SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 18, 1996
Xechem International, Inc.
(Exact name of Registrant as Specified in its Charter)
Delaware 0-23788 22-3284803
(State of Incorporation) (Commission File No.) (IRS Employer Identification No.)
100 Jersey Avenue, Bldg. B, #310
New Brunswick, N.J. 08901
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (908) 247-3300
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Item 1. Changes and Control of Registrant
On November 18, 1996, Xechem International, Inc. (the "Company") announced
that it had entered into and closed the initial stage of a Stock Purchase
Agreement providing for the sale to of up to 55,000 shares of the Company's
Class C Series 2 Convertible Preferred Stock for a purchase price of $100 per
share ($5,500,000 in the aggregate) over approximately nine months. At the
initial closing, The Edward A. Blech Trust purchased 5,000 shares of Series 2
Stock for $500,000. Mr. David Blech has the right under the Stock Purchase
Agreement to designate the purchasers (which may include himself) to purchase an
additional 5,000 shares of Series 2 Stock on or before December 2, 1996 (which
right has also been assigned to the Trust); 5,000 shares on or before December
16, 1996; 7,500 shares on or before January 15, 1997; 17,500 shares on or before
February 17, 1997; 10,000 shares on or before June 2, 1997; and a final 5,000
shares on or before July 15, 1997. Mr. Blech has the right to designate third
party purchasers, reasonably acceptable to the Company, to purchase any and all
of such shares. The Stock Purchase Agreement also provides that the Company's
President and Chief Executive Officer, Dr. Ramesh Pandey, will exchange certain
indebtedness of the Company owed to him and the Class B 8% Preferred Stock of
the Company held by him for 13,180 shares of the Company's Class C Series 3
Convertible Preferred Stock at the January 1997 closing.
The shares of Series 2 Stock and Series 3 Stock will be automatically
converted into the Company's Common Stock upon amendment of the Company's
certificate of incorporation to authorize the issuance of sufficient shares of
Common Stock for such conversion (or, if later, the January 1997 closing). The
conversion price of the Series 2 Stock will be $.05 per share if the November
1996 and January 1997 purchases are completed, and will be $.0625 per share if
such purchases are not completed. The conversion price of the Series 3 Stock
will be $.0625 per share. If such conversion is effected prior to a scheduled
closing, the underlying shares of Common Stock will be acquired in lieu of
acquiring shares of Series 2 Stock or Series 3 Stock. If all the Series 2 and
Series 3 shares are issued and converted to Common Stock, Mr. Blech and his
designees will acquire 110,000,000 shares of Common Stock and Dr. Pandey will
acquire 21,088,000 shares of Common Stock. The holders of the shares of Series 2
Stock or Series 3 Stock are entitled to vote with the holders of the Common
Stock, casting a number of votes per share equal to the number of shares of
Common Stock into which the Series 2 Stock or Series 3 Stock is convertible.
Pursuant to the Stock Purchase Agreement, Dr. Pandey and Mr. Blech and his
designees have agreed to vote or execute a written consent to approve such an
amendment to the certificate of incorporation. The Company anticipates
submitting such amendment for stockholder approval as soon as practicable. As a
result of the voting rights of the Series 2 Stock, The Edward A. Blech Trust
will own securities entitling it to cast approximately 49% of the aggregate
votes entitled to be cast at an election of directors and Mr. Blech and his
designees collectively will be entitled to cast approximately 77% of such votes
if all transactions contemplated by the Purchase Agreement are completed.
Pursuant to the Stock Purchase Agreement, the Company, Dr. Pandey, and Mr.
Blech have also entered into a stockholders agreement, which, among other
things: (i) generally prohibits the sale of any of Dr. Pandey's shares of
capital stock of the Company for a period of 5 years, except with the consent of
Mr. Blech; (ii) provides Mr. Blech and his designees with the right to sell his
pro rata portion (relative to the holdings of Dr. Pandey) of any proposed sale
of shares by Dr. Pandey, and a reciprocal right in favor of Dr. Pandey to sell
his pro rata portion of any shares sold by Mr. Blech and his designees; (iii)
requires Mr. Blech and his designees to vote for Dr. Pandey as a director of the
Company, and to use his efforts to cause Dr. Pandey to remain Chairman,
President and CEO of the Company; (iv) requires the Company and its directors
(subject to their fiduciary duties to the Company and its stockholders) to take
such actions after the January 1997 closing as Mr. Blech may request to elect
his nominees to constitute a majority of the directors of the Company; and (v)
provides for certain demand and piggyback registration rights in favor of Mr.
Blech and his designees.
The Company will pay a commission of $50,000 and issue an option to
purchase 200,000 shares of Common Stock to the investment banking firm which
introduced Mr. Blech to the Company.
The Company has received an opinion from The Griffing Group, Inc., an
independent valuation and financial advisory firm, as to the fairness of the
above transactions, from a financial point of view, to the shareholders of the
Company.
Item 5. Other Events.
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As previously reported on August 29, 1996, the Company and its then
wholly-owned subsidiary, XetaPharm, Inc. ("XetaPharm"), entered into a
Memorandum of Understanding (the "MOU") with Petron International, Inc.
("Petron"), wherein Petron agreed to purchase 96 shares of common stock of
XetaPharm (48.98% of the shares to be outstanding) for a total of $500,000. The
MOU provides that Petron will pay for the XetaPharm shares as follows: $50,000
on or before September 5, 1996; $100,000 on September 30, 1996; $150,000 on
October 30, 1996; and $200,000 on November 30, 1996. The Company agreed to make
its existing facility and personnel available to XetaPharm at a cost of $25,000
per month for twelve months ending August 31, 1997.
After each payment, Petron would receive that number of XetaPharm shares
for which full payment has been made.
In the MOU, Petron also agreed to purchase 1,250,000 shares of the
Company's Common Stock for a total of $500,000. The MOU provides that Petron
will pay for the Company's shares as follows: $50,000 on or before September 5,
1996 and $50,000 on the first day of each of the following nine months. After
each payment, Petron would receive that number of shares for which full payment
had been made. Petron had granted the Company an option to repurchase up to
250,000 of such shares any time before August 29, 1999 at a price of $0.75 per
share.
On September 5, 1996, XetaPharm and the Company each received the initial
payment of $50,000. Petron defaulted on its payments of $100,000 to XetaPharm
due September 30, 1996 and $50,000 to the Company due October 1, 1996.
On October 14, 1996, the Company, notified Petron that due to non-payment
of amounts due under the MOU, the MOU was terminated.
Petron now owns 125,000 shares of the Company's Common Stock and an 8.3%
minority interest in XetaPharm.
Petron subsequently advised the Company that it wished to return its
purchased shares for its investment amount. The Company is evaluating whether to
accept such offer, to exercise its option to purchase back the shares of the
Company's Common Stock, or take other action.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Xechem International, Inc.
By: /s/ Dr. Ramesh C. Pandey
Dr. Ramesh C. Pandey, President and Chief
Executive Officer
Dated: November 21, 1996
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STOCKHOLDERS AGREEMENT
AGREEMENT, dated November 18, 1996, among Xechem International, Inc., a
Delaware corporation (the "Company"); David Blech (the "Purchaser"); and Ramesh
C. Pandey ("Pandey").
WHEREAS, Pandey is the principal stockholder of the Company;
WHEREAS, pursuant to a Stock Purchase Agreement (the "Purchase Agreement")
among the Company, the Purchaser, and Pandey, the Purchaser and Pandey are on
and after the date hereof acquiring certain shares of the capital stock of the
Company; and
WHEREAS, Pandey and the Purchaser desire to provide reasonable
restrictions upon the transfer of shares of such capital stock and to agree to
vote such shares in accordance with this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
I Certain Definitions. For purposes of this Agreement, the following
terms shall have
the meanings indicated:
1.1. Common Shares. "Common Shares" shall mean shares of the Company's
Common
Stock, par value $.00001 per share.
1.2. Dispose Of. "Dispose Of" shall mean pledge, hypothecate, give away,
sell, grant anoption with respect to, or otherwise transfer, other than
pursuant to a plan of
merger or
consolidation, to anyone, whether or not he is then a Stockholder. The term
"Disposition" shall have
a correlative meaning.
1.3. Eligible Holders. "Eligible Holders" shall mean holders of
Registrable Securities.
1.4. Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as
amended.
1.5. Family Donee. "Family Donee" with respect to a Stockholder shall mean
(a) any parent, child, descendant, or sibling of the Stockholder, the spouse of
any of the foregoing, or the spouse of the Stockholder; (b) any trust
established by the Stockholder, or any trustee, custodian, fiduciary, or
foundation which will hold the shares of Shares for charitable purposes or for
the benefit of the Stockholder or any of the persons described in Section
1.5(a); and (c) committees, guardians, or other legal representatives of the
Stockholder or of any of the persons described in Section 1.5(a).
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1.6. Majority Holders. "Majority Holders" shall mean stockholders who
hold (or would
hold, if all Purchaser Shares were converted to Common Shares) a majority of the
Registrable Securities.
1.7. Pandey Stockholders. "Pandey Stockholders" shall mean Pandey and
all persons who
obtain Shares from Pandey or another Pandey Stockholder in accordance with
Section 2.1(b).
1.8. Public Transaction. "Public Transaction" shall mean any
Dispositionof Shares in anopen market broker's or underwritten transaction,
hether pursuant to an offering registered under
the Securities Act or pursuant to Rule 144 under the Securities Act.
1.9. Purchaser Shares. "Purchaser Shares" shall have the meaning as
defined in the
Purchase Agreement.
1.10. Purchaser Stockholders. "Purchaser Stockholders" shall mean the
Purchaser, any
other person who acquires Purchaser Shares pursuant to the Purchase Agreement,
and any person
who acquires Shares from another Purchaser Stockholder other than in a Public
Transaction.
