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EXHIBIT 1.1
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF JULY 21, 2000
BY AND BETWEEN
AXYS PHARMACEUTICALS, INC.
AND
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
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TABLE OF CONTENTS
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ARTICLE I Definitions............................................................... 1
Section 1.1 Definitions............................................................... 1
ARTICLE II Purchase and Sale of Common Stock......................................... 3
Section 2.1 Purchase and Sale of Stock................................................ 3
Section 2.2 The Shares................................................................ 3
Section 2.3 Purchase Price and Closing................................................ 3
ARTICLE III Representations and Warranties............................................ 4
Section 3.1 Representation and Warranties of the Company.............................. 4
Section 3.2 Representations and Warranties of the Purchaser........................... 11
ARTICLE IV Covenants................................................................. 12
Section 4.1 Securities................................................................ 12
Section 4.2 Registration and Listing.................................................. 12
Section 4.3 Registration Statement.................................................... 12
Section 4.4 Compliance with Laws...................................................... 12
Section 4.5 Keeping of Records and Books of Account................................... 13
Section 4.6 Reporting Requirements.................................................... 13
Section 4.7 Non-public Information.................................................... 13
Section 4.8 Effective Registration Statement.......................................... 13
Section 4.9 No Stop Orders............................................................ 13
Section 4.10 Amendments to the Registration Statement.................................. 14
Section 4.11 Prospectus Delivery....................................................... 14
Section 4.12 Notice.................................................................... 14
ARTICLE V Conditions to Closing, Draw Downs and Call Options........................ 15
Section 5.1 Conditions Precedent to the Obligation of the Company to
Close this Agreement, Issue a Draw Down Notice or Grant a
Call Option and Sell the Shares........................................... 15
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close..................................................................... 16
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Call Option Grant and Purchase the
Shares.................................................................... 16
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TABLE OF CONTENTS
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ARTICLE VI Draw Down Terms; Call Option.............................................. 17
Section 6.1 Draw Down Terms........................................................... 17
Section 6.2 Purchaser's Call Option................................................... 20
ARTICLE VII Termination............................................................... 20
Section 7.1 Termination by Mutual Consent............................................. 20
Section 7.2 Other Termination......................................................... 20
Section 7.3 Effect of Termination..................................................... 21
ARTICLE VIII Indemnification........................................................... 21
Section 8.1 General Indemnity......................................................... 21
Section 8.2 Indemnification Procedures................................................ 22
ARTICLE IX Miscellaneous............................................................. 23
Section 9.1 Fees and Expenses......................................................... 23
Section 9.2 Specific Enforcement, Consent to Jurisdiction............................. 23
Section 9.3 Entire Agreement; Amendment............................................... 24
Section 9.4 Notices................................................................... 24
Section 9.5 Waivers................................................................... 25
Section 9.6 Headings.................................................................. 25
Section 9.7 Successors and Assigns.................................................... 25
Section 9.8 Governing Law............................................................. 25
Section 9.9 Survival.................................................................. 25
Section 9.10 Counterparts.............................................................. 26
Section 9.11 Publicity................................................................. 26
Section 9.12 Severability.............................................................. 26
Section 9.13 Further Assurances........................................................ 26
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
July 21, 2000 by and between Axys Pharmaceuticals, Inc., a Delaware corporation
(the "Company") and Acqua Wellington North American Equities Fund, Ltd., a
company organized under the laws of the Commonwealth of The Bahamas (the
"Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
(a) "Call Option" shall have the meaning assigned to such term in
Section 6.2(a) hereof.
(b) "Call Option Notice" shall have the meaning assigned to such
term in Section 6.2(a) hereof.
(c) "Commission" means the Securities and Exchange Commission.
(d) "Commission Documents" shall have the meaning assigned to
such term in Section 3.1(f) hereof.
(e) "Commission Filings" means the Company's Form 10-K for the
fiscal year ended December 31, 1999, Form 10-Q for the period ended March 31,
1999, Forms 8-K filed on February 22, 2000 and May 15, 2000, Registration
Statement on Form S-3, No. 333-35826, and all other filings made by the Company
after the date hereof pursuant to the Securities Exchange Act of 1934.
(f) "Common Stock" shall have the meaning assigned to such term
in Section 2.1 hereof.
(g) "Draw Down" shall have the meaning assigned to such term in
Section 6.1(a) hereof.
(h) "Draw Down Amount" means the actual amount of a Draw Down up
to $40,000,000, or such other amount mutually agreed upon by the Purchaser and
the Company, which shall be in addition to the Initial Purchase.
