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COMMON STOCK UNDERWRITING AGREEMENT
BETWEEN
RAMIUS SECURITIES, LLC
AND
TRIANGLE PHARMACEUTICALS, INC.
November 1, 2000
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
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TABLE OF CONTENTS
Page
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I. DEFINITIONS............................................................1
II. SALE OF COMMON STOCK...................................................6
2.1 Underwriting and Greenshoe.................................6
2.2 Limitations on Investment Amount...........................6
2.3 Mechanics of Notification..................................7
2.4 Closings and Settlements...................................7
2.5 Termination, Suspension and Modification of
Underwriting Obligation....................................8
2.6 Purchase Option............................................9
III. CONDITIONS PRECEDENT..................................................11
3.1 Conditions Precedent to the Obligation of the
Underwriter to Sell Common Stock Pursuant to a
Capital Demand Notice.....................................11
3.2 Due Diligence Review......................................12
3.3 Occurrence of Material Events.............................13
IV. REPRESENTATIONS AND WARRANTIES OF UNDERWRITER.........................13
4.1 Authorization; Enforcement................................13
4.2 Not an Affiliate..........................................14
4.3 Organization and Standing.................................14
4.4 Absence of Conflicts......................................14
4.5 Broker-Dealer.............................................14
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................14
5.1 Corporate Organization....................................14
5.2 Capitalization and Indebtedness...........................14
5.3 Subsidiaries..............................................15
5.4 Authorization; Enforcement; Compliance with Other
Instruments...............................................15
5.5 No Conflicts..............................................16
5.6 Compliance with Applicable Law; Regulatory Permits........16
5.7 Absence of Litigation.....................................16
5.8 SEC Documents, Financial Statements.......................17
5.9 No Undisclosed or Contingent Liabilities..................18
5.10 [Intentionally Omitted]...................................18
5.11 Employment Matters; ERISA Matters.........................18
5.12 Absence of Certain Changes................................18
5.13 Environmental Matters.....................................19
5.14 Material Contracts........................................20
5.15 Properties; Encumbrances..................................20
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5.16 Insurance.................................................20
5.17 Material Disclosure.......................................20
5.18 Intellectual Property.....................................21
5.19 Compliance With Food and Drug Act.........................22
5.20 Subsidiaries..............................................22
5.21 No Brokers................................................23
5.22 Acknowledgment Regarding the Underwriter's Sale of
the Common Stock..........................................23
5.23 Certain Transactions......................................23
5.24 Securities Act of 1933....................................23
5.25 Foreign Corrupt Practices.................................23
5.26 Investment Company Status.................................23
VI. COVENANTS.............................................................24
6.1 [Intentionally Omitted]...................................24
6.2 Reservation of Common Stock...............................24
6.3 Listing of Common Stock...................................24
6.4 Exchange Act Registration.................................24
6.5 Legends...................................................24
6.6 Corporate Existence.......................................24
6.7 Additional SEC Documents..................................24
6.8 Registration Requirements.................................24
6.9 Registration Procedures...................................25
6.10 Information by Underwriter................................26
6.11 No Other Similar Agreements...............................26
6.12 No Short Selling..........................................26
VII. ASSIGNMENT, ENTIRE AGREEMENT, AMENDMENT, TERMINATION..................26
7.1 Successors and Assigns....................................26
7.2 Entire Agreement; Amendment...............................26
7.3 Publicity.................................................26
7.4 Termination...............................................26
VIII. NOTICES; COSTS AND EXPENSES...........................................27
8.1 Notices...................................................27
8.2 Costs and Expenses........................................29
IX. INDEMNIFICATION AND CONTRIBUTION......................................29
9.1 Indemnification...........................................29
9.2 Contribution..............................................31
X. GOVERNING LAW; MISCELLANEOUS..........................................32
10.1 Governing Law.............................................32
10.2 Counterparts..............................................32
10.3 Headings..................................................32
10.4 Severability..............................................32
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10.5 Survival..................................................32
10.6 No Third Party Beneficiaries..............................32
10.7 Further Assurances........................................32
10.8 Construction..............................................32
10.9 Equitable Relief..........................................33
10.10 Consent to Jurisdiction...................................33
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List of Exhibits and Schedules
Capital Demand Notice Exhibit 2.3(a)
Underwriter Sales Notice Exhibit 2.3(b)
Purchase Option Notice Exhibit 2.6(a)(ii)
Legal Opinions Exhibit 3.1(g)(i)
Legal Opinions Exhibit 3.1(g)(ii)
Officer's Certificate Exhibit 3.1(i)
Instructions to the Underwriter's Clearing Broker Exhibit 3.1(l)
Irrevocable Transfer Agent Instructions Exhibit 3.1(m)
Notice of Blocking Period Exhibit 3.3
Issuance of Common Stock Schedule 2.2
Jurisdictions of Company and Subsidiaries Schedule 5.1
Company's Subsidiaries Schedule 5.3(a)
Material Intellectual Property and Material Intellectual
Property Contracts Schedule 5.18(a)
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CROSS REFERENCES
Defined Term
------------
"Advice" Section 3.3
"Affiliate" Section 1
"Agreement" Preamble
"Blue Sky Laws" Section 6.8
"Block Trades" Section 1
"Blocking Event" Section 2.5(a)(vi)
"By-laws" Section 5.2(a)
"Business Intellectual Property" Section 1
"Business Trade Secrets" Section 5.18(j)
"Capital Demand Notice" Section 1
"Capital Stock" Section 1
"Certificate of Incorporation" Section 5.2(a)
"Claims" Section 9.1(a)
"Closing Date" Section 1
"Code" Section 5.11
"Commission" Section 2.4(d)
"Commitment Period" Section 1
"Common Stock" Recitals
"Company" Preamble
"Company Permits" Section 5.6
"Condition Precedent Date" Section 3.1
"Deemed Receipt" Section 3.3
"Designated Officer" Section 1
"DTC" Section 2.4(b)
"Due Diligence Materials" Section 3.2(a)
"Due Diligence Period" Section 1
"Due Diligence Request List" Section 1
"DWAC" Section 2.4(b)
"Environmental Laws" Section 5.13
"ERISA" Section 5.11
"Exchange Act" Section 1
"GAAP" Section 5.8(a)
"Governmental Entity" Section 1
"Hard Floor Price" Section 1
"Hazardous Substance" Section 5.13
"Indemnified Damages" Section 9.1(a)
"Indemnified Party" Section 9.1(b)
"Indemnified Person" Section 9.1(a)
"Intellectual Property" Section 1
"Intellectual Property Contracts" Section 1
"Knowledge" Section 1
"Licensed Intellectual Property" Section 1
"Liens" Section 5.15
"Material Adverse Effect" Section 1
"Material Contracts" Section 5.14(a)
"Maximum Draw Down Amount" Section 1
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"Minimum Draw Down Amount" Section 1
"Minimum Share Amount" Section 1
"NASD" Section 3.1(f)
"Notice" Section 6.9(e)
"Notice of Blocking Period" Section 3.3
"Organic Change" Section 2.6(b)(iii)
"Owned Intellectual Property" Section 1
"Permitted Transferee" Section 7.1
"Person" Section 1
"Plans" Section 1
"Preferred Stock" Section 5.2(a)
"Principal Market" Section 1
"Prospectus" Section 1
"Purchase Option" Section 2.6(a)(i)
"Purchase Option Issuance Date" Section 1
"Purchase Option Exercise Price" Section 1
"Purchase Option Expiration Date" Section 1
"Purchase Option Notice" Section 2.6(a)(ii)
"Purchase Option Share Amount" Section 1
"Qualified Daily Trading Limit" Section 1
"Registered" Section 1
"Registrable Securities" Section 1
"Registration Statement" Section 2.5(a)(i)
"Releases" Section 5.13
"SEC" Section 2.5(a)(i)
"SEC Documents" Section 5.8
"SEC Filings" Section 1
"Securities Act" Section 1
"Selling Period" Section 1
"Selling Period Obligation" Section 1
"Settlement" Section 1
"Settlement Date" Section 1
"Significant Subsidiaries" Section 5.20
"Subsidiaries Section 5.3
"Suit" Section 5.18(c)
"Tax Return" Section 1
"Taxes" Section 1
"Trading Day" Section 1
"Transfer Agent" Section 1
"Underwriter" Preamble
"Underwriter's Clearing Broker" Section 1
"Underwriting Price" Section 1
"Underwriter Sales Notice" Section 2.3(b)
"Violations" Section 9.1(a)
"VWAP" Section 1
"WARN" Section 5.11
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COMMON STOCK UNDERWRITING AGREEMENT
COMMON STOCK UNDERWRITING AGREEMENT dated as of November 1, 2000
(the "Agreement"), between Ramius Securities, LLC, a limited liability company
organized and existing under the laws of the State of Delaware (the
"Underwriter"), and Triangle Pharmaceuticals, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company may elect from time to time to issue and sell through the
Underwriter up to $100 million of the Company's Common Stock, $.001 par value
per share (the "Common Stock");
NOW, THEREFORE, the parties hereto agree as follows:
I. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall mean, with respect to a specified Person, a Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified Person.
"Agreement" shall mean this Common Stock Underwriting Agreement
dated as of November 1, 2000 between the Underwriter and the Company.
"Block Trades" shall mean block trades greater than 50,000 shares.
"Blocking Event" shall mean an event described in Subsection
2.5(a)(i),(ii),(iii),(iv),(v) or (vi).
"Business Intellectual Property" shall mean the Owned Intellectual
Property and the Licensed Intellectual Property.
"Capital Demand Notice" shall mean the written notice, in the form
attached hereto as Exhibit 2.3(a), delivered by a Designated Officer of the
Company to the Underwriter on any Trading Day during the Commitment Period
pursuant to Section 2.3.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
any and all equivalent ownership interests in a Person (other than a
corporation).
"Closing Date" shall mean, with respect to each sale of Common Stock
subject to the conditions contained herein, each Trading Day that the
Underwriter delivers an Underwriter Sales Notice to the Company and the date on
which the Underwriter delivers a Purchase Option Notice to the Company.
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"Commission" shall have the meaning set forth in Section 2.4(d).
"Commitment Period" shall mean the period commencing on the date
hereof and expiring on the earliest to occur of (a) the election by the Company
or the Underwriter to terminate the Underwriter's obligation to sell, as the
Company's Underwriter, on a best efforts basis, Common Stock pursuant to Section
7.4 herein, (b) the date occurring on the three year anniversary of the date
hereof or (c) the date that the Underwriter has sold an aggregate of $100
million of Common Stock pursuant to Capital Demand Notices (without regard to
the Purchase Option).
"Common Stock" shall mean the common stock of the Company, $.001 par
value per share.
"Company" shall mean Triangle Pharmaceuticals, Inc., a corporation
organized and existing under the laws of the State of Delaware.
"Deemed Receipt" shall have such definition as provided in Section
3.3.
"Designated Officer" shall mean the Chief Executive Officer, the
President, the General Counsel or the Chief Financial Officer of the Company or
such other person as designated by any of them in writing.
"DTC" shall mean The Depository Trust Company.
