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EXHIBIT 2.1
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
CytRx Corporation
And
Majorlink Holdings Limited
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of April 26, 2000 (the
"Agreement"), between Majorlink Holdings Limited, a British Virgin Islands
corporation (the "Investor") and CytRx Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to $5,000,000
(the "Aggregate Purchase Price") of the Common Stock (as defined below); and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Bid Price" shall mean the closing bid price (as reported by
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Bloomberg L.P.) of the Common Stock on the Principal Market on the date in
question.
Section 1.2 "Capital Shares" shall mean the Common Stock and any shares of
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any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
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rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
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sale of the Common Stock pursuant to Section 2.1.
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Section 1.5 "Closing Date" shall mean, with respect to a Closing, the
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fifth Trading Day following the end of the Valuation Period related to such
Closing, provided all conditions to such Closing have been satisfied on or
before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the dollar amount necessary
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which the Investor has agreed to provide to the Company in order to purchase up
to $5,000,000 of Put Shares pursuant to the terms and conditions of this
Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on the
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Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased $5,000,000 of Put Shares pursuant to this
Agreement, (y) the date this Agreement is terminated pursuant to Section 2.4, or
(z) the date occurring thirty (30) months from the date of commencement of the
Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, par
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value $.001 per share.
Section 1.9 "Condition Satisfaction Date" shall have the meaning set forth
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in Section 7.2.
Section 1.10 "Effective Date" shall mean the date on which the SEC first
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declares effective a Registration Statement registering the sale by the Company
and resale by the Investor of the Registrable Securities as set forth in Section
7.2(f).
Section 1.11 "Escrow Agent" shall mean the escrow agent designated in the
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Escrow Agreement.
Section 1.12 "Escrow Agreement" shall mean the escrow agreement in the
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form attached hereto as Exhibit A.
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
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1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "Investment Amount" shall mean the dollar amount to be
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invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.2
hereof.
Section 1.15 "Market Price" on any given date shall mean, the average of
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the nine (9) lowest VWAP of the Common Stock on any Trading Day during the
Valuation Period relating to such date.
Section 1.16 "Material Adverse Effect" shall mean any effect on the
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business, Bid Price, operations, properties, prospects, or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition,
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circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, the Registration Rights Agreement or the Escrow Agreement in any
material respect.
Section 1.17 "Maximum Put Amount" shall mean, as of any Put Date, 4.125%
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of the weighted average price for the three (3) month period prior to the Put
Date multiplied by the total trading volume for the three (3) month period prior
to the Put Date.
Section 1.18 "NASD" shall mean the National Association of Securities
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Dealers, Inc.
Section 1.19 "Outstanding" when used with reference to shares of Common
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Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
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then directly or indirectly owned or held by or for the account of the Company.
Section 1.20 "Person" shall mean an individual, a corporation, a
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partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.21 "Principal Market" shall mean the NASDAQ National Market, the
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NASDAQ SmallCap Market, the American Stock Exchange, the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock. Principal Market shall not include the OTC Bulletin Board
without the express written consent of the Investor.
Section 1.22 "Purchase Price" shall mean with respect to Put Shares,
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ninety percent (90%) (the "Purchase Price Percentage") of the Market Price
during the Valuation Period related to a Put (or such other date on which the
Purchase Price is calculated in accordance with the terms and conditions of this
Agreement).
Section 1.23 "Put" shall mean each occasion the Company elects to exercise
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its right to tender a Put Notice requiring the Investor to purchase shares of
the Company's Common Stock, subject to the terms of this Agreement.
Section 1.24 "Put Date" shall mean the Trading Day during the Commitment
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Period that a Put Notice to sell Common Stock to the Investor is deemed
delivered pursuant to Section 2.2(b) hereof.
Section 1.25 "Put Notice" shall mean a written notice to the Investor
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setting forth the Investment Amount that the Company intends to sell to the
Investor in the form attached hereto as Exhibit B.
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Section 1.26 "Put Shares" shall mean all shares of Common Stock or other
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securities issued or issuable pursuant to a Put that has occurred or may occur
in accordance with the terms and conditions of this Agreement.