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(i) "Draw Down Discount Percentage" means (i) 94% if the
Threshold Price is equal to or greater than $6.00 and less than $8.00; (ii)
94.5% if the Threshold Price is equal to or greater than $8.00 and less than
$11.00; (iii) 95% if the Threshold Price is equal to or greater than $11.00 and
less than $14.00; or (iv) 95.5% if the Threshold Price is equal to or greater
than $14.00.
(j) "Draw Down Exercise Date" shall have the meaning assigned to
such term in Section 5.1 hereof.
(k) "Draw Down Notice" shall have the meaning assigned to such
term in Section 6.1(i) hereof.
(l) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive trading days following a Draw Down Notice, or such other period
mutually agreed upon by the Purchaser and the Company.
(m) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby is
declared effective.
(n) "Investment Period " shall have the meaning assigned to such
term in Section 7.1 hereof.
(o) "Material Adverse Effect" shall mean any effect on the
business, results of operations, prospects, assets or financial condition of the
Company that is material and adverse to the Company and its subsidiaries, taken
as a whole and/or any condition, circumstance, or situation that would prohibit
the Company from entering into and performing any of its obligations under this
Agreement in any material respect.
(p) "Material Change in Ownership" shall mean that, as of any
particular measurement date, the officers and directors of the Company shall
beneficially own in the aggregate less than 1% of the outstanding Common Stock
of the Company, except that for purposes of making any such calculation, Common
Stock issued to the Purchaser pursuant to this Agreement shall not be included
in such calculation.
(q) "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement, or, if the prospectus
included in the Registration Statement omits information in reliance on Rule
430A under the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "Securities Act"), and such
information is included in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Securities Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b).
(r) "Registration Statement" shall mean the registration
statement on Form S-3, Commission File Number 333-35826 under the Securities
Act, filed with the Securities and Exchange Commission for the registration of
the Shares, as such Registration Statement may be amended from time to time.
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(s) "Settlement Date" shall have the meaning assigned to such
term in Section 6.1(d) hereof.
(t) "Shares" shall mean the shares of Common Stock of the Company
being purchased hereunder including those shares of Common Stock issuable to the
Purchaser upon exercise of the Call Options.
(u) "Threshold Price" is the lowest VWAP at which the Company may
set in the Draw Down Notice to sell Shares during a Draw Down Pricing Period
(not taking into account the Draw Down Discount Percentage during such Draw Down
Pricing Period).
(v) "VWAP" shall mean the daily volume weighted average price
(based on a trading day from 9:30 a.m. to 4:00 p.m., eastern time) of the Common
Stock of the Company on the NASDAQ National Market as reported by Bloomberg
Financial LP using the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to $50,000,000 of the
Company's common stock, $.001 par value per share (the "Common Stock"),
consisting of (i) an initial purchase of 1,639,344 shares of Common Stock at a
price of $6.10 per share for an aggregate purchase price of $10,000,000 (the
"Initial Purchase") and (ii) additional purchases of up to $40,000,000 of Common
Stock based on Draw Downs in accordance with Section 6.1 hereof and Call Options
of up to the Draw Down Amount per Draw Down Pricing Period in accordance with
Section 6.2 hereof that the Company may grant to the Purchaser in the Company's
sole discretion. In no event shall the amount of Common Stock purchased by the
Purchaser exceed $10,000,000 per Draw Down, not including any related Call
Options, unless otherwise mutually agreed upon by the Purchaser and the Company.
SECTION 2.2 The Shares. The Company has authorized and has
reserved and covenants to continue to reserve, subject to Section 4.4(b) hereof,
free of preemptive rights and other similar contractual rights of stockholders,
a sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call
Options.