"Due Diligence Period" shall mean (i) with respect to the first
Capital Demand Notice delivered by the Company hereunder, the period commencing
on the Trading Day that the Company delivers or makes available all of the Due
Diligence Materials and ending on the seventh (7th) Trading Day thereafter or
(ii) with respect to each subsequent Capital Demand Notice, the period
commencing on the Trading Day that the Company delivers or makes available the
Due Diligence Materials and ending on the later of (x) the second (2nd) Trading
Day thereafter or (y) if there have been more than forty-five (45) days since
the end of the immediately preceding Selling Period, the fifth (5th) Trading Day
after the beginning of such Due Diligence Period.
"Due Diligence Request List" shall mean, (i) with respect to the
initial due diligence review conducted by the Underwriter, its advisors and
representatives, the form of initial due diligence request list previously
delivered to the Company by the Underwriter or (ii) with respect to subsequent
due diligence reviews conducted by the Underwriter, its advisors and
representatives, the form of subsequent due diligence request lists previously
delivered to the Company by the Underwriter.
"DWAC" shall mean the Deposit and Withdrawal At Custodian system.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Governmental Entity" shall mean any federal, state, local or
foreign legislative body, court, government, department or instrumentality, or
governmental, administrative or regulatory authority or agency.
"Hard Floor Price" shall be set by the Company in its sole
discretion in each Capital Demand Notice and such Hard Floor Price may be
different in each Capital Demand Notice, provided, however, that the Hard Floor
Price may not be less than $4.00 per share.
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"Intellectual Property" shall mean all foreign and domestic (i)
trademarks, service marks, brand names, certification marks, collective marks,
d/b/a's, Internet domain names, logos, symbols, trade dress, assumed names,
fictitious names, trade names, and other indicia of origin, all applications and
registration for the foregoing, and all goodwill associated therewith and
symbolized thereby, including all extensions, modifications and renewals of same
(collectively, "Trademarks"); (ii) inventions, discoveries and ideas, whether
patentable or not, and all patents, registrations, and applications therefor,
including divisions, continuations, continuations-in-part and renewal
applications, and including renewals, extensions and reissues (collectively,
"Patents"); (iii) confidential and proprietary information, trade secrets and
know-how, including processes, schematics, formulae, drawings, prototypes,
models, designs and customer lists (collectively, "Trade Secrets"); (iv)
published and unpublished works of authorship, whether copyrightable or not
(including without limitation databases and other compilations of information),
copyrights therein and thereto, and registrations and applications therefor, and
all renewals, extensions, restorations and reversions thereof (collectively,
"Copyrights"); and (v) all other intellectual property or proprietary rights
resulting in causes of action arising out of or related to any infringement,
misappropriation or other violation of any of the foregoing, including rights to
recover for past, present and future violations thereof (collectively, "Other
Proprietary Rights").
"Intellectual Property Contracts" shall mean all agreements
concerning the Business Intellectual Property, including without limitation
agreements granting the Company rights to use the Licensed Intellectual
Property, agreements granting rights to use Owned Intellectual Property,
confidentiality agreements, Trademark coexistence agreements, Trademark consent
agreements and nonassertion agreements.
"Knowledge" shall mean the actual or deemed awareness or
understanding of the executive officers of the Company or the Underwriter after
diligent inquiry.
"Licensed Intellectual Property" shall mean the Intellectual
Property rights that the Company is licensed or otherwise permitted by other
Persons to use.
"Material Adverse Effect" shall mean any material adverse effect on
(i) the business, operations, properties, conditions (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole, or
(ii) the ability of the Company to enter into and perform its obligations under
this Agreement and under the agreements or instruments to be entered into or
filed in connection herewith or therewith.
"Maximum Draw Down Amount" shall mean the maximum dollar amount the
Underwriter may sell, as the Company's Underwriter, on a best efforts basis, of
shares of Common Stock pursuant to a Capital Demand Notice, which number shall
be equal to 110% of the Minimum Draw Down Amount specified in such Capital
Demand Notice.
"Minimum Draw Down Amount" shall mean the minimum dollar amount the
Underwriter is obligated to sell in shares of Common Stock pursuant to a Capital
Demand Notice; provided, however, that the Minimum Draw Down Amount shall be
subject to the limitations in Sections 2.1 and 2.2; provided further, that the
Minimum Draw Down Amount shall not be more than 15% of the aggregate number of
shares of Common Stock traded on each Trading Day during the Selling Period, as
reported by Bloomberg Financial LP using the AQR function multiplied by the
volume weighted average of the VWAP on each Trading Day during such fifteen
Trading Day period; provided, that the number of shares traded on each Trading
Day, as used pursuant to the above proviso, shall be zero for any Trading Day
that the VWAP is below the Hard Floor Price.
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"Minimum Share Amount" shall mean the quotient of the Minimum Draw
Down Amount divided by the Underwriting Price.
"Notice of Blocking Period" shall mean the notice delivered by the
Company to the Underwriter pursuant to Section 3.3, in the form attached hereto
as Exhibit 3.3.
"Owned Intellectual Property" shall mean Intellectual Property owned
by the Company.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or subdivision thereof.
"Plans" means every employee benefit plan (whether or not subject to
ERISA), including, but not limited to, each retirement, pension, savings, bonus,
stock purchase, profit sharing, stock option, deferred compensation, severance
or termination pay, insurance, death, medical, hospital, dental, vision care,
drug, sick leave, disability, salary continuation, vacation, incentive or other
compensation plan or arrangement or other employee benefit for the benefit of
employees or former employees (or dependents or beneficiaries thereof) of the
Company (or as to which the Company may otherwise have any liability (whether
actual or contingent), whether funded, insured or self-funded or whether written
or oral, maintained, contributed to or required to be contributed to by the
Company or any of member of its controlled group (determined in accordance with
Section 4001(a)(14) of ERISA).
"Principal Market" shall mean the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market, whichever is at the time or becomes the principal trading exchange or
market for the Common Stock.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.
"Purchase Option Issuance Date" shall mean the date hereof.
"Purchase Option Exercise Price" shall mean $13.00 per share,
subject to adjustment pursuant to Section 2.6(b).
"Purchase Option Expiration Date" shall mean the earliest to occur
of (i) the third anniversary of the Purchase Option Issuance Date and (ii) the
exercise in full of the Purchase Option.
"Purchase Option Share Amount" shall mean 300,000 shares, subject to
adjustment pursuant to Section 2.6(b).
"Qualified Daily Trading Limit" shall mean the lesser of (a) the
Minimum Draw Down Amount divided by the Hard Floor Price, the result of which is
divided by the number of trading days in the Selling Period, and (b) 15% of the
aggregate number of shares of Common Stock (excluding Block Trades) traded on
each Trading Day of any Selling Period, as reported by Bloomberg Financial LP
using the AQR function; provided, that the Qualified Daily Trading Limit shall
be zero for any Trading Day that the VWAP is below the Hard Floor Price.
The terms "register," "registered" and "registration" shall refer to
a registration effected by preparing and filing an appropriate registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
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"Registered" shall mean issued, registered, renewed or the subject
of a pending application.
"Registrable Securities" shall mean any shares of Common Stock
issued or issuable pursuant to this Agreement (including shares of Common Stock
issuable in connection with the exercise of the Purchase Option).
"Registration Statement" shall mean a registration statement of the
Company relating to Common Stock issuable pursuant to this Agreement (including
shares of Common Stock issuable in connection with the exercise of the Purchase
Option), as amended or supplemented from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Filings" shall mean the Registration Statement and all
exhibits, financial statements and schedules included therein and documents
incorporated by reference therein, including, but not limited to, the Company's
Form 10-K for the fiscal year ended December 31, 1999, its Form 10-Q for the
fiscal quarters ended March 31, 2000, and June 30, 2000, and all other filings
made by the Company after the date hereof pursuant to the Exchange Act, and all
exhibits and attachments thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Period" shall mean the period commencing at the opening of
the first (1st) Trading Day following the expiration of the Due Diligence Period
and ending at the closing of the fifteenth (15th) Trading Day thereafter.
"Selling Period Obligation" shall mean, during any Selling Period,
the lesser of (i) the Minimum Share Amount and (ii) the sum of the Qualified
Daily Trading Limit for each Trading Day during such Selling Period; provided,
however, that the Selling Period Obligation may be deemed to be zero, at the
Underwriter's sole option, if the VWAP shall be below the Hard Floor Price for
five consecutive Trading Days during such Selling Period; provided further, that
the Underwriter's obligation to sell shares of Common Stock pursuant to a
Capital Demand Notice shall be null and void if the Selling Period Obligation
multiplied by the Underwriting Price is less than $100,000.
"Settlement" shall mean the delivery, on the Settlement Date, of the
shares of the Company's Common Stock into the Company's DTC account.
"Settlement Date" shall mean, with respect to each purchase and sale
of Common Stock, subject to the conditions contained herein, the Trading Day no
later than three days (or such lesser time period as is mandated under "regular
ways" settlement on the Principal Market) following each Closing Date.
"Significant Subsidiaries" means any subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulations S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Tax Return" shall mean any report, return, information statement or
other information required to be supplied to any federal, state, local or
foreign taxing authority, or any election permitted to be made, in connection
with Taxes.
"Taxes" shall mean all taxes, charges, fees, levies, duties or other
assessments, including without limitation all net income, gross income, gross
receipts, franchise, value added, sales, use,
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property, ad valorem, transfer, withholding, profits, license, employee,
payroll, social security, unemployment, excise, estimated, severance and any
other taxes, duties, withholdings, fees, assessments or charges of any kind
whatsoever, including any interest, penalties or additional amounts attributable
thereto, imposed by any federal, state, local or foreign taxing authority.
"Trading Day" shall mean any day (from 9:30 a.m. to 4:00 p.m.,
Eastern time) during which the Principal Market shall be open for business and
on which trading of the Common Stock on the Principal Market shall not have been
suspended or limited.
"Transfer Agent" shall mean American Stock Transfer & Trust Company.
"Triggering Amount" shall mean, for any Capital Demand Notice, the
product of (i) 15% of the aggregate number of shares of Common Stock traded on
each Trading Day of the fifteen (15) Trading Day period ending on the Trading
Day immediately prior to the first Trading Day of the Selling Period, as
reported by Bloomberg Financial LP using the AQR function, multiplied by (ii)
the volume weighted average of the VWAP on each Trading Day during such fifteen
(15) Trading Day period.
"Underwriter" shall mean Ramius Securities, LLC, a limited liability
company organized and existing under the laws of the State of Delaware.
"Underwriter's Clearing Broker" shall mean Bear Stearns Securities
Corp.
"Underwriter Sales Notice" shall mean the notice delivered by the
Underwriter to the Company and to the Transfer Agent pursuant to Section 2.3(b)
in the form attached hereto as Exhibit 2.3(b).
"Underwriting Price" shall mean 95.75% of the VWAP during each
Trading Day of the Selling Period provided, that if the VWAP for any Trading Day
during the Selling Period is at or below the Hard Floor Price, the VWAP for such
day shall be deemed to be the Hard Floor Price.