1.11. Registrable Securities. "Registrable Securities" at any time shall
mean then outstanding or reserved for issuance Common Shares (or, if the
Amendment (as defined in the Purchase Agreement) is not filed by July 1, 1997,
shares of Series 2 Stock) which are Purchaser Shares or underlying Conversion
Shares (as defined in the Purchase Agreement) and which (i) are owned by (or
issuable upon conversion of Purchaser Shares owned by) the Purchaser
Stockholders and (ii) are not then eligible for immediate sale pursuant to an
effective registration statement under the Securities Act or pursuant to
paragraph (k) of Rule 144 under the Securities Act.
1.12. SEC. "SEC" shall mean the Securities and Exchange Commission.
1.13. Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.14. Shares. "Shares" shall mean all shares of capital stock of the
Company, including
Common Shares.
1.15. Stockholder. "Stockholder" shall mean any person, other than the
Company, who is
or becomes a party to this Agreement.
II Restrictions on Transfer
2.1. Permitted Transfer(a) No Pandey Stockholder shall Dispose Of any
Shares without the consent of the Purchaser, except as permitted by Section
2.1(b) or the last sentence of Section 2.2. Any other purported disposition
shall be void.
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(b) Notwithstanding Section 2.1(a), any Pandey Stockholder may at any time
and from time to time (i) Dispose Of all or a part of his Shares to (A) one or
more of his Family Donees if each such Family Donee becomes a party to this
Agreement upon acquisition of such Shares or (B) any other Pandey Stockholder
who is a party to this Agreement or (ii) pledge Shares if the pledgee agrees not
to seek the transfer of such Shares (on foreclosure or otherwise) except in
accordance with Section 2.1(a). Any Pandey Stockholder effecting a Disposition
pursuant to this Section 2.1(b) shall give immediate notice thereof to the
Purchaser, including the name and address of the recipient of the Disposed Of
Shares and a copy of such transferee's agreement as required pursuant to this
Section 2.1(b).
2.2. Tag-Along. If (a) any Pandey Stockholder shall propose to Dispose Of
any Shares other than pursuant to Section 2.1(b), or (b) any Purchaser
Stockholder shall propose to Dispose Of any Shares, such Stockholder (the
"Selling Stockholder") shall give notice (a "Notice") of such proposed
Disposition to the Purchaser, if the Selling Stockholder is a Pandey
Stockholder, or Pandey, if such Selling Stockholder is a Purchaser Stockholder,
describing the proposed Disposition. If such Disposition is a sale of Common
Shares other than pursuant to a Public Transaction, then, in addition to the
requirements of Section 2.1 (if the Selling Stockholder is a Pandey
Stockholder), the Purchaser Stockholders collectively (if the Selling
Stockholder is a Pandey Stockholder) or the Pandey Stockholders collectively (if
the Selling Stockholder is a Purchaser Stockholder) (the Purchaser Stockholders
collectively, or any of them, or the Pandey Stockholders collectively, or any of
them, as the case may be, being the "Tagging Stockholders") shall have the
right, by giving notice (a "Tag- Along Notice") to the Selling Stockholder
within 10 days of the Notice, to sell, on the terms and to the transferee(s)
described in the Notice, a number of Common Shares equal to the number of Common
Shares then held by the Tagging Stockholders multiplied by a fraction (the
"Fraction"), the numerator of which is the number of Common Shares proposed to
be sold by such Selling Stockholder and the denominator of which is the number
of Common Shares held by all Pandey Stockholders (if the Selling Stockholder is
a Pandey Stockholder) or Purchaser Stockholders (if the Selling Stockholder is a
Purchaser Stockholder) at the date of the Notice; and, if the Tagging
Stockholders give a Tag-Along Notice, such Selling Stockholder shall not effect
such Disposition unless the Tagging Stockholders are afforded such opportunity
to sell such portion of their Common Shares. Any notice given by Pandey or the
Purchaser pursuant to this Section 2.2 shall be deemed given by all Pandey
Stockholders or Purchaser Stockholders, respectively; and, if the Pandey
Stockholders or Purchaser Stockholders are entitled to sell shares pursuant to
this Section 2.2, the shares to be sold shall be allocated among the Pandey
Stockholders or Purchaser Stockholders, as the case may be, in proportion to
their holdings of shares of Common Stock, or as they may otherwise agree. In the
case of a Disposition by a Purchaser Stockholder pursuant to a Public
Transaction, then, notwithstanding Section 2.1(a), each Pandey Stockholder shall
be entitled to sell the Fraction of his shares of Common Stock, on such terms as
such Pandey Stockholder may obtain.
2.3. Termination. The provisions of this Article II shall terminate on the
earliest of (a) the fifth anniversary of the date hereof, (b) the date, if any,
on which the Purchaser or Pandey shall have defaulted on any of its or his
obligations under Section 1.1 of the Purchase Agreement (provided, that (i) only
a party's rights, but not its or his obligations, shall terminate as a result of
such a default and
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(ii) such termination shall not take effect until the non-defaulting parties or
party have afforded the defaulting party or parties at least 15 business days
notice of and opportunity to cure such default), and (c) the date on which the
Purchaser Stockholders or Pandey Stockholders beneficially own (as determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
thereunder) less than 10% of the outstanding Common Shares.
III Voting Agreement
3.1. Voting. (a) Subject to any fiduciary obligations it may have, each
Purchaser Stockholder agrees to vote all Shares beneficially owned by such
Purchaser Stockholder for the election of Pandey as a director of the Company,
and, further, to use his or its best efforts to cause Pandey to be named as the
Chairman of the Board, President, and Chief Executive Officer of the Company.
The Purchaser and each subsequent Purchaser Stockholder agrees not to Dispose Of
any Shares to any person (other than in a Public Transaction) unless such
transferee agrees to become a party to this Agreement as a Purchaser
Stockholder, and a copy of such agreement is provided to Pandey.
(b) The provisions of this Section 3.1 shall terminate on the earliest of
(i) the date on which Pandey is discharged from the employ of the Company "for
cause" (as such term is defined in the Employment Agreement, dated February
1994, between Pandey and the Company), (ii) the date, if any, on which Pandey
shall have defaulted on any of his obligations under Section 1.1 of the Purchase
Agreement (provided, that such termination shall not take effect until the
Purchaser has afforded Pandey at least 15 business days notice of and
opportunity to cure such default), and (iii) the date on which Pandey
beneficially owns (as determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations thereunder) less than 10% of the
outstanding Common Shares.
3.2. Directors. (a) Following the Fourth Closing (as defined in the
Purchase Agreement), the Company, Pandey, and, by their signature at the end
hereof, each other current director of the Company agrees (subject to their
fiduciary duties to the Company and its stockholders) to from time to time take
such action as the Purchaser shall request from time to time (including, without
limitation, calling and holding meetings of the Board of Directors or
stockholders of the Company and amending the By-laws of the Company) to cause to
be elected as directors of the Company such nominees of the Purchaser, in such
number, as the Purchaser shall request.
(b) The provisions of this Section 3.2 shall terminate on the earliest of
(i) the fifth anniversary of the date hereof, (ii) the date, if any, on which
the Purchaser shall have defaulted on any of its obligations under Section 1.1
of the Purchase Agreement (provided, that such termination shall not take effect
until Pandey has afforded the Purchaser at least 15 business days notice of and
opportunity to cure such default), (iii) the date, if any, on which nominees of
the Purchaser constitute a majority of the Board of Directors, and (iv) the date
on which the Purchaser beneficially owns (as
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determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations thereunder) less than 50% of the outstanding Common Shares.
IV Registration Rights
4.1. Request for Registration. (a) Subject to Sections 4.1(b) and (c), if
the Company shall receive a written request (specifying that it is being made
pursuant to this Article IV) from Majority Holders that the Company file a
registration statement under the Securities Act covering the registration of at
least 5% of the Registrable Securities, the Company shall, within ten business
days of the receipt thereof, give written notice of such request to all Eligible
Holders and shall file as soon as practicable, and in any event within 60 days
of the receipt of such request, a registration statement under the Securities
Act covering all Registrable Securities which the Eligible Holders request to be
registered within 30 days of the mailing of such notice to all Eligible Holders.
(b) Notwithstanding the foregoing, (i) the Company shall not be obligated
to effect a registration pursuant to this Section 4.1 during the period starting
with the date 60 days prior to the Company's estimated date of filing of, and
ending on a date six months following the effective date of, a registration
statement pertaining to an underwritten public offering of securities for the
account of the Company, provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith; (ii) if the Company shall furnish
to the Eligible Holders initiating the registration request hereunder (the
"Initiating Eligible Holders") a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors it
would be materially detrimental to the Company or its stockholders for a
registration statement to be filed in the near future, then the Company's
obligation to file a registration statement shall be deferred for a period not
to exceed six months; provided, however, that the Company may furnish such a
certificate to Initiating Eligible Holders only once in any one-year time
period; and (iii) if the managing underwriter of an underwritten offering to be
made pursuant to this Section 4.1 advises the Initiating Eligible Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Initiating Eligible Holders shall so advise all
Eligible Holders whose Registrable Securities would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Eligible Holders
thereof in proportion to the amount of Registrable Securities owned by each
Eligible Holder.
(c) The Company shall be obligated to effect only two registrations
pursuant to this Section 4.1.
4.2. "Piggyback" Registration. (a) Subject to Section 4.2(b), if at any
time the Company determines to register (including for this purpose a
registration effected by the Company for stockholders other than the Eligible
Holders) any Common Shares under the Securities Act in connection with the
public offering of such securities solely for cash on an SEC Form that would
also
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permit the registration of the Registrable Securities (other than Forms S-4 and
S-8), the Company shall promptly give each Eligible Holder written notice of
such determination. Upon the written request of each Eligible Holder given
within 20 days after mailing of any such notice by the Company, the Company
shall, subject to the provisions of this Section 4.2, cause to be registered
under the Securities Act all of the Registrable Securities that each such
Eligible Holder has requested be registered; provided however, that the Company
shall not be required to proceed with such registration if the offering is
abandoned in its entirety and no other securities are offered for sale.