SECTION 2.3 Purchase Price and Closing. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser, agrees to purchase the Initial Purchase and that
number of the Shares to be issued in connection with each Draw Down and the
exercise of each Call Option. The closing of the Initial Purchase and the
execution and delivery of this Agreement shall take place at the offices of
Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, NY
10174 (the "Closing") at 10:00 a.m., eastern time, on (i) July 21, 2000, or (ii)
such other time and place or on such date as the Purchaser and the Company may
agree upon (the "Closing Date"). Each party shall deliver all
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documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial
statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the
"Form 10-Q"), or on Schedule 3.1(a) attached hereto. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction in
which the failure to be so qualified will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Section 4.4(b), no further consent or authorization of the Company or its Board
of Directors or stockholders is required. This Agreement has been duly executed
and delivered by the Company. This Agreement constitutes, or shall constitute
when executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company
and the shares thereof issued and outstanding as of the date hereof are set
forth in the Registration Statement or in its latest Form 10-K. All of the
outstanding shares of the Company's Common Stock have been duly and validly
authorized, and are fully paid and non-assessable. Except as set forth in this
Agreement or as set forth in the Registration Statement, the Commission
Documents or the Commission Filings, as of the date hereof no shares of Common
Stock are entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement or as set forth in the Registration
Statement, the
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Commission Documents or the Commission Filings, as of the date hereof there are
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities
and as set forth in the Registration Statement, the Commission Documents or the
Commission Filings, as of the date hereof, the Company is not a party to any
agreement granting registration rights to any person with respect to any of its
equity or debt securities. Except as set forth in the Registration Statement,
the Commission Documents or the Commission Filings, the Company is not a party
to, and it has no knowledge of, any agreement restricting the voting or transfer
of any shares of the capital stock of the Company. Except as set forth in the
Registration Statement, the Commission Documents or the Commission Filings, the
offer and sale of all capital stock, convertible securities, rights, warrants,
or options of the Company issued prior to the Closing complied with all
applicable federal and state securities laws, and no stockholder has a right of
rescission or damages with respect thereto which would be reasonably expected to
have a Material Adverse Effect. The Company has furnished or made available to
the Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Charter"), and the Company's
Bylaws as in effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for and issued in accordance with the terms hereof and the Registration
Statement and Prospectus, the Shares shall be validly issued and outstanding,
fully paid and non-assessable, and the Purchaser shall be entitled to all rights
accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares in accordance with the terms hereof
(other than the Registration Statement, Prospectus and any filings with the NASD
or any filings which may be required to be made by the Company with the
Commission, or the Nasdaq National Market subsequent to the Closing, and, any
registration statement which
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may be filed pursuant hereto); provided that, for purpose of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock
of the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and except as
disclosed in the Registration Statement, the Commission Documents or the
Commission Filings, as of the date hereof the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing including filings incorporated by reference therein
being referred to herein as the "Commission Documents"). The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since December 31, 1999 and prior
to the Closing Date. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. The
Form 10-K for the year ended December 31, 1999 complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents, and the said Form 10-K did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. Except as set forth in the Commission
Documents or the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.
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(h) No Material Adverse Change. Since March 31, 2000, the Company
has not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed on the
Commission Documents or Commission Filings, the Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission Documents
or Commission Filings, other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since March 31, 2000 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect.
(k) Indebtedness. The Commission Filings set forth as of March
31, 2000 all outstanding secured and unsecured Indebtedness of the Company, or
for which the Company has commitments. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $100,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $100,000 due under
leases required to be capitalized in accordance with GAAP. The Company is not in
default with respect to any Indebtedness.
(l) Title to Assets. The Company has good and marketable title to
all of its real and personal property reflected in the Commission Documents,
free of any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the Commission Documents and the
Commission Filings or such that could not reasonably be expected to cause a
Material Adverse Effect. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as disclosed in the Commission Documents or Commission
Filings, there is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened, against or involving the
Company, or any of its properties or assets which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
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(n) Compliance with Law. The business of the Company has been and
is presently being conducted in accordance with all applicable federal, state
and local governmental laws, rules, regulations and ordinances, except as set
forth in the Commission Documents or the Commission Filings or such that do not
cause a Material Adverse Effect. The Company has all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(o) Certain Fees. No brokers, finders or financial advisory fees
or commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement.
(p) Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company in
connection with the transactions contemplated by this Agreement taken as a whole
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(q) Operation of Business. The Company owns or possesses all
patents, trademarks, service marks, trade names, copyrights, licenses and
authorizations as set forth in the Commission Documents or the Commission
Filings and all rights with respect to the foregoing, which are reasonably
necessary for the conduct of its business as now conducted without any conflict
with the rights of others, except to the extent set forth in the Commission
Documents or except as would not be reasonably expected to result in a Material
Adverse Effect.
(r) Environmental Compliance. Except as disclosed in the
Commission Filings, the Company has 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 emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate be reasonably expected
to have a Material Adverse Effect, to the best of the Company's knowledge, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company that violate or could
reasonably be expected to violate any Environmental Law after the Closing or
that could reasonably be expected to give rise to a Material Adverse Effect.
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(s) Material Agreements. Except as set forth in the Commission
Documents, the Company is not a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which is required to be filed with the Commission as an exhibit to the
Registration Statement (collectively, "Material Agreements"). The Company has in
all material respects performed all the obligations required to be performed to
date under the foregoing agreements, has received no notice of default and, to
the best of the Company's knowledge is not in default under any Material
Agreement now in effect, the result of which could reasonably be expected to
cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the
Commission Documents and Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, or
any of its customers (excluding agreements related to the purchase or lease of
the Company's products) or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any person who
would be covered by Item 404(a) of Regulation S-K or any corporation or other
entity controlled by such officer, employee, consultant, director or person.