"VWAP" shall mean the daily volume weighted average price per share
(based on a trading day from 9:30 a.m. to 4:00 p.m., Eastern time) of the Common
Stock on the Principal Market (or any successor thereto) as reported by
Bloomberg Financial LP using the AQR function and eliminating any Block Trades.
II. SALE OF COMMON STOCK.
2.1 Underwriting and Greenshoe.
(a) Underwritings. Subject to the terms and conditions set forth
herein, during the Commitment Period the Company may elect to deliver a Capital
Demand Notice. Upon the Company's delivery of such Capital Demand Notice, the
Underwriter, subject to the limitations of Section 2.2(a), agrees, during the
Selling Period corresponding to such Capital Demand Notice, to sell, on behalf
of the Company and on a best efforts basis, the number of shares of the
Company's Common Stock equal to the Minimum Share Amount. The Minimum Draw Down
Amount specified in any Capital Demand Notice shall not be less than $1,000,000
nor more than $30,000,000.
(b) Greenshoe. The Underwriter shall be entitled, but not obligated,
to sell, as the Company's Underwriter, on a best efforts basis, the number of
shares of Common Stock equal to (A) the quotient of (x) the difference between
the Maximum Draw Down Amount and (y) the Minimum Draw Down Amount divided by (B)
the Underwriting Price.
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2.2 Limitations on Investment Amount.
(a) Selling Period Obligations. The Underwriter shall only be
obligated during any Selling Period to sell a number of shares equal to the
Selling Period Obligation. If during any Selling Period the Company shall issue
any shares of Common Stock (other than shares of Common Stock issued under this
Agreement, and other than as set forth on Schedule 2.2. The Underwriter may in
its sole discretion elect to eliminate any obligation of the Underwriter during
the remainder of such Selling Period. The Underwriter shall notify the Company
of such election, if any, on the Trading Day immediately preceding the Closing
Date relating to the last Trading Day of the Selling Period.
(b) In addition, if the Triggering Amount prior to any Selling
Period is less than $500,000, the Underwriter shall have no obligation to sell
shares of the Company's Common Stock during the Selling Period, unless the
Company undertakes to pay the Underwriter's due diligence fees for the calendar
quarter in which the Selling Period occurs (up to $4,000 for such quarter);
provided, however, that the Underwriter shall have no obligation to sell shares
of the Company's Common Stock during the Selling Period if the Triggering Amount
is less than $300,000 (regardless of whether the Company undertakes to pay the
Underwriter's due diligence fees).
2.3 Mechanics of Notification.
(a) Capital Demand Notice. On any Trading Day during the Commitment
Period, the Designated Officer may deliver a written notice, in the form
attached hereto as Exhibit 2.3(a), by facsimile and electronic mail, to the
Underwriter (a "Capital Demand Notice"). The Capital Demand Notice must specify
each of the Minimum Draw Down Amount, the Maximum Draw Down Amount and the Hard
Floor Price. A Capital Demand Notice shall be irrevocable. The Company may issue
as many Capital Demand Notices as it may elect during the Commitment Period but
may not deliver a new Capital Demand Notice during an existing Selling Period.
(b) Underwriter Sales Notice. Prior to 8:00 p.m. Eastern time on
each Trading Day during the Selling Period when the Underwriter has sold shares
of Common Stock, the Underwriter shall deliver a notice to the Company and to
the Transfer Agent in the form of Exhibit 2.3(b) attached hereto (an
"Underwriter Sales Notice") setting forth the number of shares of Common Stock
that the Underwriter has sold and the Underwriting Price on such Trading Day.
(c) Date of Delivery of Notices. Except as otherwise provided
herein, any notices delivered by the Company to the Underwriter or by the
Underwriter to the Company hereunder shall be in accordance with the terms set
forth in Section 8.1.
2.4 Closings and Settlements.
(a) Brokerage Account. The Company must have a brokerage account
with the Underwriter prior to the date on which the Company delivers a Capital
Demand Notice, into which account the proceeds of any sale of Common Stock, net
of any amounts payable under Section 2.4(d), shall be deposited.
(b) Deliveries. The Company shall credit the number of shares of
Common Stock set forth in the Underwriter Sales Notice by the Settlement Date to
the Company's or its designee's balance account with The Depository Trust
Company ("DTC") through DWAC or deliver such shares by such other means as may
be mutually agreed upon by the parties. In addition to the requirements of
Article III, prior to each Closing Date, each of the Company and the Underwriter
shall deliver all other documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
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Agreement in order to implement and effect the transactions contemplated herein.
(c) Company's Failure to Deliver Shares. If the Company shall fail
to deliver shares of Common Stock to the Underwriter by the Settlement Date, the
Underwriter shall send a written notice to the Company advising the Company that
such shares have not been received. If, after such notice, the Company shall
fail to issue shares of Common Stock by the fifth Business Day after the
Settlement Date for such shares, the Company shall pay damages to the
Underwriter equal to any actual damages incurred by the Underwriter because of
the Company's failure to deliver such required shares, including damages
resulting from the Underwriter's need, as determined by the Underwriter in its
sole discretion, to "unwind" any and all sales of the Company's Common Stock
made during the Selling Period and to reimburse any and all purchasers for their
completed purchases of the Company's Common Stock. Moreover, if the shares have
not been delivered by such date, the Underwriter will not be obligated to pay
the Company (unless the Company has already paid the Underwriter's actual
damages, if any, incurred during such Selling Period) for any shares sold by the
Underwriter or that the Underwriter agreed to sell or was obligated to sell
during the Selling Period nor will the Underwriter be obligated to engage in any
further efforts to sell the Company's Common Stock during the remainder of the
Selling Period. In addition, if the shares have not been delivered by the
Company by the fifth Business Day after the Settlement Date, at the
Underwriter's sole option, it may terminate this Agreement.
(d) Underwriter's Commission. During the Selling Period, the Company
will pay the Underwriter, at the end of each Trading Day, a commission (the
"Commission") equal to the difference, if any, between (i) the daily gross
proceeds from sales of shares minus (ii) the aggregate number of shares sold
multiplied by the Underwriting Price. Such Commission will be deducted from the
Company's account at the end of each Trading Day during a Selling Period. In the
event that the Commission shall equal a negative amount, such Commission shall
not be paid by the Underwriter to the Company at the end of such Trading Day,
but rather shall be accumulated and credited against the next Commission(s)
payable by the Company to the Underwriter. Immediately following the Selling
Period, the Underwriter shall pay to the Company any accumulated amounts which
have not so credited.
2.5 Termination, Suspension and Modification of Underwriting Obligation.
(a) Blocking Events. The Underwriter shall not be obligated to sell
any shares of Common Stock from the Company pursuant to any Capital Demand
Notice, nor shall a Capital Demand Notice be delivered at any time during the
Commitment Period, when there shall exist any one or more of the following:
(i) the withdrawal or suspension of the effectiveness of a
registration statement (the "Registration Statement") for the registration of
not less than the number of shares of Common Stock equal to, for any Capital
Demand Notice, the Maximum Draw Down Amount divided by the Hard Floor Price,
plus the maximum number of shares of Common Stock issuable pursuant to the
Purchase Option, which Registration Statement shall have been declared effective
by the Securities and Exchange Commission (the "SEC");
(ii) the failure of the Common Stock issuable hereunder to be
validly listed on the Principal Market;
(iii) the Company's failure to satisfy the requirements of
Section 3.1 or 3.2;
(iv) any failure or interruption in the compliance by the
Company with any of the covenants provided in Article VI;
(v) any merger or consolidation of the Company with or into,
or a transfer of all or substantially all of the
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
assets of the Company to, another entity; or
(vi) receipt or Deemed Receipt (as provided in Section 3.3) by
the Underwriter of a Notice of Blocking Period (each of (i), (ii), (iii), (iv),
(v) or (vi) a "Blocking Event").
The Company shall be obligated to notify the Underwriter in writing using the
form attached hereto as Exhibit 3.3 immediately upon the occurrence of a
Blocking Event.
Reduction or Elimination of Underwriter Obligation to Sell During
Any Selling Period or Extension of Selling Period. In the event that a Blocking
Event occurs during a Selling Period, at the option of the Underwriter, (i) the
Selling Period, and therefore the Underwriter's obligations, shall be extended
by the number of Trading Days that such Blocking Event exists or (ii) unless
such Blocking Event is waived in writing by the Underwriter, the obligation of
the Underwriter to sell shares of Common Stock during such Selling Period shall
be canceled for such Selling Period and the Underwriter shall be entitled to
rescind any sales made during such Selling Period, whether or not the Settlement
of such sales has occurred prior to such Blocking Event, and the Company shall
be liable for all actual damages incurred by the Underwriter caused by the
occurrence of the Blocking Event.
If the Underwriter has sold shares of Common Stock during the
Selling Period and the Settlement of such sales has not occurred prior to the
occurrence of a Blocking Event, the Company shall use, subject to Section 6.8,
its reasonable best efforts to take all actions necessary to cure such Blocking
Event, if curable, within 24 hours, provided, however, that the Company shall
not be required to disclose any material information relating to a proposed
transaction or event that constitutes a Blocking Event prior to such time as the
Company would generally, based on advice from counsel, disclose such transaction
or event.
2.6 Purchase Option.
(a) Purchase Option.
(i) The Company hereby grants to the Underwriter the right to
purchase, on the terms and conditions set forth in this Section 2.6, that number
of shares of Common Stock equal to the Purchase Option Share Amount (the
"Purchase Option").
(ii) The Purchase Option may be exercised at any time and from
time to time by the Underwriter on or after the Purchase Option Issuance Date
but prior to the Purchase Option Expiration Date by written notice to the
Company of its desire to so exercise in the form of Exhibit 2.6(a)(ii) attached
hereto (a "Purchase Option Notice"), accompanied by payment therefor in the
amount of the Purchase Option Exercise Price multiplied by the number of shares
of Common Stock for which the Purchase Option is then being exercised. Payment
of the Purchase Option Exercise Price may be made as follows (or by any
combination of the following): (i) in United States currency by cash or delivery
of a certified or official bank check payable to the order of the Company or by
wire transfer to its account, (ii) by cancellation of such number of shares of
Common Stock specified by the Underwriter otherwise issuable to the Underwriter
upon such exercise, such that the excess of the aggregate closing price on the
Trading Day immediately prior to date of exercise of such specified number of
shares over the portion of the Purchase Option Exercise Price attributable to
such shares shall equal the Purchase Option Exercise Price attributable to the
shares of Common Stock to be issued upon such exercise, in which case such
amount shall be deemed to have been paid to the Company and the number of shares
issuable upon such exercise shall be reduced by such specified number, or (iii)
by surrender to the
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
Company for cancellation by delivery through DWAC of shares of Common Stock of
the Company owned by the Underwriter (or delivery of certificates representing
the shares of Common Stock of the Company properly endorsed for transfer in
blank) having an aggregate closing price on the Trading Day immediately prior to
the date of exercise equal to the Purchase Option Exercise Price. In the event
that the Purchase Option is exercised in part, the Purchase Option Share Amount
shall be reduced by that number of shares of Common Stock that the Underwriter
has exercised and the Purchase Option relating to the remainder of the Purchase
Option Share Amount shall remain in full force and effect.