(b) In connection with any offering involving an underwriting of shares
being issued by the Company, the Company shall not be required under this
Section 4.2 to include any of the Eligible Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the reasonable opinion of the underwriters, jeopardize
the success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by the Eligible Holders and other
stockholders having registration rights to be included in such offering exceeds
the amount of securities to be sold other than by the Company (or the
stockholders initiating the registration) that the underwriters reasonably
believe compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters believe will not
jeopardize the success of the offering. In such event, the securities requested
to be included which are excluded shall be apportioned pro rata among the
Eligible Holders and, to the extent permitted by the contractual rights of other
selling stockholders, all other prospective selling stockholders according to
the total amount of securities requested to be included therein owned by each
such Eligible Holder and other selling stockholder or in such other proportions
as shall mutually be agreed to by such Eligible Holders and such other selling
stockholders.
4.3. Obligations of the Company. Whenever required under this Article IV
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its commercially reasonable
efforts to cause such registration statement to become effective, and,
upon the request of the holders of a majority of the Registrable
Securities registered thereunder, to keep such registration statement
effective for up to 90 days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Eligible Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act,
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and such other documents as they may reasonably request to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be necessary
for the Eligible Holders to dispose of the Registrable Securities,
provided that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general
consent to service of process or subject itself to taxation in any such
states or jurisdictions.
(e) Enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter, if
any, of such offering. Each Eligible Holder participating in such
underwriting shall also enter into and perform its obligations under such
an agreement.
(f) Notify each Eligible Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(g) Make generally available to its stockholders an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act
(including by means of satisfying the provisions of Rule 158 under the
Securities Act) as soon as reasonably practical covering the 12-month
period beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the registration statement.
4.4. Furnish Information. The Company shall not be required to include in
any registration any Registrable Securities unless the holder thereof shall have
furnished to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of the Registrable Securities.
4.5. Expenses of Registration. All expenses other than underwriting
discounts and commission incurred in connection with any registration, filing,
or qualification pursuant to this Article IV, including, without limitation, all
registration, filing, and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of a single counsel for the Eligible Holders and any other selling
stockholders selected by them shall be borne by the Company; provided, however,
that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 4.1 if the registration
request is subsequently withdrawn at the request of the Eligible Holders of a
majority of
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the Registrable Securities to be registered (in which case all participating
Eligible Holders shall bear such expenses), unless, at the time of such
withdrawal, the Eligible Holders have learned of a material adverse change in
the condition, business or prospects of the Company from that known to the
Eligible Holders at the time of their request, in which case the Eligible
Holders shall not be required to pay any such expenses and shall retain all
rights pursuant to Section 4.1.
4.6. Indemnification and Contribution. In the event any Registrable
Securities are
included in a registration statement under this Article IV:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Eligible Holder participating in such registration, the
officers and directors of each such Eligible Holder, any underwriter (as
defined in the Securities Act) for such Eligible Holder and each person,
if any, who controls such Eligible Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any Damages (as
defined in the Purchase Agreement) to which they may become subject under
the Securities Act, the Exchange Act, or other federal or state law,
insofar as such Damages arise out of or are based upon any of the
following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law, or any rule or regulation
promulgated under the Securities Act, the Exchange Act, or any state
securities law; and the Company will reimburse each such Eligible Holder,
officer or director, underwriter, or controlling person for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such action; provided, however, that the
Company shall not be liable in any such case for any such Damages to the
extent that it arises out of or is based upon (x) a Violation which occurs
in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such
Eligible Holder or underwriter or (y) any untrue statement or alleged
untrue statement made in, or omission or alleged omission from, any
preliminary prospectus or final prospectus, if the final prospectus or the
final prospectus as amended or supplemented, respectively, which shall
have been furnished, to the underwriter or Eligible Holder claiming
indemnification, prior to the time such underwriter sent written
confirmation of or the Eligible Holder made such sale to the person
alleging such statement, alleged statement, omission, or alleged omission,
does not contain such statement, alleged statement, omission, or alleged
omission and a copy of such final prospectus or such prospectus as amended
or supplemented, respectively, shall not have been sent or given to such
person; and provided, further, that in no case shall the Company be liable
for amounts paid in settlement if such settlement is effected without the
written consent of the Company, which consent shall not be unreasonably
withheld.
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(b) To the extent permitted by law, each Eligible Holder
participating in any registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
registration statement, each controlling person, and any underwriters,
against any Damages to which the Company or any such director, officer,
controlling person, or underwriter may become subject, under the
Securities Act, the Exchange Act, or other federal or state law, insofar
as such Damages arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Eligible Holder expressly for use in connection with such registration or
as a result of a circumstance described in clause (y) of Section 4.6(a);
and each such Eligible Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
controlling person, or underwriter in connection with investigating or
defending any such action; provided, however, that the indemnity agreement
contained in this Section 4.6(b) shall not apply to amounts paid in
settlement if such settlement is effected without the consent of the
Eligible Holder, which consent shall not be unreasonably withheld;
provided further that, in no event shall any indemnity under this Section
4.6(b) exceed the net proceeds from the offering received by such Eligible
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 4.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
4.6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually reasonably satisfactory to the
parties; provided, however, that an indemnified party shall have the right
to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding.
(d) To provide for just and equitable contribution under the
Securities Act in any case in which (i) any indemnified party makes claim
for indemnification pursuant to this Section 4.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced
in such case notwithstanding the fact the express provisions of this
Section 4.6 provide for indemnification, or (ii) contribution under the
Securities Act may be required on the part of any indemnified party, then
the indemnifying party in lieu of indemnifying such indemnified party
hereunder shall contribute to the amount paid or payable by such
indemnified party as a result of such Damages in such proportion as is
appropriate to reflect the relative fault of the indemnifying parties on
the one hand and of the indemnified parties on the other in connection
with the statements or omissions which resulted in such Damages as well as
any other relevant
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equitable considerations. The relative fault of the indemnifying parties
and of the indemnified parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information
supplied by the indemnifying party, or by the indemnified party, and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
The parties further agree that it would not be just and equitable if
contribution pursuant to this Section 4.6(d) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the Damages referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any action or claim.
Notwithstanding the provisions of this Section 4.6(d), in no event shall
any contribution under this Section 4.6(d) exceed the net proceeds from
the offering received by such Eligible Holder. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Eligible Holders under this
Section 4.6 shall survive the completion of any offering of Registrable
Securities.
4.7. Amendment of Registration Rights. Any provision of this Article IV
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Majority Holders. Any amendment or waiver
effected in accordance with this Section 4.7 shall be binding upon each holder
of Registrable Securities, each future holder of all such securities, and the
Company.
V Miscellaneous
5.1. Legend. The following legend shall be noted conspicuously on all
certificates
representing shares of Shares heretofore or hereafter issued which are subject
to the terms of this
Agreement:
"The shares represented by this certificate are subject to restrictions on
transfer and voting, as provided in an agreement dated November 18, 1996
among the Company and certain of its stockholders, a copy of which is on
file with the Secretary of the Company."
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Each person signing this Agreement other than the Company agrees severally and
not jointly to deliver to the Company, as promptly as possible but in any event
within ten business days from the date of this Agreement, certificates
representing shares of Shares owned by him for legending.
5.2. Transfers. The Company agrees not to effect a transfer on its books
of any Shares
which are subject to the terms of this Agreement except in accordance with such
terms.
5.3. Secretary to Retain Copy. A copy of this Agreement shall be filed
with the Secretary
of the Company.
5.4. Stock Changes. The provisions of this Agreement shall be deemed to
apply equally
to any Shares or other securities distributed in respect of Shares.
5.5. Further Actions. At any time and from time to time each party
agrees, at its or his
expense, to take such actions and to execute and deliver such documents as may
be reasonably
necessary to effectuate the purposes of this Agreement.
5.6. Availability of Equitable Remedies. Since a breach of the provisions
of this Agreement could not adequately be compensated by money damages, any
party shall be entitled, in addition to any other right or remedy available to
him, to an injunction restraining such breach or a threatened breach and to
specific performance of any such provision of this Agreement, and in either case
no bond or other security shall be required in connection therewith, and the
parties hereby consent to such injunction and to the ordering of specific
performance.
5.7. Modification. This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
5.8. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given at the address of such party set forth in the Purchase Agreement
or, in the case of a person who becomes a Stockholder after the date of this
Agreement, at the address of such party as reflected on the books and records of
the Company (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 5.8). Notices to the
estate of a Stockholder shall be sufficient if addressed to the Stockholder as
provided in this Section 5.8. Except as otherwise specifically provided in this
Agreement, any notice given by certified mail shall be deemed given at the time
of certification thereof except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
5.9. Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall
not operate as or be construed to be a waiver of any other breach of such
provision or of any breach
of any other provision of this Agreement. The failure of a party to insist
upon strict adherence to any
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term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
5.10. Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and the respective
successors and assigns of the corporate parties hereto and the respective
assigns, heirs, and personal representatives of the individual parties hereto,
and shall inure to the benefit of the indemnified parties under Article IV.
5.11. No Third Party Beneficiaries. This Agreement does not create, and
shall not be
construed as creating, any rights enforceable by any person not a party to this
Agreement (except as
provided in Section 5.10).
5.12. Separability. If any provision of this Agreement is invalid,
illegal, or unenforceable,
the balance of this Agreement shall remain in effect, and if any provision is
inapplicable to any person
or circumstance, it shall nevertheless remain applicable to all other persons
and circumstances.
5.13. Headings. The headings in this Agreement are solely for convenience
of reference and
shall be given no effect in the construction or interpretation of this
Agreement
5.14. Pronouns. Any masculine personal pronoun shall be considered to
mean the
corresponding feminine or neuter personal pronoun, as the context requires.
