiaries.
(g) The Company will make generally available to its security holders as
soon as practicable, but in any event not later than 15 months after the end of
the Company's current fiscal quarter, an earnings statement covering a 12-month
period that satisfies the provisions of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations.
(h) The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses incident
to the performance of its obligations hereunder, including, but not limited to,
expenses relating to (i) the preparation, printing and filing of the
Registration Statement as originally filed, of each Prospectus and of each
amendment and supplement thereto, (ii) the preparation, issuance and delivery of
the Shares, (iii) the fees and disbursements of the Company's counsel and
accountants, (iv) the qualification of the Shares under securities laws in
accordance with the provisions of Section 7(d) of this Agreement, including
filing fees and any reasonable fees or disbursements of counsel for CF&Co in
connection therewith, (v) the printing and delivery to CF&Co of copies of the
Prospectus and any amendments or supplements thereto, and of this Agreement,
(vi) the fees and expenses incurred in connection with the listing or
qualification of the Shares for trading on the Nasdaq National Market and (vii)
filing fees, if any, of the Commission and the National Association of
Securities Dealers, Inc.
(i) The Company will use the Net Proceeds as described in the Prospectus
and, in any case, for general corporate purposes only, in the ordinary course of
its business and consistent with past practice and, without limiting the
generality of the foregoing, shall not use such proceeds to make a loan to any
employee, officer, director or stockholder of the Company (other than loans made
to new employees as a condition of employment), to repay any loan or other
obligation of the Company to any such person or to repurchase or pay a dividend
on shares of Common Stock or other securities of the Company (in any such case,
regardless of whether such loan or payment was authorized by the Company's Board
of Directors prior to the date hereof).
(j) Without the written consent of CF&Co, the Company will not, directly
or indirectly, offer to sell, sell, contract to sell, grant any option to sell
or otherwise dispose of any shares of Common Stock (other than the Shares
offered pursuant to the provisions of this Agreement) or securities convertible
into or exchangeable for Common Stock, warrants or any rights to purchase or
acquire, Common Stock during the period beginning on the fifth (5th) Trading Day
immediately prior to the date on which any Acceptance of a Placement Notice is
delivered to CF&Co hereunder and ending on the fifth (5th) Trading Day
immediately following the final Settlement Date with respect to Shares sold
pursuant to such Placement Notice;
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provided, however, that such restriction will not be required in connection with
the Company's issuance or sale of (i) Common Stock, options to purchase shares
of Common Stock or Common Stock issuable upon the exercise of options, pursuant
to any employee or director stock option or benefits plan, stock ownership plan
or dividend reinvestment plan (but not shares subject to a waiver to exceed plan
limits in its stock purchase plan) of the Company now in effect, and (ii) Common
Stock issuable upon conversion of securities or the exercise of warrants,
options or other rights in effect or outstanding, and disclosed in writing to
CF&Co.
(k) The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise CF&Co immediately after it shall have
received notice or obtain knowledge thereof, of any information or fact that
would alter or affect any opinion, certificate, letter or other document
provided to CF&Co pursuant to this Agreement.
(l) The Company will cooperate with any due diligence review conducted
by CF&Co or its agents, including, without limitation, providing information and
making available documents and senior corporate officers, as CF&Co may
reasonably request; provided, however, that the Company shall be required to
make available documents and senior corporate officers only (i) at the Company's
principal offices and (ii) during the Company's ordinary business hours.
(m) The Company agrees that on or prior to the Business Day after the
end of each calendar week during which sales of Shares were made by CF&Co (each
such week, a "Reporting Period") or on such earlier date as the Rules and
Regulations shall require, the Company will (i) file a prospectus supplement
with the Commission under the applicable paragraph of Rule 424(b) under the Act
(each a "Filing Date"), which prospectus supplement will set forth, with regard
to such sales, the dates included within the Reporting Period, the amount of
Shares sold through CF&Co, the Net Proceeds to the Company and the compensation
payable by the Company to CF&Co and (ii) deliver such number of copies of each
such prospectus supplement to each exchange or market on which such sales were
effected as may be required by the rules or regulations of such exchange or
market.