(b) Adjustment to Purchase Option Exercise Price, Dilution and Other
Events. In order to prevent dilution of the rights granted under the Purchase
Option, the Purchase Option Share Amount and the Purchase Option Exercise Price
will be subject to adjustment from time to time as provided in this Section
2.6(b). Any such adjustments will be applicable to the Purchase Option if not
yet exercised.
(i) Dividends and Distributions. If the Company shall declare
or pay to the holders of the Common Stock a dividend or other distribution
payable in shares of Common Stock or any other security convertible into or
exchangeable for shares of Common Stock, the Underwriter shall be entitled to
receive the number of shares of Common Stock or other securities exercisable for
shares of Common Stock, as applicable, which the Underwriter would have been
entitled to after the declaration and payment of such dividend or other
distribution as if the Purchase Option then held by the Underwriter had been
exercised immediately prior to the record date for the determination of
stockholders entitled to receive such dividend or other distribution.
(ii) Stock Splits and Combinations. If the Company shall
subdivide (by means of any stock split, stock dividend, recapitalization or
otherwise) the outstanding shares of Common Stock into a greater number of
shares of Common Stock, or combine (by means of any combination, reverse stock
split or otherwise) the outstanding shares of Common Stock into a lesser number
of shares, or issue by reclassification of shares of Common Stock any shares of
the Company, the Purchase Option Share Amount and the Purchase Option Exercise
Price in effect immediately prior thereto shall be adjusted so that the
Underwriter shall receive the number of shares of Common Stock at the exercise
price which the Underwriter would have been entitled after the happening of any
and each of the events described above if the Underwriter had exercised the
Purchase Option held by the Underwriter immediately prior to the happening of
each such event on the day upon which such subdivision or combination, as the
case may be, becomes effective. Additional shares of Common Stock deemed to have
been issued pursuant to this Section 2.6(b) shall be deemed to have been issued
for no consideration.
(iii) Organic Changes. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets (in one or a series of related transactions) to another person
or entity or other transaction which is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an "Organic Change". In case the Company
shall effect an Organic Change, then the Company will make appropriate provision
(in form and substance reasonably satisfactory to the Underwriter) to insure
that the provisions of this Section 2.6(b)(iii) will thereafter be applicable to
the Purchase Option (including, in the case of any such Organic Change in which
the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Purchase Option Share Amount and the Purchase Option
Exercise Price to the value for the Common Stock reflected by the terms of such
Organic Change, if the value so reflected would result in the Purchase Option
Share Amount or the Purchase Option Exercise Price being adversely affected
compared to the Purchase Option Share Amount or the Purchase Option Exercise
Price in effect immediately prior to such Organic Change). The Company will not
effect any such Organic Change
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<PAGE>
unless prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change assumes, by written instrument
(in form and substance satisfactory to the Underwriter), the obligation to
deliver to the Underwriter such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Underwriter may be entitled to
acquire or receive. The provisions of this subparagraph (iii) shall similarly
apply to successive Organic Changes.
(iv) No Dilution or Impairment. The Company shall not, by amendment
of its certificate of incorporation or through any Organic Change or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Section 2.6(b). Without limiting the generality of the
foregoing, the Company (A) shall not take any action which results in any
adjustment of the Purchase Option Exercise Price or the Purchase Option Share
Amount if the total number of shares of Common Stock issuable after the action
upon the exercise of the Purchase Option would exceed the total number of shares
of Common Stock then authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such exercise and (B) shall not
permit the par value of any shares of stock receivable upon the exercise of the
Purchase Option to exceed the amount payable therefor upon such exercise.
III. CONDITIONS PRECEDENT.
3.1 Conditions Precedent to the Obligation of the Underwriter to Sell
Common Stock Pursuant to a Capital Demand Notice. The obligation of the
Underwriter to sell Common Stock, as the Company's Underwriter, on a best
efforts basis, pursuant to a Capital Demand Notice is subject to the
satisfaction, on the date of delivery of a Capital Demand Notice, and on each
applicable Closing Date (each a "Condition Precedent Date") of each of the
following conditions, which conditions cannot be waived without the prior
written consent of the Underwriter:
(a) Effective Registration Statement. The Registration Statement
shall be in effect and shall remain effective on each Condition Precedent Date
and (i) neither the Company nor the Underwriter shall have received notice that
the SEC has issued or intends to issue a stop order with respect to the
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of the Registration Statement, either temporarily or permanently,
or intends or has threatened to do so, and (ii) no other suspension of the use
of the Registration Statement or related Prospectus shall exist.
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company, as set forth in this Agreement,
without taking into account any materiality qualifications therein, shall be
true and correct in all material respects as of each Condition Precedent Date as
though made at each such time (except for representations and warranties made as
of a specific date).
(c) Performance by the Company. The Company shall have performed,
satisfied and complied with in all material respects all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Precedent Date.
(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 Entity of competent jurisdiction which
prohibits or adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced which may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.
(e) Adverse Changes. Except as disclosed pursuant to public filings
under the Exchange Act, since the date
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
through which the most recent quarterly report of the Company on Form 10-Q (or
annual report on Form 10-K if more recent) has been prepared and filed with the
SEC, no event which had or is reasonably likely to have a Material Adverse
Effect has occurred.
(f) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the National Association of Securities Dealers, Inc.
("NASD"), and the Common Stock to be issued hereunder (including the Common
Stock issuable upon exercise of the Purchase Option) shall have been approved
for listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing Date (including the Common Stock issuable upon exercise of the Purchase
Option), if any, shall not violate the shareholder approval requirements of the
Principal Market.
(g) Legal Opinions. The Company shall have caused to be delivered to
the Underwriter, on the Trading Day immediately prior to the first Trading Day
of each Selling Period, a legal opinion of the Company's one or more outside
counsel, containing the opinions set forth in Exhibit 3.1(g)(i) hereto. In
addition, the Company shall have caused to be delivered to the Underwriter on
the Trading Day immediately prior to the first Trading Day of the first Selling
Period following the filing of any SEC Filings to be incorporated by reference
into the Registration Statement or any amendment thereto (including, but not
limited to, any filings on Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB or
Form 8-K), a legal opinion of the Company's one or more outside counsel
containing the opinions set forth in Exhibit 3.1(g)(ii) hereto, 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.
(h) Accountant's Letter. On the Trading Day immediately prior to the
first Trading Day of the first Selling Period following the filing of any SEC
Filings to be incorporated by reference into the Registration Statement or any
amendment thereto (including, but not limited to, any filings on Form 10-K, Form
10-KSB, Form 10-Q, Form 10-QSB, or Form 8-K), the Company shall have furnished
to the Underwriter a comfort letter of its independent auditors in customary
form, including a statement to the effect that they have performed the
procedures in accordance with the provisions of Statement on Auditing Standards
No. 71, as amended, as agreed to by the parties hereto, and reports thereon as
shall have been reasonably requested by the Underwriter with respect to certain
financial information contained in the Registration Statement.
(i) Officer's Certificate. The Company shall have delivered to the
Underwriter, on the first Closing Date of each Selling Period, a certificate in
the form attached hereto as Exhibit 3.1(i), executed by an executive officer of
the Company and to the effect that all the conditions to such Closing shall have
been satisfied as at the date of each such certificate.
(j) Due Diligence. The Underwriter shall have been reasonably
satisfied with the Due Diligence Materials pursuant to Section 3.2 and to the
adequacy of the disclosure contained in the Registration Statement.
(k) [Intentionally Omitted].
(l) Clearing Broker Instructions. The Company shall have issued
instructions to the Underwriter's Clearing Broker (in the form attached hereto
as Exhibit 3.1(l)) to release the Commission at the Underwriter's request. The
Company shall also cooperate with the Underwriter to provide the Underwriter's
Clearing Broker with any additional documentation requested thereby in
connection with payment of Commissions to the Underwriter.
(m) Transfer Agent Instructions. The Company shall have issued
instructions to its Transfer Agent (in the
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
form attached hereto as Exhibit 3.1(m)) to issue certificates, or at the
Underwriter's request, to electronically issue such shares (e.g., through DWAC
or DTC) (such electronic issuance to be made only if such shares have been
registered under the 1933 Act), registered in the name of the Underwriter or its
respective nominee(s), for the Common Stock issuable under this Agreement.
(n) Account. The Company must have an account open with the
Underwriter.
3.2 Due Diligence Review.
(a) Upon delivery of a Capital Demand Notice, the Company shall also
deliver or make available, during normal business hours, for inspection and
review by the Underwriter, advisors to and representatives of the Underwriter
(who may or may not be affiliated with the Underwriter), all such information
reasonably requested in the applicable Due Diligence Request List (the "Due
Diligence Materials") (including, without limitation, responses to all questions
and other inquiries reasonably made or submitted therein), for the sole purpose
of enabling the Underwriter and such representatives, advisors and underwriters
and their respective accountants and attorneys to conduct initial and ongoing
due diligence with respect to the Company and the accuracy of the Registration
Statement.
(b) Prior to disclosure of material non-public information to the
Underwriter, advisors to or representatives of the Underwriter, the Company
shall identify such information as being material nonpublic information and
provide the Underwriter, such advisors and representatives with the opportunity
to accept or refuse to accept such nonpublic information for review. If the
Company discloses material nonpublic information to the Underwriter, advisors to
or representatives of the Underwriter prior to disclosure of such information in
a registration statement, prospectus or amendment thereto, such event shall
constitute a Blocking Event pursuant to Section 2.5(a).
3.3 Occurrence of Material Events. If the Company's management determines
in its good faith judgment (i) that it is required or advisable to do so or (ii)
that any fact exists or any event has occurred that makes any statement of a
material fact made in the Registration Statement, the prospectus, any amendment
or supplement thereto, or any document incorporated by reference therein untrue
in any material respect, or that requires the making of any additions to or
changes in the Registration Statement or the prospectus, in order to make the
statements therein not misleading in any material respect, the Company shall
notify the Underwriter using the form attached hereto as Exhibit 3.3 (a "Notice
of Blocking Period") that it may not sell the Registrable Securities pursuant to
any Registration Statement or prospectus; provided, that if the Underwriter
reasonably believes, after advice from its attorneys and notice to the Company
after consultation with the Company, that a fact exists or an event has occurred
that makes any statement of a material fact made in the Registration Statement,
the prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue in any material respect, or that
requires the making of any additions to or changes in the Registration Statement
or the prospectus, in order to make the statements therein not misleading in any
material respect, then the Company shall have been deemed to have delivered a
Notice of Blocking Period to the Underwriter ("Deemed Receipt"). The Underwriter
agrees by sale of the Registrable Securities that, upon receipt of a Notice of
Blocking Period from the Company of the existence of any fact of the kind
described in the immediately preceding sentence, the Underwriter shall not
dispose of, sell or offer for sale the Registrable Securities pursuant to the
Registration Statement until such Underwriter receives (i) copies of the
supplemented or amended prospectus, or until counsel for the Company shall have
determined that such disclosure is not required due to subsequent events, (ii)
notice in writing (the "Advice") from the Company that the use of the prospectus
may be resumed and (iii) copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus. If so directed by the Company
in connection with any such notice, each Underwriter will deliver to the Company
(at the Company's expense) all copies, other than permanent file
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
copies then in such Underwriter's possession, of the prospectus covering such
Registrable Securities that was current immediately prior to the time of receipt
of such notice.