5.15. Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of New York
(except with respect to matters governed by the General Corporation Law of the
State of Delaware), without giving effect to conflict of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
XECHEM INTERNATIONAL, INC.
By /s/ Ramesh C. Pandey
Ramesh C. Pandey, President
/s/ Ramesh C. Pandey
Ramesh C. Pandey
/s/ David Blech
David Blech
AGREED AS TO SECTION 3.2:
/s/ Brian Arenare
Brian Arenare
/s/ Lester A. Mitscher
Lester A. Mitscher
13
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STOCK PURCHASE AGREEMENT
AMONG
XECHEM INTERNATIONAL, INC.,
DAVID BLECH,
AND
RAMESH C. PANDEY
November 18, 1996
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Page
TABLE OF CONTENTS
Page
I. The Exchanges 1
1.1. Terms of the Exchange 1
1.2. The Closings 3
II Representations and Warranties of the Company and Pandey 3
2.1. Organization and Qualification 3
2.2. SEC Reports 3
2.3. Capitalization 3
2.4. Litigation and Claims 4
2.5. Authority to Sell 4
2.6. No Conflicts 4
2.7. Valid Issuance, Etc. 5
2.8. Completeness of Disclosure
III Additional Representations and Warranties of Pandey 5
3.1. Authority to Act 5
3.2. No Conflicts 5
3.3. Non-Distributive Intent 6
3.4. Pandey Debt and Preferred Stock 6
3.5. Completeness of Disclosure 6
IV Representations and Warranties of the Purchaser 6
4.1. Authority to Buy 6
4.2. No Conflicts 6
4.3. Non-Distributive Intent 7
4.4. Completeness of Disclosure 7
V Conditions to Obligations of the Purchaser 7
5.1. Accuracy of Representations and Compliance with Conditions 7
5.2. Opinion of Counsel 8
5.3. Legal Action 8
5.4. No Governmental Action 8
5.5. Contractual Consents Needed 8
5.6. Stockholders Agreement 8
5.7. Pandey Closing 8
5.8. Consulting Agreement 8
5.9. Bankruptcy 8
5.10. Chief Executive 8
VI Conditions to the Obligations of the Company and Pandey 9
6.1. Accuracy of Representations and Compliance with Conditions 9
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Page
6.2. Opinion of Counsel 9
6.3. Legal Action 9
6.4. No Governmental Action 9
6.5. Contractual Consents Needed 9
6.6. Stockholders Agreement 9
6.7. Purchaser Closing 9
6.8. Fairness Opinion 9
VII Covenants and Agreements 9
7.1. Advice of Changes 10
7.2. Confidentiality 10
7.3. Public Statements 10
7.4. Furnish Future Information 10
7.5. Amendment 10
7.6. Nasdaq 11
7.7. Employment Agreement 11
7.8. Expenses 11
7.9. Pandey Debt 11
VIII Indemnification 11
8.1. General 11
8.2. Indemnity Procedures 11
8.3. Exclusivity 12
8.4. Survival 12
IX Termination 12
9.1. Termination 12
9.2. Effect of Termination 13
X Miscellaneous 13
10.1. Further Actions 13
10.2. Availability of Equitable Remedies 13
10.3. Modification 13
10.4. Notices 14
10.5. Waiver 14
10.6. Binding Effect 14
10.7. No Third Party Beneficiaries 15
10.8. Separability 15
10.9. Headings 15
10.10.Counterparts; Governing Law 15
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LIST OF EXHIBITS
Exhibit 1.1 - Stockholders Agreement
Exhibit 2.3A - Capitalization
Exhibit 2.3B - Commitments
Exhibit 2.3C - Warrant Adjustments
Exhibit 2.5 - Certificate of Designation
Exhibit 2.6 - Consents
Exhibit 4.3 - Disclosure Documents
Exhibit 5.2 - Opinion of Duane, Morris & Heckscher
Exhibit 5.8 - Consulting Agreement
Exhibit 6.2 - Opinion of Herzfeld & Rubin
iii
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STOCK PURCHASE AGREEMENT
Agreement, dated November 18, 1996, among Xechem International, Inc., a
Delaware corporation (the "Company"); David Blech (the "Purchaser"); and Ramesh
C. Pandey ("Pandey").
The Purchaser and Pandey desire to acquire certain shares of the capital
stock of the Company, in exchange for cash and debt of the Company as
hereinafter provided, and the Company desires to effect such exchange.
I. The Exchanges
1.1. Terms of the Exchange. On the basis of the representations,
warranties, covenants,
and agreements contained in this Agreement and subject to the terms and
conditions of this
Agreement:
(a) at the Initial Closing (as defined below):
(i) the Company shall issue to the Purchaser a certificate
registered in the name of the Purchaser for 5,000 shares (the
"Initial Shares") of the Class C Series 2 Convertible Voting
Preferred Stock (the "Series 2 Stock") of the Company;
(ii) in consideration for the Initial Shares, the Purchaser
shall deliver to the Company (A) the promissory note, dated October
17, 1996, from the Company to The Edward A. Blech Trust, in the
principal amount of $100,000, and any subsequent promissory notes
issued by the Company to such Trust or the Purchaser, each marked
paid in full, and (B) the excess, if any, of $500,000 over the
aggregate principal amount of such promissory notes and any other
advances made by such Trust or the Purchaser, by wire transfer of
immediately available funds (the Purchaser hereby agreeing to
provide evidence, reasonably acceptable to the Company, at the
Initial Closing that repayment to the Trust of such advances has
been made); and
(iii) the parties shall enter into a Stockholders Agreement
(the "Stockholders Agreement") in the form attached as Exhibit 1.1
hereto;
(b) at each of the Second Closing and the Third Closing
(each as defined below):
(i) the Company shall issue to the Purchaser a certificate
registered in the name of the Purchaser for 5,000 shares (the
"Second Shares" or "Third Shares," respectively) of the Series 2
Stock; and
(ii) in consideration for the Second Shares or Third Shares,
as the case may be, the Purchaser shall deliver to the Company
$500,000 by wire transfer of immediately available funds;
(c) at the Fourth Closing (as defined below),
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(i) the Company shall issue to the Purchaser a certificate
registered in the name of the Purchaser for 7,500 shares (the
"Fourth Shares") of the Series 2 Stock;
(ii) in consideration for the Third Shares, the Purchaser
shall deliver to the Company $750,000 by wire transfer of
immediately available funds;
(iii) the Company shall issue to Pandey a certificate
registered in his name for 13,180 shares (the "Pandey Shares") of
the Class C Series 3 Convertible Voting Preferred Stock (the "Series
3 Stock") of the Company; and
(iv) in consideration for the Pandey Shares, Pandey shall
deliver to the Company (A) all promissory notes or other instruments
evidencing the indebtedness owed as of the date of this Agreement by
the Company or any of its subsidiaries to Pandey (the "Pandey
Debt"), marked paid in full, and (B) the stock certificate(s) held
by Pandey representing the Class B 8% Preferred Stock of the Company
(the "Class B Preferred Stock"), together with a stock power related
thereto;
(d) at the Fifth Closing (as defined below):
(i) the Company shall issue to the Purchaser a certificate
registered in the name of the Purchaser for 17,500 shares (the
"Fifth Shares") of the Series 2 Stock; and
(ii) in consideration for the Fifth Shares, the Purchaser
shall deliver to the Company $1,750,000 by wire transfer of
immediately available funds; and
(e) at the Sixth Closing (as defined below),
(i) the Company shall issue to the Purchaser a certificate
registered in the name of the Purchaser for 10,000 shares (the
"Sixth Shares") of the Series 2 Stock;
(ii) in consideration for the Sixth Shares, the Purchaser
shall deliver to the Company $1,000,000 by wire transfer of
immediately available funds;
(f) at the Final Closing (as defined below):
(i) the Company shall issue to the Purchaser a certificate
registered in the name of the Purchaser for 5,000 shares (the "Final
Shares" and, together with the Initial Shares, the Second Shares,
the Third Shares, the Fourth Shares, the Fifth Shares, and the Sixth
Shares, the "Purchaser Shares") of the Series 2 Stock;
(ii) in consideration for the Final Shares, the Purchaser
shall deliver to the Company $500,000 by wire transfer of
immediately available funds.
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(g) Notwithstanding the foregoing, if, prior to any Closing Date (as
hereinafter defined), the Conversion Date (as defined in the Certificate of
Designation (as hereinafter defined)) has occurred, the Purchaser and Pandey, to
the extent applicable, shall receive, at the Closing (as hereinafter defined)
held on such Closing Date, in lieu of the shares of Series 2 Stock or Series 3
Stock, respectively, issuable as provided above, the shares of Common Stock into
which such shares of Series 2 Stock or Series 3 Stock would have been
convertible on such Closing Date. In such case, the shares of Common Stock so
delivered shall be deemed the Purchaser Shares or Pandey Shares delivered at
such Closing.
(h) At the option of the Purchaser, the Purchaser may, at any Closing,
purchase some or all of the Purchaser Shares to be purchased at a subsequent
Closing. The Purchaser shall give the Company five business days prior notice of
intent to exercise the option set forth in this Section 1.1(h).
1.2. The ClosingsThe closing of the transactions contemplated by Section
1.1(a) (the "Initial Closing") shall take place on or as soon as practicable
after the date hereof (the "Initial Closing Date"). The closings of the
transactions contemplated by Sections 1.1(b), (c), (d), (e), and (f) (the
"Second Closing," "Third Closing," "Fourth Closing," "Fifth Closing," "Sixth
Closing," and "Final Closing," consecutively, and collectively, including the
Initial Closing, the "Closings") shall take place on such dates (the "Second
Closing Date," "Third Closing Date," "Fourth Closing Date," "Fifth Closing
Date," "Sixth Closing Date," and "Final Closing Date," consecutively, and
collectively, including the Initial Closing Date, the "Closing Dates") shall
take place on or before December 2, 1996, December 16, 1996, January 15, 1997,
February 17, 1997, June 2, 1997, and July 15, 1997, consecutively, as the
Purchaser shall, on five business days notice, inform the Company that the
Purchaser is prepared to proceed with the respective Closing. Each Closing shall
take place at the offices of Duane, Morris & Heckscher, 122 East 42nd Street,
New York, New York.