(n) On the date that the Registration Statement is declared effective,
on each Filing Date and each time that (i) the Registration Statement shall be
amended or the Prospectus supplemented (other than a supplement filed (1)
pursuant Rule 424(b) under the Act that contains solely the information
confirmed to the Company by CF&Co pursuant to Section 3 above or (2) paragraph
(m) above) or (ii) there is filed with the Commission any document incorporated
by reference into the Prospectus, the Company shall furnish or cause to be
furnished to CF&Co forthwith a certificate dated the date of filing with the
Commission of such supplement, or other document, or the date of the
effectiveness of the Registration Statement or such amendment, as the case may
be, in the form attached hereto as Exhibit 8(h) to the effect that the
representations and warranties made by the Company in this Agreement are true
and correct on such date as though made at and as of such date (except that such
statements shall be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented to such time) and that the Company has
complied with all of the agreements to be performed by it at or prior to such
date.
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(o) On the date that the Registration Statement is declared effective
and each time that (i) the Registration Statement is amended or the Prospectus
supplemented (other than a supplement filed (1) pursuant Rule 424(b) under the
Act that contains solely the information confirmed to the Company by CF&Co
pursuant to Section 3 above or (2) paragraph (m) above) or (ii) there is filed
with the Commission any document incorporated by reference into the Prospectus,
the Company shall furnish or cause to be furnished forthwith to CF&Co and to
counsel to CF&Co a written opinion of Latham & Watkins, counsel to the Company
("Company Counsel") and a written opinion of Oppenheimer Wolff & Donnelly LLP
("Special Counsel"), or other counsels satisfactory to CF&Co, dated the date of
effectiveness of the Registration Statement or amendment, or the date of filing
with the Commission of such supplement or other document, as the case may be, in
form and substance satisfactory to CF&Co and its counsel, in substantially the
forms attached hereto as Exhibits 8(e)(1) and 8(f)(1) respectively (for the date
of effectiveness of the Registration Statement) and Exhibits 8(e)(2) and 8(f)(2)
respectively (for subsequent dates), but modified as necessary to relate to the
Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such opinion.
(p) On the date that the Registration Statement is declared effective
and each time that the Registration Statement is amended or the Prospectus
supplemented to include additional amended financial information or there is
filed with the Commission any document incorporated by reference into the
Prospectus which contains additional amended financial information, the Company
shall cause its independent accountants reasonably satisfactory to CF&Co,
forthwith to furnish CF&Co letters (the "Comfort Letters"), dated the date of
effectiveness of the Registration Statement or such amendment, or the date of
filing of such supplement or other document with the Commission, as the case may
be, in form and substance satisfactory to CF&Co, (i) confirming that they are
independent public accountants within the meaning of the Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating,
as of such date, the conclusions and findings of such firm with respect to the
financial information and other matters ordinarily covered by accountants'
"comfort letters" to underwriters in connection with registered public offerings
(the first such letter, the "Initial Comfort Letter") and (iii) updating the
Initial Comfort Letter with any information which would have been included in
the Initial Comfort Letter had it been given on such date and modified as
necessary to relate to the Registration Statement and the Prospectus, as amended
and supplemented to the date of such letter.
(q) The Company will not, directly or indirectly, (i) take any action
designed to cause or result in, or that constitutes or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or (ii)
sell, bid for, or purchase the Shares, or pay anyone any compensation for
soliciting purchases of the Shares other than CF&Co.
(r) The Company acknowledges and agrees that CF&Co has informed the
Company that CF&Co may purchase and sell shares of Common Stock for its own
account at the same time as Shares are being sold by the Company pursuant to
this Agreement, provided that the Company shall not be deemed to have authorized
or consented to any such purchases or sales by CF&Co.
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(s) Upon Acceptance of each Placement Notice hereunder, the Company
shall furnish or cause to be furnished to CF&Co and to counsel to CF&Co a
written opinion of Company Counsel dated the date of such Acceptance in form and
substance satisfactory to CF&Co and its counsel, in substantially the form
attached hereto as Exhibits 8(e)(3) with respect to the Placement Shares to be
sold pursuant to the applicable Placement Notice.
8. Conditions to CF&Co's Obligations. The obligations of CF&Co hereunder
with respect to a Placement will be subject to the continuing accuracy and
completeness of the representations and warranties made by the Company herein,
to the due performance by the Company of its obligations hereunder, to the
completion by CF&Co of a due diligence review satisfactory to CF&Co in its
reasonable judgment, and to the continuing satisfaction (or waiver by CF&Co in
its sole discretion) of the following additional conditions:
(a) The Registration Statement shall have become effective and shall be
available for the resale of (i) all Placement Shares issued pursuant to all
prior Placements and not yet sold by CF&Co and (ii) all Placement Shares
contemplated to be issued by the Placement Notice relating to such Placement.