IV. REPRESENTATIONS AND WARRANTIES OF UNDERWRITER.
The Underwriter represents and warrants to the Company as follows:
4.1 Authorization; Enforcement. The Underwriter has full power and
authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby in accordance with the terms hereof. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Underwriter.
No other proceedings on the part of Underwriter are necessary to approve and
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby in accordance with the terms hereof. This
Agreement has been validly executed and delivered by the Underwriter and is a
valid and binding agreement of the Underwriter enforceable against it in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and similar laws relating to, or affecting generally the enforcement
of, applicable creditors' rights and remedies.
4.2 Not an Affiliate. The Underwriter is not an officer, director or
Affiliate of the Company.
4.3 Organization and Standing. The Underwriter is duly organized, validly
existing, and in good standing under the laws of Delaware, and has all requisite
power and authority to carry on its business as now being conducted, and is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualifications necessary,
except where the failure to be so qualified or in good standing would not have a
material adverse effect.
4.4 Absence of Conflicts. The execution and delivery of this Agreement and
any other document or instrument executed in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements hereof and thereof, will not violate the provision of any
indenture, instrument or agreement to which the Underwriter is a party or is
subject, or by which the Underwriter or any of its assets is bound, or conflict
with or constitute a material default thereunder, or result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by the
Underwriter to any third party.
4.5 Broker-Dealer. The Underwriter is a registered broker-dealer under the
Exchange Act and is a member in good standing of the NASD.
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as disclosed in the Schedules delivered by the Company to the
Underwriter on the date hereof, the Company represents and warrants to the
Underwriter as follows:
5.1 Corporate Organization. Each of the Company and its Subsidiaries (a
complete list of which is set forth in Schedule 5.3(a)) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authority to own or lease and operate its properties and to carry on
their business as now being conducted. Each of the Company and its Subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the property owned, leased, or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
qualified or be in good standing would not have, individually or in the
aggregate, a Material Adverse Effect and all of which jurisdictions in which
either the Company or its Subsidiaries are or believes they should be duly
qualified is set forth on Schedule 5.1 hereto.
5.2 Capitalization and Indebtedness.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 75,000,000 shares of Common Stock, of which as of the date
hereof, 38,313,803 shares are issued and outstanding, and 5,000,000 shares of
preferred stock (the "Preferred Stock") of the Company, of which as of the date
hereof no shares are issued or outstanding. All of the outstanding shares have
been validly issued and are fully paid and nonassessable. Except as disclosed in
the SEC Filings, no shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens suffered or permitted
by the Company. Except as disclosed in the SEC Filings, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of Capital Stock of the Company or any of
its Subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of Capital Stock of the Company or any of its Subsidiaries,
(ii) there are no outstanding debt securities, notes, credit agreements, or
other agreements, documents or instruments evidencing indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound and (iii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except as
provided in this Agreement). Except as disclosed in the SEC Filings, there are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of any of the Common Stock as described in
this Agreement. The Company has furnished to the Underwriter true and correct
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
(b) Upon issuance of the Common Stock issuable upon exercise of the
Purchase Option, and payment of the Purchase Option Exercise Price therefor,
pursuant to a purchase and sale in accordance with the terms of this Agreement,
the Company will transfer to the Underwriter good and valid title to the Common
Stock, free and clear of any liens, other than liens created by the Underwriter,
and such Common Stock will be duly authorized, fully paid and nonassessable.
5.3 Subsidiaries.
(a) The Company does not have any Subsidiaries that own material
assets or are subject to material liabilities, other than those listed on
Schedule 5.3(a) (the "Subsidiaries"). Each Subsidiary is, directly or
indirectly, wholly owned by the Company.
(b)(i) Except as disclosed in the SEC Filings, all the outstanding
stock or other equity or ownership interests of each Subsidiary is owned free
and clear of all material liens and is validly issued and (ii) there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which any Subsidiary is a party or otherwise obligating any
Subsidiary to issue or sell, or entitling any Person to acquire from any
Subsidiary, and no Subsidiary is a party to any agreement, arrangement or
commitment obligating it to repurchase, redeem or otherwise acquire, any shares
of the Capital Stock or any securities convertible into or exchangeable for the
Capital Stock of any such Subsidiary.
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5.4 Authorization; Enforcement; Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and to issue, sell and perform its
obligations with respect to the Common Stock in accordance with the terms hereof
(including the Common Stock issuable upon exercise of the Purchase Option), (ii)
the execution and delivery of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby, including, without limitation,
the reservation for issuance and the issuance of the Common Stock (including the
Common Stock issuable upon exercise of the Purchase Option), have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, and (iii) this Agreement has been duly executed and delivered by
the Company. To the Knowledge of the Company, no other corporate proceedings on
the part of the Company are necessary to approve and authorize the execution and
delivery of this Agreement and the issuance of the Common Stock issuable upon
each Closing, and the consummation of the transactions contemplated hereby in
accordance with the terms hereof. The Common Stock issuable in accordance with
the terms of this Agreement (including the Common Stock issuable upon exercise
of the Purchase Option), upon the issuance thereof and the payment of the
Underwriting Price or Purchase Option Exercise Price therefor, as applicable, in
accordance with the terms hereof, will be duly and validly issued, fully paid
and nonassessable, and this Agreement, when executed and delivered, constitutes
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
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
5.5 No Conflicts. The execution, delivery and performance of this
Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation of the Company or its Subsidiaries or their
respective By-laws, or (ii) violate or conflict with, or result in a breach of
any provision of, 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, or result in
the creation of any lien on or against any of the properties of the Company or
any of its Subsidiaries, any note, bond, mortgage, agreement, license indenture
or instrument to which the Company or any of its Subsidiaries is a party, or
result in a violation of any statute, law, rule, regulation, writ, injunction,
order, judgment or decree (including U.S. federal and state securities laws and
regulations and the rules and regulations of the Principal Market on which the
Common Stock is traded or listed) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except where such violation, conflict, breach
or other consequence would not have a Material Adverse Effect. Except as
disclosed in the SEC Filings, neither the Company nor its Subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation,
or By-laws or its organizational charter or by-laws, respectively, or in
violation of any material term of or in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries. Except as specifically contemplated by this Agreement and as
required under the Securities Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental or regulatory or self-regulatory agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not in violation of the listing requirements of
the Principal Market. The Company and its Subsidiaries have no Knowledge of any
facts or circumstances which might give rise to any of the foregoing.
5.6 Compliance with Applicable Law; Regulatory Permits. The businesses of
the Company are not being
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conducted in violation of any law, ordinance, rule, regulation, judgment, decree
or order of any Governmental Entity, except for possible violations which,
individually or in the aggregate, would not have a Material Adverse Effect. The
Company and its Subsidiaries possess all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to conduct their
respective businesses as currently being conducted (collectively, the "Company
Permits"), except where failure to possess any of such Company Permits would not
have a Material Adverse Effect. There is no action pending or, to the Knowledge
of the Company, threatened regarding the suspension or cancellation of any of
the Company Permits. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits except
where such conflict, default or violation would not, individually or in the
aggregate, have a Material Adverse Effect.
5.7 Absence of Litigation. Except as disclosed in the SEC Filings, there
is no action, suit, proceeding, inquiry or investigation before or by any
Governmental Entity or arbitrator pending or, to the Knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the Company or its
Subsidiaries or their respective directors or officers, or the Common Stock,
wherein an unfavorable decision, ruling or finding would have, individually or
in the aggregate, a Material Adverse Effect. There are no pending, or to the
Knowledge of the Company, threatened proceedings against or to the Company's
Knowledge affecting the Company or any of its Subsidiaries. There is no
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries that has
had, or would reasonably be expected in the future to have, a Material Adverse
Effect or which reasonably could be expected to materially adversely affect the
transactions contemplated by this Agreement.
5.8 SEC Documents, Financial Statements.
(a) The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, (all of the foregoing, and all other
documents and registration statements, whether heretofore or hereafter filed by
the Company with the SEC, and the Registration Statement, when declared
effective, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Common Stock is currently
listed or quoted on the Principal Market which is, as of the date hereof, the
Nasdaq National Market. The Company (i) has delivered or made available to the
Underwriter or its advisor or representative true and complete copies of the SEC
Documents as the Underwriter or its advisor or representative has requested from
the Company and (ii) agrees to deliver or make available to the Underwriter or
its advisor or representative true and complete copies of any additional SEC
Documents, upon request. As of their respective dates, the SEC Filings (except
for the Registration Statement and the Prospectus, which are discussed below)
complied as to form in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Filings, and none of the SEC
Filings, at the time they were filed with the SEC (except those SEC Documents
that were subsequently amended), contained any untrue statement of a material
fact or omitted 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. 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 as to form when so filed in all material respects with the provisions
of 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 SEC under Rule 424(b) under the Securities Act
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<PAGE>
complied as to form 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 were 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 Underwriter furnished to
the Company in writing by or on behalf of the Underwriter expressly for use
therein. As of the date of delivery by the Underwriter of the Prospectus
contained in the Registration Statement in connection with sales of Common Stock
by the Underwriter, such Prospectus will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder, and other federal, state and
local laws, rules and regulations applicable to such Prospectus. As of their
respective dates, the financial statements of the Company included (or
incorporated by reference) in the SEC Filings complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a 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 exclude 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 its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments).
(b) During the three (3) years preceding the date hereof, the SEC
has not issued an order preventing or suspending the use of any prospectus
relating to the offering of any shares of Common Stock or instituted proceedings
for that purpose.
5.9 No Undisclosed or Contingent Liabilities. Neither the Company nor any
of its Subsidiaries has any claims, liabilities or obligations of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether due
or to become due) that would be required to be reflected or reserved against on
a consolidated balance sheet of the Company and its consolidated Subsidiaries
under GAAP, except for claims, liabilities or obligations (i) disclosed in the
Company's SEC Filings or (ii) incurred by the Company or any of its Subsidiaries
since the date of filing the most recent SEC Document, which are in the ordinary
course of business and which are consistent with past practice and that,
individually or in the aggregate, would not have a Material Adverse Effect.
5.10 [Intentionally Omitted].
5.11 Employment Matters; ERISA Matters. The Company and its Subsidiaries
are in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours except where failure to be in compliance would
not have, individually or in the aggregate, a Material Adverse Effect. To the
Knowledge of the Company, there are no pending investigations involving, or any
unfair labor practice charges or complaints against, the Company or any of its
Subsidiaries by, or before, any Governmental Entity responsible for the
enforcement of such federal, state, local or foreign laws and regulations.
Neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement and no labor organization or group of employees of the
Company or any of its Subsidiaries has made a pending demand for recognition or
certification.
Neither the Company nor any of its Subsidiaries has any liability
pursuant to the Worker Adjustment and Retraining Notification Act ("WARN"),
except for such liability that would not,
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<PAGE>
individually or in the aggregate, have a Material Adverse Effect. Except for
such failures that would not have, individually or in the aggregate, a Material
Adverse Effect, each of the Plans has been maintained and administered in
accordance with its terms and applicable laws, including, without limitation,
the Employment Retirement Income Security Act of 1974, as amended ("ERISA") and
the Internal Revenue Code of 1986, as amended (the "Code"). None of the Plans is
subject to Title IV of ERISA and no Plan is a multiemployer plan (within the
meaning of Section 3(37) of ERISA).
Neither the Company nor any of its Subsidiaries has any obligation
to provide post-retirement health or life benefits, except as required by law.
The Company does not have any Plans intended to qualify under
Section 401(a) or 501(c) of the Code other than a Section 401(k) Plan which is a
standardized prototype Plan.
5.12 Absence of Certain Changes.
Since June 30, 2000 or the end of the most recent fiscal quarter before the
delivery of each Capital Demand Notice, as the case may be, the business of the
Company and its Subsidiaries has been conducted in the ordinary course
consistent with past practices and except in the ordinary course of business
consistent with past practice there has not been:
(i) any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has had or would
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of Capital Stock of the Company
or any repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of Capital Stock or other securities of, or
other ownership interests in, the Company or any Subsidiary;
(iii) any amendment of any material term of any outstanding
security of the Company or any Subsidiary;
(iv) any incurrence, assumption or guarantee by the Company or
any Subsidiary of any indebtedness for borrowed money, other than (i) working
lines of credit or borrowings under existing lines of credit or floor plan
financing arrangements, (ii) any license fees and royalties and (iii) pursuant
to any lease;
(v) any creation or assumption by the Company or any
Subsidiary of any lien on any material asset other than in the ordinary course
of business consistent with past practice;
(vi) any making of any loan, advance or capital contributions
to or investment in any Person in excess of $500,000 other than loans, advances
or capital contributions to or investments in wholly-owned Subsidiaries made in
the ordinary course of business consistent with past practice;
(vii) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of the Company or
any Subsidiary which, individually or in the aggregate, has had or would have a
Material Adverse Effect;
(viii) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any Subsidiary relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other right,
in any such case, material to the Company and the Subsidiaries, taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practice and those contemplated by this Agreement;
or
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<PAGE>
(ix) any material change in any method of accounting or
accounting practice by the Company or any Subsidiary.
(b) None of the Company or its Subsidiaries have taken any steps,
and do not currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or its Subsidiaries have any Knowledge
or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
5.13 Environmental Matters. The Company and each of its Subsidiaries have
obtained all material 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. "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 Releases of Hazardous Substances 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. "Hazardous Substance" shall include any element, compound or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic or hazardous substance, hazardous waste, medical waste, special
waste or solid waste under Environmental Laws, including, but not limited to
petroleum, PCBs or asbestos containing materials. "Releases" shall mean any
escaping, leaking, spilling, leaking, pumping, emitting, emptying, discharging,
injecting, dumping or disposing of Hazardous Substances into the environment. 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 or its Subsidiaries that violate or could reasonably
be expected to violate any Environmental Law 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 Release of any Hazardous Substance.
5.14 Material Contracts.
(a) Other than as filed in any SEC Filings or as previously made
available to the Underwriter, neither the Company nor any Subsidiary is a party
to or bound by any agreement or arrangement material to the Company and its
Subsidiaries taken as a whole ("Material Contracts").
(b) Each Material Contract is in full force and effect and
constitutes a legal, valid and binding obligation of the Company or the
Subsidiary party thereto and, to the Knowledge of the Company, each other party
thereto, and is enforceable against the Company or its Subsidiaries and, to the
Knowledge of the Company, each other party thereto in accordance with its terms,
except to the extent that such enforceability is limited by (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity, and, to the Knowledge of the Company, no other
party thereto is in conflict therewith or in violation or breach thereof or
default thereunder, except for such conflicts, violations, breaches and defaults
which, individually or in the aggregate, would not have a Material Adverse
Effect.
5.15 Properties; Encumbrances. The Company owns no real property. Except
as disclosed in the SEC Filings, each of the Company and its Subsidiaries has
good and valid title to all material properties and assets which it purports to
own (personal, tangible and intangible) free and clear of all liens, mortgages,
claims, interests, charges, security interests or other encumbrances or adverse
interests of any nature whatsoever and other title or interest retention
arrangements ("liens").
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
5.16 Insurance. The Company and each of its Subsidiaries maintains
reasonably adequate insurance based on customary insurance coverage for
similarly situated companies in the industry.
5.17 Material Disclosure. There is no fact, transaction or development
which the Company has not disclosed to the Underwriter in writing (including
pursuant to the SEC Documents filed prior to the date hereof) which would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. This Agreement (including any Exhibit or Schedule hereto) and
any written statements, documents or certificates furnished to the Underwriter
by the Company or its Subsidiaries prior to the date hereof in connection with
the transactions contemplated hereby, taken as a whole, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated herein or therein or necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. Except with respect to transactions contemplated by this Agreement,
no event or circumstance has occurred or information exists with respect to the
Company or any of its Subsidiaries or its or their business, properties,
operations or financial conditions, 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 (assuming for this purpose that
the Company's reports filed under the Exchange Act are being incorporated into
an effective registration statement filed by the Company under the Securities
Act).
5.18 Intellectual Property.
(a) Material Intellectual Property and material Intellectual
Property Contracts are listed or described in SEC Filings or are listed on
Schedule 5.18(a).
(b) Material risks associated with Intellectual Property and
Intellectual Property Contracts are described by the Company in the SEC Filings.
Except as set forth in the SEC Filings, and in particular in the statements
under the Heading "Risks and Uncertainties" entitled "If we or our licensors are
not able to obtain and maintain adequate patent protection for our product
candidates, we may be unable to commercialize our product candidates or to
prevent other companies from using our technology in competitive products";
(i) All material Business Intellectual Property is valid,
subsisting and enforceable. No material Owned Intellectual Property has been
canceled or adjudicated invalid (excepting any expirations in the ordinary
course), or is subject to any outstanding order, judgment or decree restricting
its use or adversely affecting or reflecting the Company's rights thereto. To
the Company's Knowledge, no material Licensed Intellectual Property has been
canceled or adjudicated invalid (excepting any expirations in the ordinary
course), or is subject to any outstanding order, judgment or decree restricting
its use or adversely affecting or reflecting the Company's rights thereto. The
material Owned Intellectual Property has been used with all patent, trademark,
copyright, confidential, proprietary, and other Intellectual Property notices
and legends prescribed by law or otherwise permitted.
(ii) No suit, action, reissue, reexamination, public protest,
interference, opposition, cancellation or other proceeding (collectively,
"Suit") is pending concerning any claim or position that the Company has
violated any material Intellectual Property rights of a third party. To the
Knowledge of the Company, no claim has been threatened or asserted against the
Company or its Subsidiaries or any of their indemnitees for violation of any
material Intellectual Property rights of a third party. The Company is not
violating and has not violated any material Intellectual Property rights of a
third party.
(iii) No Suit is pending concerning any claim or position that
the Company, or to the Knowledge of the Company another Person, has breached any
material Intellectual Property Contract. No claim has been
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<PAGE>
threatened or asserted that the Company, or to the Knowledge of the Company,
another Person has breached any material Intellectual Property Contract. To the
Company's Knowledge, neither the Company nor any other party to a material
Intellectual Property Contract is in default or in breach of that material
Intellectual Property Contract. No party to any material Intellectual Property
Contract has given the Company notice of its intention to cancel, terminate or
fail to renew any such Intellectual Property Contract.
(iv) No Suit is pending concerning the Owned Intellectual
Property, including any Suit concerning a claim or position that the Owned
Intellectual Property has been violated or is invalid, unenforceable,
unpatentable, unregisterable, cancelable, not owned or not owned exclusively by
the Company. To the Company's Knowledge, no such claim has been threatened or
asserted. To the Company's Knowledge, no valid basis for any such Suits or
claims exists.
(v) To the Company's Knowledge, no Suit is pending concerning
the Licensed Intellectual Property, including any concerning a claim or position
that the Licensed Intellectual Property has been violated or is invalid,
unenforceable, unpatentable, unregisterable, cancelable, not owned or not owned
exclusively by the Company. To the Company's Knowledge, no such claim has been
threatened or asserted and no valid basis for any such Suits or claims exists.
(vi) To the Company's Knowledge, no Person is violating any
material Business Intellectual Property. To the Company's Knowledge, the Company
owns or otherwise holds valid rights to use all material Intellectual Property
currently used by the Company.
(vii) To the Company's Knowledge, the Company has timely made
all filings and payments with the appropriate foreign and domestic agencies
required to maintain in subsistence all material Registered Owned Intellectual
Property. To the Company's Knowledge, the Company is in compliance with all
applicable rules and regulations of such agencies with respect to Business
Intellectual Property. All documentation necessary to confirm and effect the
Company's ownership of Owned Intellectual Property, if acquired from other
Persons, has been recorded in the United States Patent and Trademark Office, and
all other appropriate offices.
(viii) The Company has taken reasonable measures to protect
the secrecy, confidentiality and value of all material Trade Secrets used in the
business (collectively, "Business Trade Secrets"). To the Company's Knowledge,
the material Business Trade Secrets have not been disclosed to any persons or
entities other than Company employees and contractors who had a need to know and
use such material Business Trade Secrets in the ordinary course of employment or
contract performance and who executed appropriate confidentiality agreements.
5.19 Compliance With Food and Drug Act.
(a) Each of the Company and its Subsidiaries has filed with the U.S.
Food and Drug Administration (the "FDA"), and with all applicable foreign, state
and local regulatory bodies for, and has received approval of, all
registrations, applications, licenses, requests for exemptions, permits and
other regulatory authorizations necessary to conduct the business of the Company
and each of its Subsidiaries. Each of the Company and its Subsidiaries is in
compliance in all material respects with all such registrations, applications,
licenses, requests for exemptions, permits and other regulatory authorizations,
and all applicable FDA, foreign, state and local rules, regulations, guidelines
and policies, including, but not limited to, applicable FDA, foreign, state and
local rules, regulations and policies relating to good manufacturing practice
("GMP") and good laboratory practice ("GLP"). Each such registration,
application, license, request for exemption, permit or other regulatory
authorization is valid and in full
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force and effect. Except as may be disclosed in the SEC Filings, no party
granting any such registration, application, license, request for exemption,
permit or other regulatory authorization has taken any action, or to the
Company's Knowledge, is considering limiting, suspending or revoking the same
and there is no basis for any such limitation, suspension or revocation.