Section 1.27 "Registrable Securities" shall mean the Put Shares and the
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Warrant Shares until (i) all Put Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Put Shares and Warrant Shares
have been sold under circumstances under which all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Put Shares and Warrant Shares have been
otherwise transferred to persons who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend
or (iv) such time as, in the opinion of counsel to the Company, all Put Shares
and Warrant Shares may be sold without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
Section 1.28 "Registration Rights Agreement" shall mean the agreement
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regarding the filing of the Registration Statement for the sale and resale of
the Registrable Securities annexed hereto as Exhibit C.
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Section 1.29 "Registration Statement" shall mean a registration statement
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on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC,
such as Form S-1 or SB-2, for which the Company then qualifies and which counsel
for the Company shall deem appropriate, and which form shall be available for
the resale by the Investor of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement, the Registration
Rights Agreement, and in accordance with the intended method of distribution of
such securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
Section 1.30 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.31 "Securities Act" shall mean the Securities Act of 1933, as
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amended.
Section 1.32 "SEC Documents" shall mean the Company's latest Form 10-K or
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10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.33 "Trading Cushion" shall mean the mandatory sixteen (16)
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Trading Days between Put Dates, unless waived by the Investor.
Section 1.34 "Trading Day" shall mean any day during which the Principal
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Market shall be open for business.
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Section 1.35 "Valuation Event" shall mean an event in which the Company at
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any time prior to the end of the Commitment Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or makes any
other distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital Shares"),
otherwise than as provided in the foregoing Subsections (a) and (b) above or (d)
and (e) below, at a price per share less, or for other consideration lower, than
the Bid Price in effect immediately prior to such issuance, or without
consideration (other than pursuant to this Agreement);
(d) issues any warrants, options or other rights to
subscribe for or purchase any Additional Capital Shares and the price per share
for which Additional Capital Shares may at any time thereafter be issuable
pursuant to such warrants, options or other rights shall be less than the Bid
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable
for Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing
Subsections (a) through (f) hereof, inclusive, which in the opinion of the
Company's Board of Directors, determined in good faith, would have a Material
Adverse Effect upon the rights of the Investor at the time of a Put.
Section 1.36 "Valuation Period" shall mean the period of fifteen (15)
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Trading Days beginning nine (9) Trading Days before the Trading Day on which a
Put Notice is deemed to be delivered and ending five (5) Trading Days after such
date; provided, however, that if a Valuation Event occurs during a Valuation
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Period, a new Valuation Period shall begin on the Trading Day immediately after
the occurrence of such Valuation Event and end on the fifteenth (15 1h ) Trading
Day thereafter.
Section 1.37 "VWAP" shall mean the daily volume weighted average price of
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the Company's Common Stock on the Nasdaq National Market or on any Principal
Market as reported by Bloomberg Financial using the AQR function.
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Section 1.38 "Warrants" shall mean the 200,000 Common Stock Purchase
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Warrants in the form of Exhibit D hereto to be delivered to the Investor at the
initial Closing. "Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of the Warrants.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments.
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(a) Puts. Upon the terms and conditions set forth herein
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(including, without limitation, the provisions of Article VII hereof), on any
Put Date the Company may make a Put by the delivery of a Put Notice. The number
of Put Shares that the Investor shall receive pursuant to such Put shall be
determined by dividing the Investment Amount specified in the Put Notice by the
Purchase Price for such Valuation Period.
(b) Maximum Aggregate Amount of Puts. Anything in this
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Agreement to the contrary notwithstanding, (i) unless the Company obtains
shareholder approval of this Agreement pursuant to the applicable corporate
governance rules of the Nasdaq Stock Market, the Company may not make a Put (or
issue any additional shares under Section 2.5) which results in the issuance of
more than 19.9% of the number of shares of Common Stock issued and outstanding
on the Closing Date hereof in the aggregate pursuant to all Puts made under the
terms of this Agreement and the exercise of the Warrants and (ii) the Company
may not make a Put to the extent that, after such purchase by the Investor, the
sum of the number of shares of Common Stock and Warrants beneficially owned by
the Investor and its affiliates would result in beneficial ownership by the
Investor and its affiliates of more than 9.9% of the then outstanding shares of
Common Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
and Exchange Act of 1934, as amended.