(b) None of the following events shall have occurred: (i) receipt by the
Company of any request for additional information from the Commission or any
other federal or state governmental authority during the period of effectiveness
of the Registration Statement, the response to which would require any
amendments or supplements to the Registration Statement or the Prospectus; (ii)
the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt
by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the occurrence of any event that makes any statement made in the
Registration Statement or the Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and (v) the Company's reasonable determination that a post-effective amendment
to the Registration Statement would be appropriate.
(c) CF&Co shall not have advised the Company that the Registration
Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact that in CF&Co's opinion is material, or omits to state
a fact that in CF&Co's opinion is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(d) Except as contemplated in the Prospectus, or disclosed in the
Company's reports filed with the Commission prior to the date of this Agreement,
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall not
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have been any material change, on a consolidated basis, in the authorized
capital stock of the Company and its subsidiaries, or any Material Adverse
Effect, or any development that may reasonably be expected to cause a Material
Adverse Effect, or a downgrading in or withdrawal of the rating assigned to any
of the Company's securities by any rating organization or a public announcement
by any rating organization that it has under surveillance or review its rating
of any of the Company's securities, the effect of which, in the case of any such
action by a rating organization described above, in the sole judgment of CF&Co
(without relieving the Company of any obligation or liability it may otherwise
have), is so material as to make it impracticable or inadvisable to proceed with
the offering of the Shares on the terms and in the manner contemplated in the
Prospectus.
(e) CF&Co shall have received the opinions of Company Counsel required
to be delivered pursuant Section 7(o) and 7(s) on or before the date on which
satisfaction of this condition is determined.
(f) CF&Co shall have received the opinions of Special Counsel required
to be delivered pursuant Section 7(o) on or before the date on which
satisfaction of this condition is determined.
(g) CF&Co shall have received the Comfort Letters required to be
delivered pursuant Section 7(p) on or before the date on which satisfaction of
this condition is determined.
(h) CF&Co shall have received the certificates required to be delivered
pursuant to Section 7(n) on or before the date on which satisfaction of this
condition is determined.
(i) The Shares shall have been duly listed, subject to notice of
issuance, on the Nasdaq National Market, and trading in the Common Stock shall
not have been suspended on such market.
(j) On each date on which the Company is required to deliver a
certificate pursuant to Section 7(n), the Company shall have furnished to CF&Co
such appropriate further information, certificates and documents as CF&Co may
reasonably request. All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof. The Company will furnish CF&Co
with such conformed copies of such opinions, certificates, letters and other
documents as CF&Co shall reasonably request.
(k) CF&Co shall have received a copy of a written waiver, in form and
substance reasonably satisfactory to CF&Co, executed by Montrose Investments
Ltd. and Strong River Investments, Inc., waiving the right of first refusal set
forth in the April 17 Letter with respect to all Placement Shares which may be
sold pursuant to this Agreement, which waiver shall be in full force and effect
as of such date.
(l) There shall not have occurred any event that would permit CF&Co to
terminate this Agreement pursuant to Section 11(a).
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9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless CF&Co, the
directors, officers, partners, employees and agents of CF&Co and each person, if
any, who (i) controls CF&Co within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, or (ii) is controlled by or is under common
control with CF&Co (a "CF&Co Affiliate") from and against any and all losses,
claims, liabilities, expenses and damages (including, but not limited to, any
and all investigative, legal and other expenses reasonably incurred in
connection with, and any and all amounts paid in settlement of, any action, suit
or proceeding between any of the indemnified parties and any indemnifying
parties or between any indemnified party and any third party, or otherwise, or
any claim asserted), as and when incurred, to which CF&Co, or any such person,
may become subject under the Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based, directly or
indirectly, on (i) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment or supplement to the Registration
Statement or the Prospectus, or in any application or other document executed by
or on behalf of the Company or based on written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify the Shares
under the securities laws thereof or filed with the Commission, (ii) the
omission or alleged omission to state in such document a material fact required
to be stated in it or necessary to make the statements in it not misleading or
(iii) any breach by any of the indemnifying parties of any of their respective
representations, warranties and agreements contained in this Agreement; provided
that this indemnity agreement shall not apply to the extent that such loss,
claim, liability, expense or damage arises from the sale of the Shares pursuant
to this Agreement and is caused directly by an untrue statement or omission made
in reliance on and in conformity with information relating to CF&Co and
furnished in writing to the Company by CF&Co expressly stating that such
information is intended for inclusion in any document described in clause (a)(i)
above. This indemnity agreement will be in addition to any liability that the
Company might otherwise have.