(b) The human clinical trials, animal studies and other preclinical
tests conducted by or on behalf of the Company and its Subsidiaries that are
described in the SEC Filings (the "Company Studies") were and, if still pending,
are being conducted in accordance with experimental protocols, procedures and
controls generally used by qualified experts in the preclinical or clinical
study of new drugs or diagnostics. The descriptions of the results of such
Company Studies are accurate and complete in all material respects, and the
Company has no Knowledge of any other trials, studies or tests, the results of
which reasonably call into question the results described or referred to in the
SEC Filings. Except as disclosed in the SEC Filings, neither the Company nor any
Subsidiary has received any notices or correspondence from the FDA or any other
governmental agency requiring the termination, suspension or a modification
which results in a materially adverse change in any Company Studies.
5.20 Subsidiaries. None of the Subsidiaries are Significant Subsidiaries.
5.21 No Brokers. The Company has taken no action which would give rise to
any claim by any Person for brokerage commissions, finder's fees or similar
payments by the Underwriter relating to this Agreement for the transactions
contemplated hereby.
5.22 Acknowledgment Regarding the Underwriter's Sale of the Common Stock.
The Company acknowledges and agrees that the Underwriter is acting solely as the
Company's Underwriter with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Underwriter 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
hereby and any advice given by the Underwriter or any of its respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Underwriter's sale of the Common
Stock hereunder. The Company further represents to the Underwriter that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives. The Company has
not provided to the Underwriter any nonpublic information that, in the opinion
of the Company, is material to a decision to sell Common Stock.
5.23 Certain Transactions. Except as disclosed in the SEC Filings and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties, none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the Knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
5.24 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 of Common Stock hereunder.
(i) The SEC has not issued any order preventing or suspending
the effectiveness of the Registration Statement. The Company is currently (i)
eligible to register securities, including a primary offering of,
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<PAGE>
and the resale of, the Common Stock purchased pursuant to this Agreement on a
Registration Statement on Form S-3 under the Securities Act and (ii) in
compliance with Rule 415(a)(1)(x) and Rule 415(a)(4). The Company has not
distributed and, prior to the completion of the sale of the shares of Common
Stock by the Underwriter, will not distribute any offering material in
connection with the offer and sale of the Common Stock other than the
Registration Statement, the Prospectus, the SEC Filings or other materials, if
any, permitted by the Securities Act.
5.25 Foreign Corrupt Practices. Neither the Company nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
5.26 Investment Company Status. The Company is not, and upon consummation
of the sale of the Common Stock will not be, an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
VI. COVENANTS.
6.1 [Intentionally Omitted]
6.2 Reservation of Common Stock. The Company shall reserve, prior to the
commencement of any Selling Period, such number of shares of Common Stock, free
of preemptive rights, equal to the number of shares of Common Stock equal to (i)
the quotient of the Maximum Draw Down Amount divided by the Hard Floor Price
plus (ii) the maximum number of shares issuable upon full exercise of the
Purchase Option. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered hereunder and the number of shares so
reserved shall be increased to reflect (a) potential increases in the Common
Stock which the Company may be obligated to issue by reason of adjustments to
the Purchase Option and (b) stock splits and stock dividends and distributions.
6.3 Listing of Common Stock. During the term of this Agreement, the
Company hereby agrees to maintain the listing of the Common Stock, including the
shares to be issued hereunder, on a Principal Market, and as soon as reasonably
practicable, but in any event prior to the commencement of the initial Selling
Period, to list any additional shares of Common Stock issuable under this
Agreement. The Company further agrees that, if the Company applies to have the
Common Stock traded on any other Principal Market, it will include in such
application the Common Stock issuable under this Agreement, and will take such
other action as is necessary or desirable to cause the Common Stock issued or
issuable hereunder to be listed on such other Principal Market as promptly as
possible.
6.4 Exchange Act Registration. During the term of this Agreement, the
Company will cause its Common Stock to continue to be registered under Section
12(g) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act. If required, the
Company will take all action to continue the listing and trading of its Common
Stock on
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
the Principal Market and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and the Principal Market.
6.5 Legends. The shares evidencing the Common Stock to be issued at each
Closing and upon exercise of the Purchase Option shall be free of legends or
stop transfer or other restrictions.
6.6 Corporate Existence. During the term of this Agreement, the Company
will take all steps necessary to preserve and continue the corporate existence
of the Company; provided, however, that nothing herein shall be construed to
limit the ability of the Company to partake in any merger, asset sale or
acquisition transaction involving the Company, subject to the Company complying
with the terms of this Agreement.
6.7 Additional SEC Documents. During the term of this Agreement, the
Company will notify the Underwriter each time that an SEC Document is submitted
to the SEC for filing.
6.8 Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable United States state securities and
takeover laws ("Blue Sky Laws") or other state laws and appropriate compliance
with applicable regulations issued under the Securities Act) as would permit or
facilitate the sale or distribution of all the Registrable Securities in the
manner (including manner of sale) and in all states reasonably requested by the
Underwriter for purposes of maximizing the proceeds realizable by the
Underwriter from such sale or distribution. The Company shall cooperate with the
Underwriter and take all such other reasonable actions in connection therewith
in order to expedite or facilitate the disposition of the Registrable
Securities. Prior to the thirtieth day from the date hereof, the Company shall
register the maximum number of shares of Common Stock issuable upon full
exercise of the Purchase Option by filing with the SEC a post-effective
amendment to the Registration Statement pursuant to the Securities Act. The
Company shall keep such Registration Statement effective until the Purchase
Option Expiration Date with regard to at least the maximum number of shares of
Common Stock issuable pursuant to the Purchase Option, except to the extent a
Blocking Event occurs pursuant to Section 3.3. If a Blocking Event occurs
pursuant to Section 3.3, the Company shall use its reasonable best efforts to
remove such Blocking Event as soon as possible, including the filing with the
SEC of a Prospectus supplement or post-effective amendment to the Registration
Statement or related Prospectus, as applicable, provided, however, that the
Company shall not be required to disclose any material information relating to a
proposed transaction or event prior to such time as the Company would generally,
based on advice from counsel, disclose such transaction or event.
6.9 Registration Procedures. The Company will keep the Underwriter advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its reasonable best efforts to:
(a) Permit the Underwriter and a single firm of counsel, initially
Schulte Roth & Zabel LLP or such other counsel as thereafter designated as
Underwriter's counsel by the Underwriter, to review and comment upon the
Registration Statement and all amendments and supplements thereto at least five
(5) days prior to their filing with the SEC, and not file any document in a form
to which such counsel reasonably objects. The Company shall not submit a request
for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto that relates to the transactions contemplated by
this Agreement without the prior approval of such counsel, which approval shall
not be unreasonably withheld;
(b) The Company shall provide a CUSIP number, a transfer agent and
registrar for all such Registrable
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
Securities;
(c) If requested by the Underwriter, the Company shall immediately
incorporate in a prospectus supplement or post-effective amendment such
information as the Underwriter requests to be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being issued,
the Underwriting Price being paid therefor and with respect to any other terms
of the underwritten offering of the Registrable Securities to be sold in such
offering; make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and in connection
therewith supplement or make amendments to any Registration Statement if
requested by the Underwriter;
(d) Furnish such number of Prospectuses and amendments and supplements
thereto, and other documents incident thereto, as the Underwriter from time to
time may reasonably request; and
(e) Notify the Underwriter and its counsel (as designated in writing by
the Underwriter) promptly, and confirm such notice (a "Notice") in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, and (ii) of any
request by the SEC for amendments or supplements to the Registration Statement
or related Prospectus or for additional information.
6.10 Information by Underwriter. The Underwriter shall promptly furnish to
the Company such information regarding the Underwriter and the distribution
proposed by such Underwriter as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in Sections 6.8 and 6.9. All information
provided to the Company by the Underwriter shall be accurate and complete in all
material respects and the Underwriter shall promptly notify the Company if any
such information becomes incorrect or incomplete.
6.11 No Other Similar Agreements. The Company shall refrain from entering
into any other similar agreements, arrangements or understandings granting to
the Company the right to issue shares of its securities to one or more
underwriters through an equity line or similar transaction; provided, however,
that the Company may enter into private placement transactions or standard
underwriting arrangements that are not "at the market" offerings.
6.12 No Short Selling. The Underwriter and its Affiliates shall not engage
in any short selling activities with respect to the Company's Common Stock.
VII. ASSIGNMENT, ENTIRE AGREEMENT, AMENDMENT, TERMINATION.
7.1 Successors and Assigns. Neither this Agreement nor any rights of the
Underwriter or the Company hereunder may be assigned by either party to any
other Person. Notwithstanding the foregoing, the Underwriter's rights and
obligations under this Agreement may be assigned at any time, in whole, with the
prior written consent of the Company (which consent shall not be unreasonably
withheld) to any Affiliate of the Underwriter (a "Permitted Transferee"). The
rights and obligations of the Underwriter under this Agreement shall inure to
the benefit of, and be enforceable by and against, any such Permitted
Transferee.
7.2 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and supercedes all other prior oral or written agreements between the parties,
their
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
Affiliates, or persons acting on their behalf. No party shall be liable or bound
to any other party in any manner by any warranties, representations or covenants
except as specifically set forth in this Agreement or therein. Except as
expressly provided in this Agreement, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
7.3 Publicity. Each of the Company and the Underwriter agrees that they
will not disclose, and will not include in any public announcement, the name of
the other without its prior consent, unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. Except as may be required by law, each of the Company and the
Underwriter shall consult with the other before issuing any press release or
otherwise making any public statements with respect to this Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation.
7.4 Termination.
(a) The Company may, in its sole discretion, terminate the Agreement
or the Underwriter's obligation to sell, as the Company's Underwriter, on a best
efforts basis, any Common Stock for the remainder of the Commitment Period;
provided, however, such termination shall not effect the continuing obligations
as set forth in this Agreement, including the survival of representations,
warranties, covenants and indemnification rights of the Underwriter and
obligations relating to the Purchase Option.
(b) The Underwriter may (in its sole and absolute discretion)
terminate this Agreement and its obligation to sell, as the Company's
Underwriter, on a best efforts basis, any shares of Common Stock pursuant to a
Capital Demand Notice as a result of (i) a breach by the Company of any material
representation, warranty, covenant or other obligation in connection with this
Agreement, (ii) the failure by the Company to comply with the requirements of
Section 6.2, 6.3, 6.4, 6.5 or 6.6, (iii) the Company, at any date after the date
hereof, effecting any merger or consolidation of the Company with or into, or
transferring all or substantially all of the assets of the Company to, another
entity, or (iv) the Underwriter reasonably determining, at any time that the
adoption of, or change in, or any change in the interpretation or application
of, any law, regulation, rule, guideline or treaty (including, but not limited
to, changes of capital adequacy) makes it illegal or materially impracticable
for the Underwriter to fulfill its commitment pursuant to this Agreement, but in
the case of (i) or (iv) above, the Underwriter may terminate this Agreement only
after a 30-day period beginning when the Underwriter gives the Company notice of
its intentions to terminate this Agreement (but the Underwriter's right to
terminate its obligation to purchase any shares of Common Stock pursuant to a
Capital Demand Notice shall not be subject to any delay or contingency) in
which, in the case of (i), the Company has not cured such breach as provided
above, or, in the case of (iv), the parties negotiate in good faith a reasonable
alternative manner not illegal or impracticable for the Underwriter to fulfill
its commitment pursuant to this Agreement; provided, however, that such
termination shall not affect the continuing obligations of the Company as set
forth in this Agreement, including the survival of representations, warranties,
covenants and indemnification rights of the Underwriter and obligations relating
to the Purchase Option, except that if the Underwriter reasonably determines at
any time that the adoption of, or change in, or any change in the interpretation
or application of, any law, regulation, rule, guideline or treaty (including,
but not limited to, changes of capital adequacy) makes it illegal or materially
impracticable for the Underwriter to fulfill its commitment pursuant to this
Agreement pursuant to clause (iv) above and (A) the Underwriter terminates this
Agreement pursuant to such clause prior to the 180 day anniversary from the date
hereof and (B) no Capital Demand Notice has been delivered by the Company, then
on the date of such termination, the Purchase Option Share Amount shall be
reduced by 1,666 shares multiplied by the number of days determined by
subtracting the number of days that have elapsed from the date hereof from 180.