(u) Securities Act of 1933. The Company has complied in all
material respects with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any
amendment or supplement thereto, or filed pursuant to
Rule 424 under the Securities Act, complied when so
filed in all material respects with the provisions of
the Securities Act. The Commission has not issued any
order preventing or suspending the use of any
Prospectus.
(ii) The Company meets the requirements for the use of Form
S-3 under the Securities Act. The Registration Statement
in the form in which it became effective and also in
such form as it may be when any post-effective amendment
thereto became effective and the Prospectus and any
supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Securities Act,
complied in all material respects except as to the
filing of certain exhibits with the provisions of the
Securities Act and did not at any such times contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary
to make the statements therein (in the case of the
Prospectus, in the light of the circumstances under
which they made) not misleading, except that this
representation and warranty does not apply to statements
in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with
information relating to the Purchaser furnished to the
Company in writing by or on behalf of the Purchaser
through you expressly for use therein.
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(iii) The Company has not distributed and, prior to the
completion of the distribution of the Shares, will not
distribute any offering material in connection with the
offering and sale of the Shares other than the
Registration Statement, the Prospectus or other
materials, if any, permitted by the Securities Act.
(v) Employees. As of the date hereof, the Company has no
collective bargaining arrangements or agreements covering any of its employees.
Except as set forth in the Registration Statement, the Commission Documents and
the Commission Filings, as of the date hereof, the Company has no employment
contract, agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company. As of the date hereof,
except as set forth in the Registration Statement, the Commission Documents or
the Commission Filings, since December 31, 1999, no officer, consultant or key
employee of the Company whose termination, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company as set forth in the Registration Statement.
(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company would be
reasonably expected to have a Material Adverse Effect. The execution and
delivery of this Agreement and the issue and sale of the Shares will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA or
in connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if the Purchaser, or
any person or entity that owns a beneficial interest in the Purchaser, is an
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
with respect to which the Company is a "party in interest" (within the meaning
of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of
ERISA, if applicable, are met. As used in this Section 3.1(y), the term "Plan"
shall mean an "employee pension benefit plan" (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are or
have been made, by the Company or by any trade or business, whether or not
incorporated, which, together with the Company, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder.
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The Company further acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereunder and any advice given
by the Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereunder is merely incidental to
the Purchaser's purchase of the Shares.
SECTION 3.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is
a limited liability company duly organized, validly existing and in good
standing under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or members is required. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
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(d) Information. The Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. The Purchaser has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Shares. Purchaser understands that it (and not the Company) shall be responsible
for its own tax liabilities that may arise as a result of this investment or the
transactions contemplated by this Agreement.
(e) Selling Restrictions. The Purchaser has the right to sell
shares of the Company's Common Stock equal in number to the number of the Shares
to be purchased pursuant to this Agreement during the Draw Down Pricing Period.
The Purchaser covenants however, that prior to and during each Draw Down Pricing
Period, neither the Purchaser, nor any of its affiliates nor any entity managed
by the Purchaser will ever be is a net short position with respect to shares of
Common Stock of the Company in any account directly or indirectly managed by the
Purchaser or any affiliate of the Purchaser or any entity managed by the
Purchaser.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees.
SECTION 4.1 Securities. The Company shall notify the Commission
and the Nasdaq National Market, if applicable, in accordance with their rules
and regulations, of the transactions contemplated by this Agreement, and shall
take all other necessary action and proceedings as may be required and permitted
by applicable law, rule and regulation, for the legal and valid issuance of the
Shares to the Purchaser or subsequent holders.
SECTION 4.2 Registration and Listing. The Company will take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, 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 Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
and the listing of the Shares purchased by Purchaser hereunder on the Nasdaq
National Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD or any
relevant market or system.
SECTION 4.3 Registration Statement. Before the Company shall
issue a Draw Down Notice, the Company shall have caused a sufficient number of
shares of Common Stock to be authorized and registered to cover the Shares to be
issued in connection with this Agreement.
SECTION 4.4 Compliance with Laws.
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(a) The Company shall comply with all applicable laws, rules,
regulations and orders, noncompliance with which would be reasonably expected to
have a Material Adverse Effect.
(b) The Company will not be obligated to issue and the Purchaser
will not be obligated to purchase any shares of the Company's Common Stock which
would result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued and outstanding shares of the
Company's Common Stock on the date hereof.