(b) CF&Co agrees to indemnify and hold harmless the Company and its
directors and each officer of the Company who signed the Registration Statement,
and each person, if any, who (i) controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act or (ii) is controlled by
or is under common control with Company (a "Company Affiliate") against any and
all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendments thereto) or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information and
relating to CF&Co furnished to the Company by CF&Co expressly stating that such
information is intended for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(c) Any party that proposes to assert the right to be indemnified under
this Section 9 will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 9, notify each such
indemnifying party of the commencement of such action, enclosing a
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copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 9 and (ii) any
liability that it may have to any indemnified party under the foregoing
provision of this Section 9 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent. No indemnifying party shall, without the prior written consent
of each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated by this Section 9 (whether or not any indemnified party
is a party thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding. Notwithstanding any
other provision of this Section 9(c), if at any time an indemnified party shall
have requested an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel for which it is entitled to reimbursement pursuant to
this Section 9(c), such indemnifying party agrees that it shall be liable for
any settlement effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into, and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement; provided
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that an indemnifying party shall not be liable for any such settlement effected
without its consent if such indemnifying party, at least five days prior to the
date of such settlement, (1) reimburses such indemnified party in accordance
with such request for the amount of such fees and expenses of counsel as the
indemnifying party believes in good faith to be reasonable and (2) provides
written notice to the indemnified party that the indemnifying party disputes in
good faith the reasonableness of the unpaid balance of such fees and expenses.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or CF&Co, the Company and
CF&Co will contribute to the total losses, claims, liabilities, expenses and
damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than CF&Co, such as persons who
control the Company within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and CF&Co may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and CF&Co on the other. The relative benefits
received by the Company on the one hand and CF&Co on the other hand shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
compensation (before deducting expenses) received by CF&Co from the sale of
Shares on behalf of the Company. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and CF&Co, on the other, with
respect to the statements or omission which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or CF&Co, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and CF&Co agree that it would not be just and equitable if
contributions pursuant to this Section 9(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense, or
damage, or action in respect thereof, referred to above in this Section 9(d)
shall be deemed to include, for the purpose of this Section 9(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim to the extent consistent
with Section 9(c) hereof. Notwithstanding the foregoing provisions of this
Section 9(d), CF&Co shall not be required to contribute any amount in excess of
the commissions received by it under this Agreement and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(d), any person who
controls a party to this Agreement within the meaning of the Act, and any
officers, directors, partners, employees or agents of CF&Co, will have the same
rights to contribution as that party, and each officer of the Company who signed
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the Registration Statement will have the same rights to contribution as the
Company, subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 9(d), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 9(d). Except for a settlement entered
into pursuant to the last sentence of Section 9(c) hereof, no party will be
liable for contribution with respect to any action or claim settled without its
written consent if such consent is required pursuant to Section 9(c) hereof.
10. Representations and Agreements to Survive Delivery. All
representations and warranties of the Company herein or in certificates
delivered pursuant hereto shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of CF&Co, any
controlling persons, or the Company (or any of their respective officers,
directors or controlling persons), (ii) delivery and acceptance of the Shares
and payment therefor or (iii) any termination of this Agreement.
11. Termination.
(a) CF&Co shall have the right by giving notice as hereinafter specified
at any time to terminate this Agreement if (i) any Material Adverse Effect, or
any development that has actually occurred and that is reasonably expected to
cause a Material Adverse Effect has occurred which, in the reasonable judgment
of CF&Co, may materially impair the investment quality of the Shares, (ii) the
Company shall have failed, refused or been unable, at or prior to any Settlement
Date, to perform any agreement on its part to be performed hereunder, (iii) any
other condition of CF&Co's obligations hereunder is not fulfilled, (iv) any
suspension or limitation of trading in the Shares or in securities generally on
the Nasdaq National Market , or any setting of minimum prices for trading of the
Shares or in securities generally on such exchange, shall have occurred, (v) any
banking moratorium shall have been declared by federal or New York authorities
or (vi) an outbreak or material escalation of major hostilities in which the
United States is involved, a declaration of war by Congress, any other
substantial national or international calamity or any other event or occurrence
of a similar character shall have occurred since the execution of this Agreement
that, in the sole judgment of CF&Co, makes it impractical or inadvisable to
proceed with the completion of the sale of and payment for the Shares to be sold
by CF&Co on behalf of the Company. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
7(f), 7(h), Section 9, Section 10, Section 16 and Section 17 hereof shall remain
in full force and effect notwithstanding such termination. If CF&Co elects to
terminate this Agreement as provided in this Section, CF&Co shall provide the
required notice as specified herein.