Section 2.2 Mechanics.
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(a) Put Notice. At any time during the Commitment Period, the
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Company may deliver a Put Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, that the Investment Amount for each Put
as designated by the Company in the applicable Put Notice shall be neither less
than $ 100,000 nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
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delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 12:00 noon Eastern Time, or (ii)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered on a day that
is not a Trading Day.
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Section 2.3 Closings. On or before each Closing Date for a Put the Investor
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shall deliver the Investment Amount specified in the Put Notice by wire transfer
of immediately available funds to the Escrow Agent. In addition, on or prior to
the Closing Date, each of the Company and the Investor shall deliver to the
Escrow Agent all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein. Upon receipt of
notice from the Escrow Agent that the Escrow Agent has possession of the
Investment Amount, the Company shall, if possible, deliver the Put Shares to the
Investor's account through the Depository Trust Company DWAC system, per written
account instructions delivered by the Investor to the Company, and if the
Company is not eligible to participate in the DWAC system, to deliver to the
Escrow Agent one or more certificates, as requested by the Investor,
representing the Put Shares to be purchased by the Investor pursuant to
Section 2.1 herein, registered in the name of the Investor or, at the Investor's
option, registered in the name of such account or accounts as may be designated
by the Investor. Payment of funds to the Company and delivery of the
certificates to the Investor (unless delivered by DWAC) shall occur out of
escrow in accordance with the Escrow Agreement, provided, however, that to the
extent the Company has not paid the fees, expenses, and disbursements of the
Investor's counsel in accordance with Section 13.7, the amount of such fees,
expenses, and disbursements shall be paid in immediately available funds, at the
direction of the Investor, to Investor's counsel with no reduction in the number
of Put Shares issuable to the Investor on such Closing Date.
Section 2.4 Termination of Investment Obligation.
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(a) The obligation of the Investor to purchase shares of
Common Stock shall terminate permanently (including with respect to a Closing
Date that has not yet occur-red) in the event that (i) there shall occur any
stop order or suspension of the effectiveness of the Registration Statement for
an aggregate of thirty (30) Trading Days during the Commitment Period, for any
reason other than deferrals or suspensions in accordance with the Registration
Rights Agreement as a result of corporate developments subsequent to the
Effective Date that would require such Registration Statement to be amended to
reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act or (ii) the Company shall at any time fail to
comply in any material respect with the requirements of Section 6.2, 6.3 or 6.5
or (iii) the Registration Statement shall not have become effective by August
31, 2000.
(b) The obligation of the Company to sell Put Shares to the
Investor shall terminate if the Investor fails to honor any Put Notice within
two (2) Trading Days of the Closing Date scheduled for such Put, and the Company
notifies Investor of such termination. Upon such termination, the Company may
immediately withdraw the Registration Statement, and the Purchaser shall return
to the Company for cancellation a pro-rata portion of the Warrants, based upon
that portion of the $5,000,000 Commitment Amount that has not been previously
honored. After the Purchaser has accepted and paid for Puts totaling up to
$300,000 in the aggregate, such termination shall be the Company's sole remedy
for the Investor's failure to honor a Put.
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Section 2.5 Additional Shares. In the event that (a) within five (5) Trading
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Days of any Closing Date, the Company gives notice to the Investor of an
impending "blackout period" in accordance with Section 3(f) of the Registration
Rights Agreement and (b) the Bid Price on the Trading Day immediately preceding
such "blackout period" (the "Old Bid Price") is greater than the Bid Price on
the first Trading Day following such "blackout period" (the "New Bid Price") the
Company shall issue to the Investor a number of additional shares (the "Blackout
Shares") equal to the difference between (y) the product of the number of
Registrable Securities purchased by the Investor on such most recent Closing
Date and still held by the Investor during such "blackout period" that are not
otherwise freely tradable during such "blackout period" and the Old Bid Price,
divided by the New Bid Price and (z) the number of Registrable Securities
purchased by the Investor on such most recent Closing Date and still held by the
Investor during such "blackout period" that are not otherwise freely tradable
during such "blackout period". If any such issuance would result in the
issuance of a number of shares which exceeds the number set forth in Section
2.1(b), then in lieu of such issuance, the Company shall pay Investor the
closing ask price of the Blackout Shares on the first Trading Day following the
end of the blackout period in cash within five Trading Days.