SECTION 4.5 Keeping of Records and Books of Account. The Company
shall keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
SECTION 4.6 Reporting Requirements. Upon request, the Company
shall furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as
soon as available, and in any event within 47 days after the end of each of the
first three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon
as available, and in any event within 92 days after the end of each fiscal year
of the Company.
SECTION 4.7 Non-public Information. Neither the Company nor any
of its officers or agents shall disclose any material non-public information
about the Company to the Purchaser and neither the Purchaser nor any of its
affiliates, officers or agents will solicit any material non-public information
from the Company.
SECTION 4.8 Effective Registration Statement. If, at the time
this Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become effective as
soon as reasonably practicable and will advise the Purchaser promptly and, if
requested by the Purchaser, will confirm such advice in writing, when it
receives notice that the Registration Statement or such post-effective amendment
has become effective.
SECTION 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware
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<PAGE> 17
of the happening of any event, which makes any statement of a material fact made
in the Registration Statement or the Prospectus (as then amended or
supplemented) untrue or which requires the making of any additions to or changes
in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Securities Act
or the regulations thereunder to be stated therein or necessary in order to make
the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Securities Act or any other law. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, the
Company will make commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible time.
SECTION 4.10 Amendments to the Registration Statement. The
Company will not (i) file any amendment to the Registration Statement or make
any amendment or supplement to the Prospectus of which the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
sales by any Purchaser or dealer, file any information, documents or reports
pursuant to the Exchange Act without delivering a copy of such information,
documents or reports to the Purchaser, promptly following such filing.
SECTION 4.11 Prospectus Delivery. The Company shall file a
prospectus supplement to its Registration Statement on the first business day
immediately following the end of each Draw Down Pricing Period, and will deliver
to the Purchaser, without charge, in such quantities as reasonably requested by
the Purchaser, copies of each form of Prospectus and prospectus supplement on
each Settlement Date. The Company consents to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and, subject to the
provisions of Section 4.10 above, file with the Commission an appropriate
supplement or amendment thereto, and will expeditiously furnish to the Purchaser
a reasonable number of copies thereof.
SECTION 4.12 Notice. The Company shall immediately notify the
Purchaser that (i) a Material Adverse Effect or Material Change in Ownership has
occurred or (ii) the Company has entered into an Other Financing (as defined in
Section 6.1(k)).
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ARTICLE V
CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS
SECTION 5.1 Conditions Precedent to the Obligation of the Company
to Close this Agreement, Issue a Draw Down Notice or Grant a Call Option and
Sell the Shares. The obligation hereunder of the Company to issue a Draw Down
Notice or grant a Call Option and sell the Shares to the Purchaser is subject to
the satisfaction or waiver, at or before the Initial Purchase and each Draw Down
or Call Option request (the "Draw Down Exercise Date"), of each of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of each Draw Down Exercise
Date and each Settlement Date as though made at that time, except for
representations and warranties that are expressly made as of a particular date.
(b) Registration Statement. The Company shall have Shares
registered under the Registration Statement which are valued at an amount equal
to or in excess of the number of Shares issuable pursuant to such Draw Down
Notice or Call Option. The Registration Statement registering the Shares shall
have been declared effective by the Commission and shall have been amended or
supplemented, as required, to disclose the sale of the Shares prior to each
Settlement Date, as applicable.
(c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to each Settlement Date..
(d) No Injunction. No statute, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the Commission or the Nasdaq National Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to such Draw Down Exercise
Date and applicable Settlement Date), and, at any time prior to each Draw Down
Exercise Date, trading in securities generally as reported on the Nasdaq
National Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by the
Nasdaq National Market.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the
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<PAGE> 19
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
SECTION 5.2 Conditions Precedent to the Obligation of the
Purchaser to Close. The obligation hereunder of the Purchaser to enter this
Agreement and to acquire and pay for the Initial Purchase is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Purchaser's sole benefit and may be
waived by the Purchaser at any time in its sole discretion.
(a) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(b) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(c) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.
(d) Registration Statement. The Company shall have Shares
registered under the Registration Statement which are valued at an amount equal
to or in excess of the Initial Purchase. The Registration Statement registering
the Shares shall have been declared effective by the Commission.
(e) Opinion of Counsel, Etc. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit A hereto, and such other certificates and documents as
the Purchaser or its counsel shall reasonably require incident to the Closing.
SECTION 5.3 Conditions Precedent to the Obligation of the
Purchaser to Accept a Draw Down or Call Option Grant and Purchase the Shares.