II Representations and Warranties of the Company and Pandey
The Company and Pandey, jointly and severally, represent and warrant to
the Purchaser as follows:
2.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with all requisite power and authority to own, lease, license, and use
its properties and assets and to carry on the business in which it is now
engaged and the business in which it contemplates engaging.
2.2. SEC Reports. The Company has delivered to the Purchaser true and
correct copies of its Annual Report on Form 10-KSB, as amended, for the year
ended December 31, 1995 (the "10- K"), Quarterly Reports on Form 10-QSB for the
periods ended March 31 and June 30, 1996, all Current Reports on Form 8-K filed
with the Securities and Exchange Commission (the "SEC") since the filing of the
10-K, and its Proxy Statement dated May 24, 1996 (collectively, the "SEC
Reports"). None of the SEC Reports when filed with the SEC contained an untrue
statement of a material fact
3
<PAGE>
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading. From the date of the last
SEC Report to each Closing Date, no event has occurred which caused a material
adverse change in the business of the Company, except as disclosed (a) in this
Agreement or one of the Exhibits hereto, (b) in a report or statement filed with
the SEC on or before such Closing Date, a copy of which is delivered to the
Purchaser in accordance with Section 7.4, or (c) to the Purchaser in writing
prior to such Closing Date.
2.3. Capitalization. Set forth on Exhibit 2.3A is the capitalization of
the Company (a) as of August 31, 1996 and (b) pro forma, giving effect to
certain transactions described on Exhibit 2.3A which occurred subsequent to such
date and prior to the date hereof and to the transactions contemplated by this
Agreement as if all such transactions (including the issuance of all of the
Purchaser Shares and Pandey Shares) had occurred on such date. Since August 31,
1996, the Company has not issued any shares of its capital stock except (c) as
indicated on Exhibit 2.3A or Exhibit 2.3B, (d) issuances on exercises of
previously outstanding stock options, (e) pursuant to this Agreement, or (f)
issuance approved in writing by the Purchaser or approved by the Board of
Directors of the Company at a time when a majority of the directors of the
Company were nominees of the Purchaser. Other than this Agreement or as
described on Exhibit 2.3B, there is (g) no commitment, plan, or arrangement to
issue, or outstanding option, warrant, or other right calling for the issuance
of, any share of capital stock of the Company, or to issue or calling for the
issuance of any security or other instrument convertible into, exercisable for,
or exchangeable for capital stock of the Company, and (h) no outstanding
security or other instrument convertible into or exchangeable for capital stock
of the Company. Set forth as Exhibit 2.3C is a description of the adjustments
made in the exercise price of certain outstanding warrants (the "Warrants") and
estimated adjustments which will result from the transactions contemplated
hereby. It is understood that such estimated adjustments are based on various
assumptions, as indicated on Exhibit 2.3C (including, without limitation, dates
for and numbers of shares to be issued at the Closings which are not identical
to the dates and numbers of shares set forth in Section 1.1), and that no
representation is made as to whether such assumptions are reasonable, are likely
to be or will be achieved, or as to the adjustments to such exercise price which
would result from facts different than those set forth in such assumptions.
2.4. Litigation and Claims. Except as disclosed in the SEC Reports, there
is no litigation, arbitration, claim, governmental or other proceeding (formal
or informal), or investigation pending or threatened, with respect to the
Company, except as would not be reasonably likely to have a material adverse
effect on the Company and its subsidiaries (each, a "Subsidiary") taken as a
whole.
2.5. Authority to Sell. The Company has all requisite power and authority
to execute, deliver, and perform this Agreement and the Stockholders Agreement.
All necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance of this Agreement and the
Stockholders Agreement by the Company, except for (a) the filing of the Amended
and Restated Certificate of Designation setting forth the terms of the Series 2
Stock and the Series 3 Stock (the "Certificate of Designation"), which will be
filed, in the form attached hereto as Exhibit 2.5, on or before the First
Closing Date and (b) approval of the stockholders of the Company ("Stockholder
Approval") of an amendment to the Certificate of
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Incorporation (the "Amendment") to increase the number of authorized shares of
the Company's Common Stock (the "Common Stock") as contemplated by Section 7.5.
Each of this Agreement and the Stockholders Agreement has been duly authorized
by the Company, this Agreement has been, and at the Initial Closing the
Stockholders Agreement will be, duly executed and delivered by the Company, and
each of this Agreement and the Stockholders Agreement constitutes or will
constitute the legal, valid, and binding obligation of the Company and is or
will be enforceable as to the Company in accordance with its terms.
2.6. No Conflicts. Except as set forth in Sections 7.5 and 7.6, no
consent, authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by the Company
for the execution, delivery, or performance of this Agreement and the
Stockholders Agreement by the Company. No consent of any party to any contract,
agreement, instrument, lease, or license (collectively, "Contracts") to which
the Company or any Subsidiary is a party, or to which it or any of its
businesses, properties, or assets are subject, is required for the execution,
delivery, or performance of this Agreement and the Stockholders Agreement by the
Company (except consents referred to in Exhibit 2.6); and the execution,
delivery, and performance of this Agreement and the Stockholders Agreement by
the Company will not (if the consents referred to in Exhibit 2.6 are obtained
prior to the Initial Closing) violate, result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under, entitle any party to rights and
privileges that such party was not receiving or entitled to receive immediately
before this Agreement was executed under, or create any obligation on the part
of the Company or any Subsidiary that it was not paying or obligated to pay
immediately before this Agreement was executed under, any term of any such
Contract or violate or result in a breach of any term of the certificate of
incorporation (or other charter document) or by-laws of the Company or any
Subsidiary, or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on the Company or any Subsidiary
or to which it or any of its businesses, properties, or assets are subject.
2.7. Valid Issuance, Etc. At each Closing, the Purchaser Shares or Pandey
Shares to be issued at such Closing will be validly authorized, validly issued,
fully paid, and nonassessable and will not have been issued in violation of any
preemptive right of stockholders, and the Purchaser or Pandey, as the case may
be, will receive good title to the shares issued to it or him, free and clear of
all liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts, other than the Stockholders Agreement. Subject to
receipt of the Stockholder Approval and filing of the Amendment, the shares of
Common Stock issuable on conversion of the Purchaser Shares and Pandey Shares
(the "Conversion Shares") have been reserved for issuance and, when issued and
delivered on conversion of the Purchaser Shares or Pandey Shares, will be
validly authorized, validly issued, fully paid, and nonassessable and will not
have been issued in violation of any preemptive right of stockholders, and the
holders of such converted the Purchaser Shares or Pandey Shares, as the case may
be, will receive good title to the shares issued to it or him, free and clear of
all liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts, other than the Stockholders Agreement.
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2.8. Completeness of Disclosure. No representation or warranty by the
Company in this Agreement contains or (except for changes beyond the control of
the Company) on any Closing Date will contain an untrue statement of a material
fact or omits or (except for changes beyond the control of the Company) on any
Closing Date will omit to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading.
III Additional Representations and Warranties of Pandey
Pandey represents and warrants to the other parties hereto as follows:
3.1. Authority to Act. This Agreement has been, and at the Initial Closing
the Stockholders Agreement will be, duly executed and delivered by Pandey, and
each of this Agreement and the Stockholders Agreement constitutes or will
constitute the legal, valid, and binding obligation of Pandey and is or will be
enforceable as to Pandey in accordance with its terms.
3.2. No Conflicts. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by Pandey for the execution, delivery, or performance of this Agreement
and the Stockholders Agreement by Pandey. No consent of any party to any
Contract to which Pandey is a party, or to which he or any of his businesses,
properties, or assets are subject, is required for the execution, delivery, or
performance of this Agreement and the Stockholders Agreement by Pandey (except
consents referred to in Exhibit 2.6); and the execution, delivery, and
performance of this Agreement and the Stockholders Agreement by Pandey will not
(if the consents referred to in Exhibit 2.6 are obtained prior to the Initial
Closing) violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to terminate
or call a default under, entitle any party to rights and privileges that such
party was not receiving or entitled to receive immediately before this Agreement
was executed under, or create any obligation on the part of Pandey that he was
not paying or obligated to pay immediately before this Agreement was executed
under, any term of any such Contract, or violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment, or decree binding on
Pandey or to which he or any of his businesses, properties, or assets are
subject.
3.3. Non-Distributive Intent. Pandey is an "accredited investor," as
defined in Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). Pandey is acquiring the Pandey Shares, and on conversion
of any Pandey Shares will acquire the underlying Conversion Shares, for his own
account (and not for the account of others) for investment and not with a view
to the distribution thereof. Pandey will not sell or otherwise dispose of the
Pandey Shares or Conversion Shares (whether pursuant to a liquidating dividend
or otherwise) without registration under the Securities Act or an exemption
therefrom, and the certificate or certificates representing the Pandey Shares
and the Conversion Shares may contain a legend to the foregoing effect. Pandey
has been given access to the kind of financial and other information about the
Company as would be contained in a registration statement filed under the
Securities Act. Pandey understands that he may not sell or otherwise dispose of
the Pandey Shares or Conversion Shares in
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the absence of either a registration statement under the Securities Act or an
exemption from the registration provisions of the Securities Act.
3.4. Pandey Debt and Preferred Stock. Pandey owns all of the Pandey Debt
and all of the shares of Class B Preferred Stock, in each case free and clear of
all liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts, other than this Agreement and the agreement
referred to on Exhibit 2.6. Pandey owns no other shares of preferred stock of
the Company, except 2,500 shares of the Class A Voting Preferred Stock of the
Company.