Section 2.6 Liquidated Damages. The parties hereto acknowledge and agree
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that the obligation to issue Registrable Securities under Section 2.5 above
shall constitute liquidated damages and not penalties. The parties further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Investor in
connection with the failure by the Company to timely cause the registration of
the Registrable Securities or in connection with a "blackout period" under the
Registration Rights Agreement, and (c) the parties are sophisticated business
parties and have been represented by legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
Representations and Warranties of Investor
Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its
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own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
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investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it
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has the capacity to protect its own interests in connection with this
transaction and is capable of evaluating the merits and risks of an investment
in Common Stock. The Investor acknowledges that an investment in the Common
Stock is speculative and involves a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and validly
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executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4 Not an Affiliate. Investor is not an officer, director or
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"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a corporation duly
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organized, validly existing, and in good standing under the laws of the British
Virgin Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this
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Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) 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 Investor to any third party; or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received and
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reviewed all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
Investor. The Company is subject to the periodic reporting requirements of the
Exchange Act, and Investor has reviewed copies of any such reports that have
been requested by it.
Section 3.8 Manner of Sale. At no time was Investor presented with or
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solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial
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capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
Section 3.10 Underwriter Liability. Investor understands' that it is the
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position of the SEC that the Investor is an underwriter within the meaning of
Section 2(11) of the Securities Act
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and that the Investor will be identified as an underwriter of the Put Shares in
the Registration Statement.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1 Organization of the Company. The Company is a corporation
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duly incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
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and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Escrow Agreement and the Warrants have been duly executed and
delivered by the Company and at the initial Closing shall constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application. The Company has duly and validly authorized and
reserved for issuance shares of Common Stock sufficient in number for the
issuance of the Put Shares and for the exercise of the Warrants
Section 4.3 Capitalization. As of April 26, 2000, the authorized capital
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stock of the Company consists of 18,750,000 shares of Common Stock, $0.001 par
value per share, of which 9,580,050 shares are issued and outstanding, 1,000
shares of preferred stock, $0.01 par value per share, of which none are issued
or outstanding. Except for (i) outstanding options and warrants as set forth in
the SEC Documents and (ii) as set forth in the Disclosure Schedule, there are no
outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its
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equity or debt securities. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
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pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. As of the date hereof, -the Principal Market is the Nasdaq
National Market and the Company has not received any notice regarding, and to
its knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5 SEC Documents. The Company has made available to the Investor
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true and complete copies of the SEC Documents. The Company has not provided to
the Investor any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by the
Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents complied 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 at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles 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 exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6 Valid Issuances. When issued and paid for in accordance with
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the terms hereof or of the Warrants, the Put Shares and the Warrant Shares will
be duly and validly issued, fully paid, and non-assessable. Neither the sales
of the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon
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the Put Shares, the Warrants or the Warrant Shares or, except as contemplated
herein, any of the assets of the Company, or (ii) entitle the holders of
Outstanding Capital Shares to preemptive or other rights to subscribe for or
acquire the Capital Shares or other securities of the Company. The Put Shares,
the Warrants and the Warrant Shares shall not subject the Investor to personal
liability to the Company or its creditors by reason of the possession thereof
Section 4.7 No Conflicts. The execution, delivery and performance of this
------------
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put
Shares, the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the initial Closing, any registration statement that may
be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.8 No Material Adverse Change. Since December 31, 2000 no
--------------------------
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since December 31,
--------------------------------------
2000, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
12
<PAGE>
Section 4.10 Litigation and Other Proceedings. Except as disclosed in the SEC
--------------------------------
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.11 No Misleading or Untrue Communication. The Company and, to
-------------------------------------
the knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Put Shares or the Warrants in connection
with the transaction contemplated by this Agreement, have not made, at any time,
any oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.12 Material Non-Public Information. The Company has not
-------------------------------
disclosed to the Investor any material non-public information that (i) if
disclosed publicly, would reasonably be expected to have a material effect on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has Dot been so disclosed.