The obligation hereunder of the Purchaser to consummate the Initial Purchase or
to accept a Draw Down or Call Option grant and to acquire and pay for the Shares
on the Settlement Date is subject to the satisfaction or waiver, at or before
each Draw Down Exercise Date and each Settlement Date, as applicable or the
consummation of the Initial Purchase, as the case may be, of each of the
conditions set forth below. The conditions are for the Purchaser's sole benefit
and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects
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as of the date when made and as of the Draw Down Exercise Date and Settlement
Date, as applicable, as though made at that time, except for representations and
warranties that speak as of a particular date.
(b) Registration Statement. The Company shall have Shares
registered under the Registration Statement which are valued at an amount equal
to or in excess of the number of Shares issuable pursuant to such Draw Down
Notice or Call Option. The Registration Statement registering the Shares shall
have been declared effective by the Commission and shall have been amended or
supplemented, as required, to disclose the sale of the Shares prior to the
Closing Date or each Settlement Date, as applicable.
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq National Market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to each Draw Down Exercise Date),
and, at any time prior to such Draw Down Exercise Date, trading in securities
generally as reported by the Nasdaq National Market shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by the Nasdaq National Market.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit B.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.
(g) Material Adverse Effect; Material Change in Ownership. No
Material Adverse Effect or Material Change in Ownership shall have occurred.
ARTICLE VI
DRAW DOWN TERMS; CALL OPTION
SECTION 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
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(a) The Company, may, in its sole discretion, issue a Draw Down
Notice with respect to a draw down (a "Draw Down") during each Draw Down Pricing
Period of up to (i) $4,000,000 if the Threshold Price is equal to or greater
than $6.00 but less than $8.00; (ii) $6,000,000 if the Threshold Price is equal
to or greater than $8.00 but less than $11.00; (iii) $8,000,000 if the Threshold
Price is equal to or greater than $11.00 but less than $14.00; or (iv)
$10,000,000 if the Threshold Price is equal to or greater than $14.00; provided,
that the Company may, in its sole discretion, issue a Draw Down Notice with
respect to any Draw Down Amount at any Threshold Price or any Draw Down Discount
Percentage pursuant to terms mutually agreed upon by the Purchaser and the
Company, which Draw Down the Purchaser will be obligated to accept. Prior to
issuing any Draw Down Notice, the Company shall have Shares registered under the
Registration Statement which are valued at an amount equal to or in excess of
the Draw Down Amount.
(b) The number of Shares to be issued in connection with each
Draw Down shall be equal to the sum of the quotients (for each trading day of
the Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction based on the length of the Draw
Down Pricing Period) of the Draw Down Amount divided by (y) the applicable Draw
Down Discount Percentage multiplied by the VWAP of the Common Stock for such
trading day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) consecutive trading days (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect
to each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days between
Draw Downs (including after consummation of the Initial Purchase), unless
otherwise mutually agreed upon between the Purchaser and the Company.
(f) There shall be a maximum of twelve (12) monthly Draw Downs
during the term of this Agreement.
(g) Each Draw Down will expire on the last trading day of each
Draw Down Pricing Period.
(h) If the VWAP on a given trading day is less than the Threshold
Price, then the total amount of the Draw Down for the relevant Draw Down Pricing
Period will be reduced by 1/20th (or such other fraction based on the length of
the Draw Down Pricing Period). Notwithstanding anything in the foregoing to the
contrary, for each trading day during the Draw Down Pricing Period that the VWAP
is less than the Threshold Price, the Purchaser may elect in its sole discretion
to purchase Shares at the Threshold Price at the end of such Draw Down Pricing
Period and the total amount of the Draw Down shall not be reduced by 1/20th
pursuant to the foregoing sentence. At no time shall the Threshold Price be set
below $6.00, unless mutually
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agreed upon by the Company and the Purchaser. If trading in the Company's Common
Stock is suspended for any reason for more than three (3) hours in any trading
day, at the Purchaser's option, the price of the Common Stock shall be deemed to
be below the Threshold Price for that trading day and the Draw Down for the
relevant Draw Down Pricing Period shall be reduced by 1/20 th (or such other
fraction based on the length of the Draw Down Pricing Period).
(i) The Company must inform the Purchaser via facsimile
transmission as to the Draw Down Amount the Company wishes to exercise before
commencement of trading on the first trading day of the Draw Down Pricing Period
(the "Draw Down Notice"), substantially in the form attached hereto as Exhibit
C. In addition to the Draw Down Amount, the Company shall set the Threshold
Price with each Draw Down Notice and shall designate the first trading day of
the Draw Down Pricing Period.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the account designated by the Company by wire
transfer of immediately available funds provided that the Shares are received no
later than 1:00 p.m., eastern time, or next day available funds if the Shares
are received thereafter.