3.5. Completeness of Disclosure. No representation or warranty by Pandey
in this Agreement contains or (except for changes beyond the control of Pandey)
on any Closing Date will contain an untrue statement of a material fact or omits
or (except for changes beyond the control of Pandey) on any Closing Date will
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading.
IV Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the other parties hereto as
follows:
4.1. Authority to Buy. This Agreement has been, and at the Initial Closing
the Stockholders Agreement will be, duly executed and delivered by the
Purchaser, and each of this Agreement and the Stockholders Agreement is or will
be the legal, valid, and binding obligation of the Purchaser and is or will be
enforceable as to the Purchaser in accordance with its terms.
4.2. No Conflicts. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by the Purchaser for the execution, delivery, or performance of this
Agreement and the Stockholders Agreement by the Purchaser. No consent of any
party to any Contract to which the Purchaser is a party, or to which it or any
of its businesses, properties, or assets are subject, is required for the
execution, delivery, or performance of this Agreement and the Stockholders
Agreement by the Purchaser; and the execution, delivery, and performance of this
Agreement and the Stockholders Agreement by the Purchaser will not violate,
result in a breach of, conflict with, or (with or without the giving of notice
or the passage of time or both) entitle any party to terminate or call a default
under, entitle any party to rights and privileges that such party was not
receiving or entitled to receive immediately before this Agreement was executed
under, or create any obligation on the part of the Purchaser that it was not
paying or obligated to pay immediately before this Agreement was executed under,
any term of any such Contract, or violate, result in a breach of, or conflict
with any law, rule, regulation, order, judgment, or decree binding on the
Purchaser or to which it or any of its businesses, properties, or assets are
subject.
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4.3. Non-Distributive Intent. The Purchaser is an accredited investor. The
Purchaser is acquiring the Purchaser Shares, and on conversion of any the
Purchaser Shares will acquire the underlying Conversion Shares, for its own
account (and not for the account of others) for investment and not with a view
to the distribution thereof. The Purchaser will not sell or otherwise dispose of
the Purchaser Shares or Conversion Shares (whether pursuant to a liquidating
distribution or otherwise) without registration under the Securities Act or an
exemption therefrom, and the certificate or certificates representing the
Purchaser Shares and the Conversion Shares may contain a legend to the foregoing
effect. The Purchaser has been given access to the kind of financial and other
information about the Company as would be contained in a registration statement
filed under the Securities Act. Without limiting the foregoing, the Purchaser
acknowledges receipt of the SEC reports and the other documents listed in or
attached to Exhibit 4.3. The Purchaser understands that it may not sell or
otherwise dispose of the Purchaser Shares or Conversion Shares in the absence of
either a registration statement under the Securities Act or an exemption from
the registration provisions of the Securities Act.
4.4. Completeness of Disclosure. No representation or warranty by the
Purchaser in this Agreement contains or (except for changes beyond the control
of the Purchaser) on any Closing Date will contain an untrue statement of a
material fact or omits or (except for changes beyond the control of the
Purchaser) on any Closing Date will omit to state a material fact required to be
stated therein or necessary to make the statements made therein not misleading.
V Conditions to Obligations of the Purchaser
The obligations of the Purchaser at any Closing under this Agreement are
subject, at the option of the Purchaser, to the following conditions:
5.1. Accuracy of Representations and Compliance with Conditions. All
representations and warranties of the Company or Pandey contained in this
Agreement shall be accurate when made and, in addition, shall be accurate as of
such Closing as though such representations and warranties were then made in
exactly the same language by the Company or Pandey (except for changes beyond
its or his control); as of the Closing the Company and Pandey shall have
performed and complied with all covenants and agreements and satisfied all
conditions required to be performed and complied with by any of them at or
before such time by this Agreement; and the Purchaser shall have received
certificates executed by the President or Vice President - Finance and
Operations of the Company and by Pandey, dated the respective Closing Date, to
that effect.
5.2. Opinion of Counsel. The Purchaser shall have received on such Closing
Date the opinion of Duane, Morris & Heckscher, counsel to the Company, dated as
of such date, in the form attached as Exhibit 5.2.
5.3. Legal Action. There shall not have been instituted or threatened
any legal proceeding
relating to, or seeking to prohibit or otherwise challenge the consummation of,
the transactions
contemplated by this Agreement, or to obtain substantial damages with respect
thereto.
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5.4. No Governmental Action. There shall not have been any action taken,
or any law, rule, regulation, order, or decree proposed, promulgated, enacted,
entered, enforced, or deemed applicable to the transactions contemplated by this
Agreement by any federal, state, local, or other governmental authority or by
any court or other tribunal, including the entry of a preliminary or permanent
injunction, which makes any of the transactions contemplated by this Agreement
illegal or prohibits, restricts, or delays consummation of any of the
transactions contemplated by this Agreement.
5.5. Contractual Consents Needed. The Company shall have obtained at or
prior to such
Closing the consents listed in Exhibit 2.6.
5.6. Stockholders Agreement. The Stockholders Agreement shall have been
duly
authorized, executed, and delivered by Pandey and the Company at or prior to
such Closing and at
such Closing shall be in full force.
5.7. Pandey Closing. The exchange by Pandey of the Pandey Debt and shares
of Class B Preferred Stock for the Pandey Shares shall have been consummated;
provided, that this Section 5.7 shall be a condition only with respect to the
Fourth Closing and each subsequent Closing.
5.8. Consulting Agreement. At the Initial Closing, the Company shall
have executed and
delivered a Consulting Agreement with Mark Germain substantially in the form
attached hereto as
Exhibit 5.8.
5.9. Bankruptcy. At such Closing Date, there shall not have been entered
any decree or order by a court having jurisdiction adjudging the Company a
bankrupt or insolvent, or approving a petition seeking reorganization,
arrangement, adjustment, or composition of or in respect of the Company, under
any federal or state bankruptcy law, and the Company shall not have (a)
commenced a voluntary case under any federal or state bankruptcy law, (b)
consented to the institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking reorganization or
relief under federal or state bankruptcy law or the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, or similar official of the Company
or of any substantial part of its property, (c) made an assignment for the
benefit of creditors, (d) admitted in writing its inability to pay its debts
generally as they become due, or (e) taken any action in furtherance of any such
action.
5.10. Chief Executive. At such Closing Date, Pandey shall be the Chief
Executive Officer of the Company; provided, that this Section 5.10 shall not
apply if Pandey shall have been removed (other than for cause) as Chief
Executive Officer by action of the Purchaser or any of its nominees as directors
of the Company.
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VI Conditions to the Obligations of the Company and Pandey
The obligations of the Company and Pandey under this Agreement are
subject, at the option of the Company and Pandey, to the following conditions:
6.1. Accuracy of Representations and Compliance with Conditions. All
representations and warranties of the Purchaser contained in this Agreement
shall be accurate when made and, in addition, shall be accurate as of such
Closing as though such representations and warranties were then made in exactly
the same language by the Purchaser (except for changes beyond its control); as
of the Closing the Purchaser shall have performed and complied with all
covenants and agreements and satisfied all conditions required to be performed
and complied with by it at or before such time by this Agreement; and the
Company and Pandey shall have received a certificate executed on behalf of the
Purchaser, dated the respective Closing Date, to that effect.
6.2. Opinion of Counsel. The Company shall have received on the First
Closing Date the
opinion of Herzfeld & Rubin, counsel to the Purchaser, dated as of such date,
in the form attached
as Exhibit 6.2.
6.3. Legal Action. There shall not have been instituted or threatened
any legal proceeding
relating to, or seeking to prohibit or otherwise challenge the consummation of,
the transactions
contemplated by this Agreement, or to obtain substantial damages with respect
thereto.
6.4. No Governmental Action. There shall not have been any action taken,
or any law, rule, regulation, order, or decree proposed, promulgated, enacted,
entered, enforced, or deemed applicable to the transactions contemplated by this
Agreement by any federal, state, local, or other governmental authority or by
any court or other tribunal, including the entry of a preliminary or permanent
injunction, which makes any of the transactions contemplated by this Agreement
illegal or prohibits, restricts, or delays consummation of any of the
transactions contemplated by this Agreement.
6.5. Contractual Consents Needed. The Company shall have obtained at or
prior to such
Closing the consents listed in Exhibit 2.6.
6.6. Stockholders Agreement. The Stockholders Agreement shall have been
duly
authorized, executed, and delivered by the Purchaser at or prior to such Closing
and at such Closing
shall be in full force.
6.7. Purchaser Closing. The purchase by the Purchaser of the Purchaser
Shares to be
purchased on or prior to such Closing Date shall have been consummated.
6.8. Fairness Opinion. The Company shall have received a written
fairness opinion, in
form and substance satisfactory to the Company, from The Griffin Group, Inc.
with respect to the
transactions contemplated by this Agreement.
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VII Covenants and Agreements
The parties covenant and agree as follows:
7.1. Advice of Changes Until the Final Closing or the termination of this
Agreement, each party will advise the others of any fact or occurrence of which
such party obtains knowledge and which (if existing and known at the date of the
execution of this Agreement) would have been required to be set forth or
disclosed in or pursuant to this Agreement or an Exhibit hereto, which (if
existing and known at any time prior to or at the Closing) would make the
performance by any party of a covenant contained in this Agreement impossible or
make such performance materially more difficult than in the absence of such fact
or occurrence, or which (if existing and known at the time of a subsequent
Closing) would cause a condition to any party's obligations under this Agreement
not to be fully satisfied.
7.2. Confidentiality. Each party shall insure that all confidential
information which such party or any of its officers, directors, employees,
counsel, agents, investment bankers, or accountants may now possess or may
hereafter create or obtain relating to the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
any other party shall not be published, disclosed, or made accessible by any of
them to any other person or entity at any time or used by any of them except in
the business and for the benefit of the party to whom such information belongs,
in each case without the prior written consent of such party; provided, however,
that the restrictions of this sentence shall not apply (a) as may otherwise be
required by law, (b) as may be necessary or appropriate in connection with the
enforcement of this Agreement, or (c) to the extent such information shall have
otherwise become publicly available.