Section 4.13 Insurance. The Company and each subsidiary maintains
---------
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.14 Tax Matters.
------------
The Company and each subsidiary has filed all Tax Returns which it is
required to file under applicable laws; all such Tax Returns are true and
accurate in all material respects and has been prepared in compliance with all
applicable laws in all material respects; the Company has paid all Taxes due and
owing by it or any subsidiary (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1998, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
To the knowledge of the Company, no claim has been made by a taxing authority in
a jurisdiction where the Company does not file tax returns that the Company or
any subsidiary is or may be
13
<PAGE>
subject to taxation by that jurisdiction. There are no foreign, federal, state
or local tax audits or administrative or judicial proceedings pending or being
conducted with respect to the Company or any subsidiary; no information related
to Tax matters has been requested by any foreign, federal, state or local taxing
authority; and, except as disclosed above, no written notice indicating an
intent to open an audit or other review has been received by the Company or any
subsidiary from any foreign, federal, state or local taxing authority. There are
no material unresolved questions or claims concerning the Company's Tax
liability. The Company (A) has not executed or entered into a closing agreement
pursuant to (S) 7121 of the Internal Revenue Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; or (B) has not
agreed to or is required to make any adjustments pursuant to (S) 481 (a) of the
Internal Revenue Code or any similar provision of slate, local or foreign law by
reason of a change in accounting method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has proposed any such adjustment
or change in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not been a
United States real property holding corporation within the meaning of (S)
897(c)(2) of the Internal Revenue Code during the applicable period specified in
(S) 897(c)(1)(A)(ii) of the Internal Revenue Code.
The Company has not made an election under (S) 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company (A) under Treas. Reg. (S) 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under (S) 280G of the Internal
Revenue Code.
For purposes of this Section 4.14:
"IRS" means the United States Internal Revenue Service.
---
"Tax" or "Taxes" means federal, state, county, local, foreign, or
--- -----
other income, gross receipts, ad valorem, franchise, profits, sales or
use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
----------
respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.15 Property. Neither the Company nor any of its subsidiaries
--------
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal
14
<PAGE>
property owned by it, free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company; and to the Company's knowledge any real property and buildings
held under lease by the Company as tenant are held by it under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and intended to be made of such property and
buildings by the Company.
Section 4.16 Intellectual Property. Each of the Company and its
---------------------
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no
adverse claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.17 Internal Controls and Procedures. The Company maintains
--------------------------------
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company or any subsidiary is a
party or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated assets
is compared with existing assets at regular intervals; (iii) access to the
Company's consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.18 Payments and Contributions. Neither the Company, any
--------------------------
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.19 No Misrepresentation. The representations and warranties of
--------------------
the Company contained in this Agreement, any schedule, annex or exhibit hereto
and any agreement, instrument or certificate furnished by the Company to the
Investor pursuant to this Agreement, do not contain any 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 light of the circumstances under
which they were made, not misleading.
15
<PAGE>
ARTICLE V
Covenants of the Investor
Investor covenants with the Company that:
Section 5.1 Compliance with Law. The Investor's trading activities with
-------------------
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed. Without limiting the generality of the foregoing, the Investor agrees
that it will, whenever required by federal securities laws, deliver the
prospectus included in the Registration Statement to any purchaser of Put Shares
from the Investor.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the Registration
-------------------
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company hereby agrees to
-----------------------
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Put Shares and the Warrant Shares. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Principal Market, it will include in such application the Put Shares and the
Warrant Shares and will take such other action as is necessary or desirable in
the opinion of the investor to cause the Common Stock to be listed on such other
Principal Market as promptly as possible. The Company will take all action to
continue the listing and trading of its Common Stock on the Principal Market (or
another Principal Market, including, without limitation, maintaining sufficient
net tangible assets) and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market and shall provide Investor with copies of any correspondence to
or from such Principal Market which questions or threatens delisting of the
Common Stock, within one Trading Day of the Company's receipt thereof.