(k) If during any Draw Down Pricing Period, the Company shall
enter into any other equity financing agreement (the "Other Financing") the
primary purpose of which is to raise financing for the Company, the Purchaser
may in its sole discretion (i) purchase the Draw Down Amount of shares of Common
Stock and/or exercise Call Options granted during such Draw down Pricing Period
at the price at which the Company issued shares of Common Stock in the Other
Financing during such Draw Down Pricing Period, (ii) purchase the Draw Down
Amount of shares of Common Stock and/or exercise Call Options granted during
such Draw Down Pricing Period at the applicable Draw Down Discount Percentage
times the VWAP for such Draw Down Pricing Period, or (iii) elect not to purchase
any Shares during such Draw Down Pricing Period. The Purchaser shall notify the
Company of its election on the business day preceding the Settlement Date.
(l) If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay, in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (l) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such
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<PAGE> 23
shares of Common Stock and piggyback registration rights if the Company files a
separate registration statement.
SECTION 6.2 Purchaser's Call Option.
(a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options to purchase shares of the Company's Common Stock in an amount up to the
applicable Draw Down Amount (a "Call Option"). For each trading day during a
Draw Down Pricing Period, the Purchaser may exercise a Call Option by providing
notice to the Company of the exercise of its Call Option (the "Call Option
Notice"), substantially in the form attached hereto as Exhibit D. The total
amount of all Call Options exercised by the Purchaser shall not exceed
$40,000,000 in the aggregate.
(b) The number of shares of Common Stock to be issued in
connection with each Call Option shall equal the quotient of (i) the amount of
the Call Option exercised and (ii) the product of the applicable Draw Down
Discount Percentage and the greater of (A) the VWAP for the Common Stock on the
day the Purchaser issues its Call Option Notice and (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw
Down Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to
this Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to
the Company no later than 8:00 p.m. (eastern time) on the day such Call Option
is exercised. If the Purchaser does not exercise a Call Option by 8:00 p.m.
(eastern time) on the last day of the applicable Draw Down Pricing Period, the
Purchaser's Call Options with respect to that Draw Down Pricing Period shall
terminate.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination by Mutual Consent. The term of this
Agreement shall be the earlier of (i) fifteen (15) months from the date of
execution of this Agreement (the "Investment Period") and (ii) the date that all
of the Shares registered under the Registration Statement have been issued and
sold. This Agreement may be terminated at any time by mutual consent of the
parties.
SECTION 7.2 Other Termination. The Company shall inform the
Purchaser, and the Purchaser shall have the right to terminate this Agreement
within the subsequent thirty (30) days (the "Event Period"), if (x) the Company
enters into any equity financing agreement without the prior written consent of
the Purchaser which provides for (i) the issuance of Common Stock or securities
convertible, exercisable or exchangeable into Common Stock at a
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discount to the then current market price of the Common Stock, (ii) a mechanism
for the reset of the purchase price of the Common Stock to below the then
current market price of the Common Stock, or (iii) the issuance of Common Stock
with warrants, such that the average purchase price of the Common Stock issued
and the shares of Common Stock issuable upon exercise of the warrants would be
less than the per share price of Common Stock of the then current market price
of the Common Stock, provided, however, that the Company may issue shares of its
Common Stock in connection with (i) the Company's stock option or stock purchase
plans, (ii) currently outstanding options or warrants, (iii) the acquisition of
products licenses or other assets and (iv) strategic partnerships or joint
ventures (the primary purpose of which is not to raise equity) or (y) an event
resulting in a Material Adverse Effect or Material Change in Ownership has
occurred. The Purchaser may terminate this Agreement upon one (1) day's notice
during the Event Period.
SECTION 7.3 Effect of Termination. In the event of termination by
the Company or the Purchaser, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.9.