7.3. Public Statements. Before any party shall release any information
concerning this Agreement or the transactions contemplated by this Agreement
which is intended for or would be likely to result in public dissemination
thereof, it shall cooperate with the other parties, shall furnish drafts of such
disclosure to the other parties for comments, and shall not release any such
information without the written consent of such other parties, such consent not
to be unreasonably withheld; provided, that (a) any party may, without complying
with this Section 7.3, make such disclosure if such disclosure is substantially
similar to public disclosure previously made by any party and (b) nothing
contained herein shall prevent any party from releasing any information to any
governmental authority if required to do so by law or the Company from
describing this Agreement and the transactions contemplated herein to the extent
the Company reasonably believes it is required in its reports and filings under
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
7.4. Furnish Future Information. Until the Final Closing or the
termination of this Agreement, and thereafter so long as the Purchaser and its
permitted assignees hereunder shall hold at least 10% of the Purchaser Shares or
underlying Conversion Shares, the Company will furnish to the Purchaser and such
assignees, promptly upon their becoming available, copies of all financial
statements, reports, notices, and proxy statements sent by the Company to its
stockholders, all regular
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and periodic reports filed by the Company with any securities exchange or with
the SEC, and all press releases.
7.5. Amendment. The Company will, and Pandey will cause the Company to,
use their best efforts to, as soon as practicable, (a) file a proxy or
information statement relating to, and call and hold a meeting of or obtain
written consent of the stockholders of the Company to approve, the Amendment,
(b) obtain the Stockholder Approval, and (c) file the Amendment. The Company
shall give the Purchaser prompt notice of the filing of the Amendment. Each of
Pandey and the Purchaser agrees to vote or execute a written consent with
respect to all shares of capital stock of the Company owned by him or it in
favor of the Amendment.
7.6. Nasdaq. Promptly after the date hereof, the Company shall give
notice to the Nasdaq
Stock Market, Inc. of the issuance or potential issuance of the Purchaser
Shares and Pandey Shares
and the potential issuance of the Conversion Shares.
7.7. Employment Agreement. For purposes of Section 5.5 of the Employment
Agreement, dated February 1994, between Pandey and the Company, Pandey hereby
agrees that he has approved the transactions contemplated by this Agreement and
that, accordingly, such transactions do not and will not result in a "Change in
Control" as defined in such Employment Agreement.
7.8. Expenses. The Company shall pay the reasonable attorneys' fees and
expenses of the Purchaser's counsel, not to exceed $15,000 in the aggregate. The
Company shall pay such expenses at the Initial Closing or thereafter upon
presentation of invoices therefor. Except for the foregoing, each party shall be
responsible for his or its own expenses in connection with this Agreement.
7.9. Pandey Debt. Effective upon delivery of the Pandey Shares, Pandey
hereby releases and discharges all claims and causes of action, whether known or
unknown, which he or his heirs, personal representatives, successors, or assigns
ever had, now have, or hereafter may have against the Company on account of or
relating to the Pandey Debt.
VIII Indemnification
8.1. General. Each party (the "indemnifying party") shall indemnify and
hold harmless the other parties and the other parties' affiliates, officers,
directors, trustees, stockholders, employees, agents, and representatives (each,
an "indemnified party") from and against any and all liabilities, claims,
demands, actions, suits, losses, damages, costs, and expenses (including,
without limitation, reasonable attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation) (collectively,
"Damages"), based upon or arising out of a breach of any covenant, agreement,
representation, or warranty made by the indemnifying party in this Agreement or
the Stockholders Agreement.
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8.2. Indemnity Procedures. (a) An indemnified party seeking
indemnification under this Agreement in respect of, arising out of, or involving
a claim or demand made by any person or governmental authority against the
indemnified party (a "Third Party Claim") shall notify the indemnifying party in
writing of the Third Party Claim within 20 days after receipt by the indemnified
party of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
under this Agreement, except to the extent the indemnifying party shall have
been prejudiced by such failure. Thereafter, the indemnified party shall deliver
to the indemnifying party, promptly after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim.
(b) The indemnifying party shall have the right, within 30 days after
being so notified, to assume the defense of such Third Party Claim with counsel
reasonably satisfactory to the indemnified party. In any such proceeding the
defense of which the indemnifying party shall have so assumed, the indemnified
party shall have the right to participate therein and retain its own counsel at
its own expense unless (i) the indemnified party and the indemnifying party
shall have mutually agreed to the retention of such counsel, (ii) the
indemnified party shall have reasonably concluded on the basis of an opinion of
its counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party,
or (iii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party, and
representation of both parties by the same counsel would be inappropriate in the
opinion of the indemnified party's counsel due to actual or potential differing
interests between them; in any such case, one such separate counsel may be
retained by all indemnified parties as a group at the indemnifying party's
expense. To the extent that the settlement of such a Third Party Claim, the
defense of which has been assumed by the indemnifying party, involves the
payment of money only, the indemnifying party shall have the right, in
consultation with the indemnified party, to settle those aspects dealing only
with the payment of money, provided that the indemnifying party pays such money
and such settlement includes a general release from the other parties to such
Third Party Claim in favor of the indemnified party. In connection with any such
defense or settlement, the indemnifying party shall not enter into a consent
decree involving injunctive or non-monetary relief or consent to an injunction
without the indemnified party's prior written consent.
(c) The indemnified party shall cooperate in all reasonable respects with
the indemnifying party in connection with any Third Party Claims and the defense
or compromise thereof. Such cooperation shall include the retention and (upon
the indemnifying party's request) the provision to the indemnifying party of
records and information reasonably relevant to the Third Party Claim, making
employees available on a mutually convenient basis to provide additional
information, and explanation of any material provided under this Agreement. If
the indemnifying party shall have assumed the defense of a Third Party Claim,
the indemnified party shall not, without first waiving the indemnity as to such
claim, admit any liability with respect to, or settle, compromise, or discharge,
the Third Party Claim, without the indemnifying party's prior written consent,
which consent shall not be unreasonably withheld; provided that admissions of
facts which a party may reasonably be required to make shall not be deemed to be
admissions of liability.
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8.3. Exclusivity. The indemnification provided by this Article VIII shall
be the sole remedy (other than termination of this Agreement pursuant to Article
IX) for any matters relating to Third Party Claims; provided, that this Section
8.3 shall not prohibit injunctive relief if available under applicable law.
8.4. Survival. All representations, warranties, covenants, and agreements
contained in this Agreement shall survive the execution and delivery of this
Agreement and the Closings hereunder for a period of, and shall terminate on,
the first anniversary of, the Final Closing, and no claim with respect to a
breach thereof shall be made thereafter; provided, that representations and
warranties contained in Sections 2.3, 2.7, 3.3, 3.4, and 4.3 shall survive
indefinitely.
IX Termination
9.1. Termination. This Agreement may be terminated at any time prior to
any Closing:
(a) by mutual written consent executed by the Company, Pandey,
and the
Purchaser;
(b) by the Company and Pandey, acting jointly, or the Purchaser, by
notice given to the Company and Pandey in writing, without liability to
the terminating party or parties on account of such termination (providing
the terminating party or parties are not otherwise in default or in breach
of this Agreement), if (i) any of the conditions to their or its
obligations under this Agreement shall not have been satisfied or waived
in writing by such parties or party or (ii) the other party or parties
shall have failed to perform in any material respect its or their
covenants or agreements contained herein required to be performed prior to
the Closing, or shall have breached any of its or their representations or
warranties contained herein, in each instance in a material respect (and
provided that the terminating parties or party shall afford the other
party or parties at least 15 business days notice of and opportunity to
cure such breach), unless such failure is attributable to the breach by
the terminating party or parties of any of its or their obligations to
consummate the transactions contemplated hereby or of any of its or their
other obligations hereunder; or
(c) by any party, by notice given to the other parties in writing,
without liability, if the transactions contemplated hereby shall violate
any non-appealable final order, decree, or judgment of any governmental
authority having competent jurisdiction or if there shall be a statute,
rule, or regulation that makes such purchase illegal or otherwise
prohibited.
9.2. Effect of Termination. Upon any termination of this Agreement
pursuant to Section 9.1, none of the parties shall have any liability or
obligation to the others arising out of this Agreement except for any liability
arising from a party's breach of this Agreement prior to such termination;
provided that (a) if this Agreement shall be terminated after the occurrence of
a Closing and prior to the occurrence of one or more other Closing, this
Agreement shall remain in effect except with respect to the transactions
contemplated to occur after the date of such termination, (b) the
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termination of this Agreement by a party or parties as a result of the failure
or refusal of another party or parties to close all or any part of the
transactions contemplated by Section 1.1 when and as required by this Agreement
shall not relieve the defaulting party or parties from any liability for such
failure or refusal to close (except that a termination resulting from the
failure by the Purchaser to consummate the purchase of the Third Shares, Fourth
Shares, Fifth Shares, Sixth Shares, or Final Shares shall relieve the Purchaser
from such liability and shall be the sole remedy for such failure), and (c) in
any case, the provisions of Sections 7.2, this Section 9.2, and Articles VIII
and X shall survive such termination.
X Miscellaneous
10.1. Further Actions. At any time and from time to time, each party
agrees, at its or his
expense, to take such actions and to execute and deliver such documents as may
be reasonably
necessary to effectuate the purposes of this Agreement.
10.2. Availability of Equitable Remedies. Since a breach of the provisions
of this Agreement could not adequately be compensated by money damages, any
party shall be entitled, either before or after the Closing, in addition to any
other right or remedy available to it, to an injunction restraining such breach
or a threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such an
injunction and to the ordering of specific performance.