Section 6.3 Exchange Act Registration. The Company will cause its Common
-------------------------
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will use its best efforts to 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 Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Act.
Section 6.4 Legends. The certificates evidencing the Common Stock to be
-------
sold to the Investor shall be free of restrictive legends.
16
<PAGE>
Section 6.5 Corporate Existence. The Company will take all steps
-------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.6 Additional SEC Documents. During the Commitment Period, the
------------------------
Company will deliver to the Investor, as and when the originals thereof are
submitted to the SEC for filing, copies of all SEC Documents so furnished or
submitted to the SEC, or else notify the Investor that such documents are
available on the EDGAR system.
Section 6.7 Notice of Certain Events Affecting Registration; Suspension of
--------------------------------------------------------------
Right to Make a Put. The Company will immediately notify the Investor upon the
-------------------
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities; (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any Put
Notice during the continuation of any of the foregoing events.
Section 6.8 Expectations Regarding Put Notices. Within ten (10) days
----------------------------------
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices. The failure by the Company
to comply with this provision can be cured by the Company's notifying the
Investor, in writing, at any time as to its reasonable expectations with respect
to the current calendar quarter.
Section 6.9 Consolidation; Merger. The Company shall not, at any time
---------------------
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or
17
<PAGE>
substantially all of the assets of the Company to, another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument or by operation of law the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
ARTICLE VII
Conditions to Delivery of Puts
and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue
--------------------------------------------------------------
and Sell Common Stock. The obligation hereunder of the Company to issue and
---------------------
sell the Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties.
--------------------------------------------------------
The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time, except as disclosed by the
Purchaser to the Company.
(b) Performance by the Investor. The Investor shall have
--------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor at or prior to such Closing, and Investor shall
provide a certificate to the Company, substantially in the form of that
delivered by the Investor.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a
-------------------------------------------------------------
Put Notice and the Obligation of the Investor to Purchase Put Shares. The right
--------------------------------------------------------------------
of the Company to deliver a Put Notice and the obligation of Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on both (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Closing Certificate. All representations and warranties of
-------------------
the Company contained herein shall remain true and correct as of the Closing
Date as though made as of such date, except as set forth in such certificate and
the Company shall have delivered into escrow an Officer's Certificate signed by
its Chief Executive Officer certifying that all of the Company's representations
and warranties herein remain true and correct as of the Closing Date, except as
set forth in such certificate and that the Company has performed all covenants
and satisfied all conditions to be performed or satisfied by the Company prior
to such Closing;
(b) Blue Sky. The Company shall have obtained all permits and
--------
qualifications required by any state for the offer and sale of the Common Stock
to the Investor and by the Investor as set forth in the Registration Rights
Agreement or shall have the availability of exemptions therefrom;
18
<PAGE>
(c) Delivery of Put Shares. Delivery into escrow or to DTC of
----------------------
the Put Shares;
(d) Opinion of Counsel. Receipt by the Investor of an opinion
------------------
of counsel to the Company, in the form of Exhibit E hereto; and
---------
(e) Transfer Agent. Delivery to the Company's transfer agent
--------------
of instructions to such transfer agent in form and substance reasonably
satisfactory to the Investor.
(f) Registration of the Common Stock with the SEC. The
---------------------------------------------
Registration Statement shall have previously become effective and shall remain
effective and available for making resales of the Put Shares and Warrant Shares
by the Investor on each Condition Satisfaction Date and (i) neither the Company
nor the Investor 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 (unless the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
the Registration Statement or related prospectus shall exist.
(g) Authority. The Company will satisfy all laws and
---------
regulations pertaining to the sale and issuance of the Put Shares.