Nothing in this Section 7.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify
and hold harmless the Purchaser and each person, if any, who controls the
Purchaser within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act from and against any losses, claims, damages,
liabilities and expenses (including reasonable costs of defense and
investigation and all attorney's fees) to which the Purchaser and each person,
if any, who controls the Purchaser may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages, liabilities and expenses
(or actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement relating to Common
Stock being sold to the Purchaser (including the any prospectus supplement filed
in connection with the transactions contemplated hereunder (the "Prospectus
Supplement") which are a part of it), or any amendment or supplement to it, or
(ii) the omission or alleged omission to state in that Registration Statement or
any document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
The Company will reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by or the controlling
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person in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding, except that the Company will not be
liable to the extent a claim or action which results in a loss, claim, damage,
liability or expense arises out of, or is based upon, an untrue statement,
alleged untrue statement, omission or alleged omission, included in any
Prospectus or Prospectus Supplement or any amendment or supplement to the
Prospectus or Prospectus Supplement in reliance upon, and in conformity with,
written information furnished by the Purchaser to the Company for inclusion in
the Prospectus or Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will
indemnify and hold harmless the Company, each of its directors and officers, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Company and each director, officer and person, if
any, who controls the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus or Prospectus Supplement or any amendment or supplement to it or (ii)
the omission or alleged omission to state in any Prospectus or Prospectus
Supplement or any amendment or supplement to it a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, the untrue statement, alleged untrue
statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by the Purchaser to the Company
for inclusion in the Prospectus or Prospectus Supplement or an amendment or
supplement to it, and the Purchaser will reimburse the Company and each such
director, officer or controlling person promptly upon demand for any legal or
other costs or expenses reasonably incurred by the Company or the other person
in investigating, defending against, or preparing to defend against any such
claim, action, suit or proceeding.
SECTION 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party will pay the reasonable fees and
expenses of no more than one separate counsel for all the indemnified parties.
Each indemnified party, as a condition to receiving indemnification as provided
in Paragraph (a) or (b) or Section
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8.1, will cooperate in all reasonable respects with the indemnifying party in
the defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent. No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Fees and Expenses. The Company shall pay all
reasonable fees and expenses related to the transactions contemplated by this
Agreement; provided, that the Company shall pay, at the Closing, all reasonable
fees and expenses, inclusive of disbursements and out-of-pocket expenses,
incurred by one legal counsel of the Purchaser of up to $50,000 in connection
with the preparation, negotiation, execution and delivery of this Agreement. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchaser in connection with any amendments, modifications or waivers of this
Agreement or incurred in connection with the enforcement of this Agreement,
including, without limitation, all reasonable fees and expenses of one legal
counsel of Purchaser. The Company shall pay all stamp or other similar taxes and
duties levied in connection with issuance of the Shares pursuant hereto.
SECTION 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
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(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of Delaware for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
SECTION 9.3 Entire Agreement; Amendment. This Agreement contains
the entire understanding of the parties with respect to the matters covered
hereby and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
SECTION 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Axys Pharmaceuticals, Inc.
180 Kimball Way
South San Francisco, California 94080
Tel. No.: (650) 829-1000
Fax No.: (650) 829-1147
Attention: William Newell
With copies to: Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Tel. No: (212) 906-1200
Fax No.: (212) 751-4864
Attention: Robert A. Zuccaro, Esq.
If to the Purchaser: Acqua Wellington North American
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<PAGE> 28
Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Montague Sterling Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No: (242) 394-2700
Fax No.: (242) 394-9667
Attention: Anthony L.M. Inder Rieden
With copies to: Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Tel. No: (212) 704-6000
Fax No: (212)704-6288
Attention: Christopher S. Auguste, Esq.
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
SECTION 9.5 Waivers. No waiver by either party of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
SECTION 9.6 Headings. The article, section and subsection
headings in this Agreement are for convenience only and shall not constitute a
part of this Agreement for any other purpose and shall not be deemed to limit or
affect any of the provisions hereof.
SECTION 9.7 Successors and Assigns. The Purchaser may not assign
this Agreement to any person without the prior consent of the Company, which
consent will not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
SECTION 9.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions.
SECTION 9.9 Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the covenants contained
in Article IV shall survive the execution and delivery hereof and the Closing
until the termination or expiration of this
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Agreement, and the agreements and covenants set forth in Article VIII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
SECTION 9.10 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
SECTION 9.11 Publicity. The Company shall not issue any press
release or otherwise make any public statement or announcement with respect to
this Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchaser. In the event the
Company is required by law, based upon an opinion of the Company's counsel, that
the Company must issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transaction contemplated
hereby, the Company shall consult with the Purchaser on the form and substance
of such press release.
SECTION 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
SECTION 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
AXYS PHARMACEUTICALS, INC.
By: /s/ John P. Walker
-------------------------------------
Name: John P. Walker
Title: Chairman/CEO
ACQUA WELLINGTON NORTH AMERICAN EQUITIES
FUND, LTD.
By: /s/ Anthony L.M. Inder Reiden
-------------------------------------
Name: Anthony L.M. Inder Reiden
Title: Director
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EXHIBIT INTENTIONALLY DELETED
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DISCLOSURE SCHEDULES INTENTIONALLY DELETED