If the
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
Company shall fail to comply with the requirements under Section 6.2, 6.3, 6.4,
6.5 or 6.6 pursuant to clause (ii) above, the Company shall notify the
Underwriter within two (2) days of the time it becomes aware of its failure to
comply with any such covenants. If the Underwriter elects to terminate this
Agreement pursuant to clause (ii) above, it must first give the Company notice
of such election and then may terminate this Agreement only after a 10-day
period in which the Company has not cured its failure to comply with such
covenants; provided, however, that such termination shall not affect the
continuing obligations of the Company as set forth in this Agreement, including
the survival of representations, warranties, covenants and indemnification
rights of the Underwriter and obligations relating to the Purchase Option. If a
Capital Demand Notice has been delivered by the Company to the Underwriter prior
to the date that the Underwriter terminates this Agreement pursuant to clause
(iii) above, regardless of the number of days that have elapsed from the date
hereof, no reduction to the Purchase Option Share Amount shall take place and
the Purchase Option shall remain in full force and effect. The Underwriter may
also, in its sole and absolute discretion, terminate this Agreement if the
Company shall fail to maintain the listing of the Common Stock on a Principal
Market, or if trading of the Common Stock on a Principal Market shall have been
suspended for a period of ten (10) consecutive Trading Days; provided, however,
that such termination shall not affect the continuing obligations of the Company
set forth in this Agreement, including the survival of representations,
warranties, covenants and indemnification rights of the Underwriter and
obligations relating to the Purchase Option. The Underwriter may waive, in its
sole and absolute discretion, in whole or in part, any of the termination events
contained in this Section 7.4.
VIII. NOTICES; COSTS AND EXPENSES.
8.1 Notices. All notices, demands, requests, consents, approvals or other
communications required or permitted to be given hereunder or which are given
with respect to this Agreement shall be in writing and shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, (iv) transmitted by hand delivery, or (v) transmitted by
facsimile and electronic mail, addressed as set forth below, or to such other
address as such party shall have specified most recently by written notice:
If to the Company, to:
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707
Attention: Andrew Finkle, Esq.
Facsimile No.: (919) 402-1192
Telephone No.: (919) 402-1116
E-mail: finklera @ tripharm.com
With a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
1633 Broadway
47th Floor
New York, New York 10019
Attention: Ellen Corenswet, Esq.
Facsimile No.: (212) 586-7878
E-mail: [email protected]
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<PAGE>
If to the Underwriter, to:
Ramius Securities, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
Attention: Jeffrey M. Solomon
Facsimile No.: (212) 845-7999
With a copy (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Eleazer N. Klein, Esq.
Facsimile No.: (212) 593-5955
E-mail: [email protected]
Any notice (including, without limitation, a Capital Demand Notice,
but excluding any Underwriter Sales Notice, which Underwriter Sales Notice shall
be deemed to be delivered on the Trading Day it is delivered, if delivered via
facsimile prior to 8:00 p.m.) sent by one party to another with confirmation of
acceptance or otherwise received in writing via courier, hand delivery or
first-class mail (return receipt requested) by the Company, or, if received on
any day which is not a Trading Day or after 12:00 noon on a Trading Day, shall
be deemed to be delivered on the immediately succeeding Trading Day. Notice
shall be deemed given on the date of service or transmission if personally
served or transmitted by facsimile or electronic mail during normal business
hours of the recipient; provided, that such transmission by facsimile or
electronic mail shall have been confirmed received. Notice otherwise sent as
provided herein shall be deemed given on the third (3rd) business day following
the date mailed or on the second business day following the date of deposit for
delivery of such notice with a reputable air courier service.
8.2 Costs and Expenses. The Company shall be responsible for the
Underwriter's reasonable (a) legal fees and related expenses incurred in
entering into this Agreement and all legal fees and expenses related to filings
with regulatory authorities, including the SEC and the NASD, up to a maximum
amount of $25,000, and (b) out-of-pocket costs and expenses in connection with
the performance of its obligations hereunder. All such fees, costs and expenses
set forth in the previous sentence, that have been incurred prior to the date
hereof, shall be payable upon execution and delivery of this Agreement. In the
event the Underwriter sells Common Stock during a Selling Period and the
Triggering Amount is under $500,000, the Company shall be responsible for
out-of-pocket costs and expenses incurred by the Underwriter while conducting
due diligence prior to such Selling Period up to a maximum amount of $4,000 per
calendar quarter. Notwithstanding anything contained in this Section 8.2 to the
contrary, the Company shall not be responsible for any costs and expenses
pursuant to this Section 8.2 in any calendar quarter in which there were no
Capital Demand Notices delivered. The Company agrees to pay the Underwriter the
amounts due under this Section 8.2 (including expenses for due diligence) that
have not yet been paid within thirty (30) days following the Underwriter's
request therefor. In the event payment is not received within such thirty (30)
day period, Underwriter shall have the right to deduct any such amounts owed by
the Company to the Underwriter from any amounts owed by the Underwriter to the
Company pursuant hereto.
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
<PAGE>
IX. INDEMNIFICATION AND CONTRIBUTION.
9.1 Indemnification.
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend the Underwriter, the directors,
officers, partners, employees and agents of the Underwriter and each Person, if
any, who controls any Underwriter within the meaning of the Securities Act or
the Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC or NASD, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto ("Indemnified Damages"), to which
any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other Blue Sky Laws of any jurisdiction in
which Registrable Securities are offered, or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement, or (iv) any breach of any representation, warranty,
covenant or agreement contained in this Agreement or any document delivered in
connection with this Agreement (the matters in the foregoing clauses (i) through
(iv) being, collectively, "Violations"). The Company shall reimburse the
Underwriters and each such controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9.1(a): (i) shall not apply
to a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by
any Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company; (ii) with respect
to any preliminary prospectus, shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it; and (iii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Underwriter.
(b) In connection with any Registration Statement or any amendment
or supplement thereto in which the
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PROVISIONAL PATENT APPLICATION HAS BEEN FILED
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Underwriter is participating, the Underwriter agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in Section
9.1(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each Person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "Indemnified Party"), against any Claim or
Indemnified Damages to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim or
Indemnified Damages (i) arise out of or are based upon any Violation, in each
case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter expressly for use in connection with any
Registration Statement covering Registrable Securities or (ii) arise out of or
are based upon the sale of Common Stock by the Underwriter to any third party
pursuant to the Registration Statement despite the fact that the Underwriter has
received a Notice of Blocking Period from the Company and has not received the
Advice from the Company signaling the end of such Blocking Period; and, subject
to Section 9.1(c), such Underwriter will reimburse such Indemnified Parties
promptly as such expenses are incurred and are due and payable for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 9.1(b) and the agreement with respect to contribution
contained in Section 9.2 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Underwriter, which consent shall not be unreasonably withheld; provided,
further, however, that the Underwriter shall be liable under this Section 9.1(b)
for only that amount of a Claim or Indemnified Damages as does not exceed the
Commission to such Underwriter as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Underwriter. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 9.1(b) with respect to
any preliminary prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 9.1 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 9.1,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right (at its expense) to participate
in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that
such indemnifying party shall diligently pursue such defense and that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, as the case may be, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Underwriter. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party
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<PAGE>
shall be liable for any settlement of any action, claim or proceeding effected
without its written consent, provided, however, that the indemnifying party
shall not unreasonably withhold, delay or condition its consent. No indemnifying
party shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 9.1, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
(d) The indemnification required by this Section 9.1 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
(e) The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
9.2 Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 9.1 to the fullest extent permitted by law; provided,
however, that: (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 9.1; (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
X. GOVERNING LAW; MISCELLANEOUS.
10.1 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws.
10.2 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
10.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
10.4 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this
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Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction; provided that such
severability shall be ineffective if it materially changes the economic benefit
of this Agreement to any party.
10.5 Survival. The representations, warranties, covenants and agreements
of the parties hereto shall survive each Closing hereunder. The indemnity and
contribution agreements contained in Sections 9.1 and 9.2 hereof shall survive
and remain operative and in full force and effect regardless of (i) any
termination of this Agreement or of the Commitment Period, (ii) any
investigation made by or on behalf of any indemnified party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Common Stock.
10.6 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person, except as provided in Article IX.
10.7 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
10.8 Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. Unless the
context of this Agreement otherwise clearly requires, references to the plural
include the singular, the singular the plural and the part the whole and "or"
has the inclusive meaning represented by the phrase "and/or". Unless the context
requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (iii) the words "herein", "hereof" and "hereunder", and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, and (iv) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement.
10.9 Equitable Relief. The Company recognizes that in the event that it
fails to perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Underwriter. The Company therefore agrees that the Underwriter shall be entitled
to seek temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
10.10 Consent to Jurisdiction. The parties hereto expressly submit
themselves to the exclusive jurisdiction of the federal courts of New York, New
York, provided, however, that in the event that the federal courts do not have
jurisdiction, then the State courts of New York, New York, in any action or
proceeding relating to this Agreement or any of the other documents contemplated
hereby or any of the transactions contemplated hereby or thereby. Each party
hereby irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of venue of any such action,
suit or proceeding brought in such a court and any claim that any such action,
suit or proceeding brought in such a court has been brought in an inconvenient
forum. The parties hereto hereby irrevocably waive any and all right to a trial
by jury with respect to any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. The parties hereto
irrevocably and unconditionally consent to
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the service of process of any of the aforementioned courts in any such action,
suit or proceeding by the mailing of copies thereof by registered or certified
mail, return receipt requested, postage prepaid, at their respective addresses
set forth or provided for herein, such service to become effective ten (10) days
after such mailing. Nothing herein shall affect the right of any party to serve
process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against the other parties in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date hereof.
RAMIUS SECURITIES, LLC
By: /s/ JEFFREY M. SOLOMON
------------------------------------
Name: Jeffrey M. Solomon
Title: Principal
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ CHRIS A. RALLIS
------------------------------------
Name: Chris A. Rallis
Title: President and
Chief Operating Officer
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