(h) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, the Registration Rights
Agreement and the Escrow Agreement to be performed, satisfied or complied with
by the Company at or prior to each Condition Satisfaction Date.
(i) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.
(j) Adverse Changes. Since the date of filing of the Company's
---------------
most recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(k) No Suspension of Trading In or Delisting of Common Stock.
--------------------------------------------------------
The trading of the Common Stock (including, without limitation, the Put Shares)
is not suspended by the SEC or a Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from
19
<PAGE>
a Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market. The Company shall not have received any
notice threatening to delist the Common Stock from the Principal Market.
(1) No Knowledge. The Company has no knowledge of any event
------------
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is reasonably likely to
occur within the thirty (30) Trading Days following the Trading Day on which
such Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed
---------------
since the next preceding Put Date.
(n) Other. On each Condition Satisfaction Date, the Investor
-----
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2.
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1 Due Diligence Review. The Company shall make available for
--------------------
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD, AMEX or other filing, all SEC
Documents and other filings with the SEC, and all other publicly available
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably requested
by the Investor or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor 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.
Section 8.2 Non-Disclosure of Non-Public Information.
-----------------------------------------
(a) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse
20
<PAGE>
to accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose
material nonpublic information to the Purchaser or its advisors or
representatives, and - the Company represents that it does not disseminate
material non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts,
provided, however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, promptly notify the advisors and.
representatives of the Purchaser and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting material non-
public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated -therein in order to make the statements,
therein in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Purchaser (without the written consent of the
Purchaser prior to disclosure of such information as set forth in Section
8.2(a)) may not obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE IX
Transfer Agent Instructions
Section 9.1 Transfer Agent Instructions. Upon each Closing, the Company
---------------------------
will issue to the transfer agent for its Common Stock (and to any substitute or
replacement transfer agent for its Common Stock upon the Company's appointment
of any such substitute or replacement transfer agent) instructions to deliver
the Put Shares without restrictive legends to the Escrow Agent.
Section 9.2 No Legend or Stock Transfer Restrictions. No legend shall be
----------------------------------------
placed on the share certificates representing the Put Shares and no instructions
or "stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto.
Section 9.3 Investor's Compliance. Nothing in this Article shall affect
---------------------
in any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Put Shares.
21
<PAGE>
ARTICLE X
Choice of Law
Section 10.1 Governing Law/Arbitration. This Agreement shall be governed by
-------------------------
and construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
or any Exhibit attached hereto shall be submitted to arbitration under the
American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to
be delivered to all parties involved in the dispute. The Board of Arbitration
shall be authorized and is directed to enter a default judgment against any
party refusing to participate in the arbitration proceeding within thirty days
of any deadline for such participation. Any decision made by the Board of
Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The prevailing party shall
be awarded its costs, including attorneys' fees, from the non-prevailing party
as part of the arbitration award. Any party shall have the right to seek
injunctive relief from any court of competent jurisdiction in any case where
such relief is available. The prevailing party in such injunctive action shall
be awarded its costs, including attorney's fees, from the non-prevailing party.
ARTICLE XI
Assignment
Section 11.1 Assignment. Neither this Agreement nor any rights of the
----------
Investor or the Company hereunder may be assigned by either party to any other
person except by operation of law. Notwithstanding the foregoing, upon the
prior written consent of the Company, which consent shall not unreasonably be
withheld or delayed in the case of an assignment to an affiliate of the
Investor, the Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any other person or entity (including any affiliate of
the Investor) who agrees to make the representations and warranties contained in
Article III and who agrees to be bound hereby.
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ARTICLE XII
Notices
Section 12.1 Notices. All notices, demands, requests, consents, approvals, and
-------
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, 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, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to CytRx Corporation: 154 Technology Parkway
Technology Park/Atlanta
Norcross, Georgia 30092
Attention: Jack J. Luchese
Telephone: (770) 368-9500
Facsimile: (770)
if to the Investor: c/o Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz, Liechtenstein
Attention: Hans Gassner
Telephone: 011-075-236-0404
Facsimile: 011-075-236-0405
with a copy to: Robert F. Charron, Esq.