(b) The Company shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time
following the period of twelve (12) months after the date of this Agreement. Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 7(f), 7(h), Section 9, Section 10, Section
16 and Section 17 hereof shall remain in full force and effect notwithstanding
such termination.
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(c) At any time following the period of twelve (12) months from the date
of this Agreement, CF&Co shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion. Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 7(f), 7(h), Section 9, Section 10, Section 16 and
Section 17 hereof shall remain in full force and effect notwithstanding such
termination.
(d) This Agreement shall remain in full force and effect unless
terminated pursuant to Sections 11(a), (b) or (c) above or otherwise by mutual
agreement of the parties; provided that any such termination by mutual agreement
shall in all cases be deemed to provide that Section 7(f), 7(h), Section 9,
Section 10, Section 16 and Section 17 shall remain in full force and effect.
(e) Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by CF&Co or the Company, as the case may be. If such termination shall
occur prior to the Settlement Date for any sale of Shares, such Shares shall
settle in accordance with the provisions of this Agreement.
12. Notices. All notices or other communications required or permitted
to be given by any party to any other party pursuant to the terms of this
Agreement shall be in writing and if sent to CF&Co, shall be delivered to CF&Co
at Cantor Fitzgerald & Co., 1 World Trade Center, New York, New York 10048, fax
no. (212) 938-8860, Attention: ITD-Investment Banking, with a copy to General
Counsel at the same address, with a copy to Zukerman Gore & Brandeis, LLP, 900
Third Avenue, New York, New York 10022, fax no. (212) 223-6433, Attention
Clifford A. Brandeis, Esq.; or if sent to the Company, shall be delivered to
NeoTherapeutics, Inc., 157 Technology Drive, Irvine, California 92618, fax no.
(949) 788-6706, attn: Chief Financial Officer, with a copy to Latham & Watkins,
650 Town Center Drive, Twentieth Floor, Costa Mesa, California 92626-1925, attn:
Alan W. Pettis, Esq. Each party to this Agreement may change such address for
notices by sending to the parties to this Agreement written notice of a new
address for such purpose. Each such notice or other communication shall be
deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 5:00 p.m., eastern time,
on a Business Day or, if such day is not a Business Day, on the next succeeding
Business Day, (ii) on the next Business Day after timely delivery to a
nationally-recognized overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, "Business
Day" shall mean any day on which the New York Stock Exchange and commercial
banks in the city of New York are open for business.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and CF&Co and their respective successors and
the affiliates, controlling persons, officers and directors referred to in
Section 9 hereof. References to any of the parties contained in this Agreement
shall be deemed to include the successors and permitted assigns of such party.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement. Neither party
may assign it rights or obligations under this Agreement without the prior
written consent of the other party, provided, however, that CF&Co may assign its
rights and obligations hereunder to an affiliate of CF&Co without obtaining the
Company's consent,
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provided, further, that the Company may terminate this Agreement at any time
following any such assignment by CF&Co.
14. Adjustments for Stock Splits. The parties acknowledge and agree that
all share related numbers contained in this Agreement (including, without
limitation, the Maximum Amount) shall be adjusted to take into account any stock
split, stock dividend or similar event effected with respect to the Shares.
15. Entire Agreement; Amendment; Severability. This Agreement
constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and CF&Co. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
16. Applicable Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the principles of conflicts of laws. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) 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 contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
17. Waiver of Jury Trial. The Company and CF&Co each hereby irrevocably
waives any right it may have to a trial by jury in respect of any claim based
upon or arising out of this agreement or any transaction contemplated hereby.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
Agreement by one party to the other may be made by facsimile transmission.
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If the foregoing correctly sets forth the understanding between the
Company and CF&Co, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and CF&Co.
Very truly yours,
NEOTHERAPEUTICS, INC.
By:
----------------------------------------
Name:
Title:
ACCEPTED as of the date first-above written:
CANTOR FITZGERALD & CO.
By:
----------------------------------------
Managing Director
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SCHEDULE 1
COMPENSATION
The amount of any discount, commission or other compensation to be paid by the
Company to CF&Co for effecting sales of Placement Shares shall be as follows:
Commission/Discount Proceeds
- ------------------- --------
4.00% $0-$ 10,000,000
3.5% of proceeds on the next: $10,000,001-$20,000,000
3.00% of proceeds on the next: $20,000,001-$40,000,000
2.75% of proceeds on the next: $40,000,001 +