(shall not constitute notice) Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York
Telephone: (212) 351-4500
Facsimile: (212) 661-0989
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Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XIII
Miscellaneous
Section 13.1 Counterparts/Facsimile/Amendments. This Agreement may be
---------------------------------
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 Entire Agreement. This Agreement, the Exhibits hereto, which
----------------
include, but are not limited to the Escrow Agreement, the Registration Rights
Agreement and the Warrants, set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3 Survival; Severability. The representations, warranties,
----------------------
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 Title and Subtitles. The titles and subtitles used in this
-------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 Reporting Entity for the Common Stock. The reporting entity
-------------------------------------
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6 Replacement of Certificates. Upon (i) receipt of evidence
---------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
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<PAGE>
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 13.7 Fees and Expenses. Each of the Company and the Investors
-----------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Investors' counsel in the amount of 10,000 plus $750 per
Closing of a Put.
Section 13.8 Brokerage. Each of the parties hereto represents that it has
---------
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party Ladenburg
Thalmann & Co. Inc. whose fee shall be paid by the Company. The Company on the
one hand, and the Investor, on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any person
claiming brokerage commissions or finder's fees on account of services purported
to have been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.
Section 13.9 Publicity. The Company agrees that it will not issue any press
---------
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent.
Section 13.10 Effectiveness of Agreement. This Agreement shall become
--------------------------
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
CYTRX CORPORATION
By:____________________________________
Jack J. Luchese, President and CEO
Majorlink Holdings Limited
By:____________________________________
Hans Gassner, Authorized Signatory
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
CYTRX CORPORATION
By:___________________________________
Jack J. Luchese, President and CEO
Majorlink Holdings Limited
By:___________________________________
Hans Gassner, Authorized Signatory
27
<PAGE>
CYTRX CORPORATION
DISCLOSURE SCHEDULE
Sec. 4.3 Capitalization
------------------------
Options & Warrants Outstanding. The Company has issued to its President & CEO
warrants for the purchase of 1,882,427 shares of its Common Stock exercisable at
$1.00 as to 1,382,427 shares and at $2.125 as to 500,000 shares. As of April
14,2000, there are 828,683 shares issuable pursuant to outstanding options
granted under the CytRx Corporation 1986, 1994 and 1995 Stock Option Plans, and
the CytRx 1999 Long-Term Incentive Plan. Following is a breakdown of these
options by exercise price:
Exercise Price No. Option
$1.00 669,933
2.125 132,500
2.625 12,500
7.7.5 12,50
827,433
There are 37,500 outstanding warrants held by a consultant exercisable at S2375
per share.
Registration and Anti-Dilution Rights. The warrants held by the Company's
President & CEO contain demand registration rights and certain anti-dilution
provisions. The Company has previously registered 1,382,427 of the 1,882,427
shares underlying such warrants.
Another former consultant to the Company holds 100,000 shares of unregistered
Common Stock which have piggyback and demand registration rights. The Company
currently is in dispute with this party over return of the 100,000 shares and
will not honor any request for registration.
Sec. 4.4 Common Stock
----------------------
On March 14, 2000, the Company received it letter from The Nasdaq-Amex Market
Group (the "Letter") notifying the Company that it no longer meets the net
tangible asset requirement for continued listing on the Nasdaq National Market,
based on Nasdaq's review of the Company's Press release dated March 10, 2000.
On March 28, 2000, the Company submitted its plan for achieving compliance with
the Nasdaq National Market listing requirements, and on April 17, 2000 the
Company received a response from Nasdaq indicating their acceptance of the
Company's plan.
4.8 No Material Adverse Change
-------------------------------
4.9 No Undisclosed Events or Circumstances
---------------------------------------------
Reference is hereby made to the Company's press releases dated October 12, 1999,
October 18, 1999, October 27, 1999, December 7, 1999, December 211, 1999, March
10, 2000, March 13, 2000 and March 14, 2000, copies of which have previously
been provided to the Investor.
28