10.3. Modification. This Agreement and the Exhibits hereto set forth the
entire understanding of the parties with respect to the subject matter hereof,
supersede all existing agreements among them concerning such subject matter, and
may be modified only by a written instrument duly executed by each party.
10.4. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail, or similar
overnight delivery or courier service, or delivered (in person or by telecopy,
telex, or similar telecommunications equipment) against receipt to the party to
whom it is to be given,
(a) if to the Company or Pandey, at
Xechem International, Inc.
100 Jersey Avenue
Building B, Suite 310
New Brunswick, NJ 08901
Attn: Dr. Ramesh C. Pandey, President
Facsimile No. (908) 247-4090
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(b) if to the Purchaser,
225 Lafayette Street
Suite 1214
New York, NY 10012
Facsimile No. (212) 431-5952
or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 10.4. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 10.4 shall be deemed given at the time of receipt
thereof.
10.5. Waiver. Any waiver by any party of a breach of any term of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that term or of any breach of any other term of this Agreement. The
failure of a party to insist upon strict adherence to any term of this Agreement
on one or more occasions will not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
10.6. Binding Effect. No party may sell, assign, transfer, or otherwise
convey any of its or his rights or delegate any of its or his duties under this
Agreement, except as hereinafter provided, and this Agreement shall be binding
upon and inure to the benefit of the parties hereto and the respec tive
permitted successors, assigns, and personal representatives of the parties.
Notwithstanding the foregoing, the Purchaser may assign its rights and delegate
its obligations to purchase any of the Shares to any person or persons, provided
that (a) such person or persons agree to be bound by this Agreement and the
Stockholders Agreement as if such person or persons were the Purchaser,
including, without limitation, that each such person shall make representations
with respect to himself or itself similar to those made by the Purchaser herein,
(b) each such person shall be reasonably acceptable to the Company (the Company
hereby agreeing that The Edward A. Blech Trust and Mark Germain are reasonably
acceptable assignees), and (c) no such assignment or delegation shall relieve
the Purchaser of its obligations to purchase any such shares if such assignee
does not. Any attempted sale, assignment, transfer, conveyance, or delegation in
violation of this Section 10.6 shall be void. The provisions of this Agreement
shall inure to the benefit of each indemnified party and its successors and
assigns (if not a natural person) and his assigns, heirs, and personal
representatives (if a natural person).
10.7. No Third Party Beneficiaries. This Agreement does not create, and
shall not be
construed as creating, any rights enforceable by any person not a party to this
Agreement (except as
provided in Section 10.6).
10.8. Separability. If any provision of this Agreement is invalid,
illegal, or unenforceable,
the balance of this Agreement shall remain in effect, and if any provision is
inapplicable to any person
or circumstance, it shall nevertheless remain applicable to all other persons
and circumstances.
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10.9. Headings. The headings in this Agreement are solely for convenience
of reference and
shall be given no effect in the construction or interpretation of this Agreement
10.10.Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
XECHEM INTERNATIONAL, INC.
By /s/ Ramesh C. Pandey
Ramesh C. Pandey, President
/s/ Ramesh C. Pandey
Ramesh C. Pandey
/s/ David Blech
David Blech
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AMENDED
CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RIGHTS
OF
CLASS C SERIES 2 VOTING CONVERTIBLE PREFERRED STOCK
AND
CLASS C SERIES 3 VOTING CONVERTIBLE PREFERRED STOCK
OF
XECHEM INTERNATIONAL, INC.
Xechem International, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that (i) no shares of its Class C Series 2 Voting Convertible
Preferred Stock or Class C Series 3 Voting Convertible Preferred Stock have been
issued and (ii) pursuant to the authority contained in Article FOURTH of its
Certificate of Incorporation, and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Corporation's
Board of Directors has duly adopted the following resolution amending and
restating the voting powers, designations, preferences, and relative,
participating, optional, and other special rights of the shares of each such
series, and the qualifications, limitations, or restrictions thereof:
RESOLVED, that two series of the class of the authorized Class C Preferred
Stock of the Corporation be created hereby, and that the designations and
amounts thereof and the voting powers, preferences, and relative, participating,
optional, and other special rights of the shares of each such series, and the
qualifications, limitations, or restrictions thereof, are as follows:
1. Designations and Numbers of Shares. Fifty-five thousand (55,000) shares
of the Class C Preferred Stock of the Corporation are hereby constituted as a
series of Class C Preferred Stock, $.00001 par value per share, and designated
as "Class C Series 2 Voting Convertible Preferred Stock" (hereinafter called the
"Series 2 Stock") and thirteen thousand one hundred eighty (13,180) shares of
the Class C Preferred Stock of the Corporation are hereby constituted as a
series of Class C Preferred Stock, $.00001 par value per share, and designated
as "Class C Series 3 Voting Convert ible Preferred Stock" (hereinafter called
the "Series 3 Stock"; the Series 2 Stock and the Series 3 Stock are hereinafter
collectively called the "1996 Convertible Preferred Stock").
2. Liquidation. Upon any voluntary or involuntary dissolution,
liquidation, or winding
up of the Corporation (a "Liquidation"), the holder of each share of each series
of 1996 Convertible
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation
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available for distribution to its stockholders, before any distribution of
assets shall be made to the holders of Common Stock of the Corporation or to the
holders of other stock of the Corporation that ranks junior to such series of
the 1996 Convertible Preferred Stock in respect to distributions upon a
Liquidation of the Corporation ("Junior Stock"), an amount equal to $100 per
share (the "Stated Value"), plus an amount equal to all dividends (whether or
not declared or due) accrued and unpaid on such share on the date fixed for
distribution of assets of the Corporation to the holders of the 1996 Convertible
Preferred Stock. The Series 2 Stock and Series 3 Stock shall rank pari passu in
right to distributions on Liquidation, shall rank senior to the Class A Voting
Preferred Stock and Class B 8% Preferred Stock of the Corporation, and shall
rank junior to the Class C Series 1 Preferred Stock of the Corporation. Neither
a consolidation or merger of the Corporation with or into any other entity, nor
a merger of any other entity with or into the Corporation, nor a sale or
transfer of all or any part of the Corporation's assets for cash or securities
or any other property, shall be considered a Liquidation. Written notice of any
Liquidation shall be given to the holders of the 1996 Convertible Preferred
Stock not less than thirty days prior to any payment date stated therein.
3. Conversion.
3.1 On the Conversion Date (as hereinafter defined), each share of 1996
Convertible Preferred Stock shall be converted automatically, without any
further action by the holder thereof or by the Corporation, into shares of the
Corporation's Common Stock (the "Conversion Shares") at a conversion price of
(a) in the case of the Series 2 Stock, $.05 per share (as adjusted, the "Series
2 Conversion Price"), subject to the next sentence and certain adjustments as
described below, and (b) in the case of the Series 3 Stock, $.0625 per share (as
adjusted, the "Series 3 Conversion Price"; the Series 2 Conversion Price and the
Series 3 Conversion Price are each hereinafter referred to as a "Conversion
Price"), subject to certain adjustments as described below. Notwithstanding the
foregoing, from and after the date on which the Stock Purchase Agreement (the
"Purchase Agreement") to be entered into among the Corporation, the purchaser or
purchasers named therein (the "Purchaser"), and Ramesh C. Pandey shall have been
terminated as a result of a default by the Purchaser on its obligations to
purchase the Second Shares, Third Shares, or Fourth Shares (each as defined in
the Purchase Agreement), the Series 2 Conversion Price shall be $.0625 per
share, subject to the adjustments described below. The number of Conversion
Shares into which the shares of 1996 Convertible Preferred Stock held by any
person are so converted shall equal the aggregate Stated Value thereof divided
by the applicable Conversion Price then in effect, calculated to the nearest
1/100th of a share, subject to Section 3.4.
3.2 If the Corporation shall (a) pay a dividend or make a distribution on
its outstanding shares of Common Stock in shares of its Common Stock, (b)
subdivide its outstanding shares of Common Stock, or (c) combine its outstanding
shares of Common Stock into a smaller number of shares, then each Conversion
Price in effect immediately prior to such action shall be adjusted so that the
holder of any shares of 1996 Convertible Preferred Stock thereafter converted
into Common Stock shall receive the number of Conversion Shares which he would
have owned immediately following such action had the Conversion Date occurred
immediately prior thereto. An adjustment made pursuant to this Section 3.2 shall
become effective immediately after the record date in the case
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of a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination, or reclassification.
No adjustment in either Conversion Price shall be required unless such
adjustment would result in an increase or decrease of at least 1% in such
Conversion Price as then in effect; provided, however, that any adjustments that
by reason of this sentence are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
3.3 If the Corporation shall consolidate or merge into or with another
corporation, or if the Corporation shall sell or convey to any other person or
persons all or substantially all of the assets of the Corporation, or shall
issue by reclassification of its shares of Common Stock any shares of capital
stock of the Corporation, each share of the 1996 Convertible Preferred Stock
then outstanding shall entitle the holder thereof to receive the kind and amount
of shares of stock, other securities, cash and property receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock into which such share would have been converted had the Conversion
Date occurred immediately prior to such consolidation, merger, sale or
conveyance, and shall have no other conversion rights.
3.4 In connection with the conversion of any shares of 1996 Convertible
Preferred Stock, no fractions of shares of Common Stock shall be issued, but the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to a like fraction of an amount equal to the closing sales
price of a share of the Corporation's Common Stock on the National Association
of Securities Dealers Automated Quotation System (or, if that shall not be the
principal market on which the Common Stock shall be trading or quoted, then on
such principal market, or, if the Common Stock shall not then be listed or
traded on any established market, such price as shall be determined by the Board
of Directors in good faith) on the business day preceding the Conversion Date.
3.5 The Corporation shall use its best efforts to, as soon as practicable
after the first issuance of the 1996 Convertible Preferred Stock, (a) file a
proxy or information statement relating to, and call and hold a meeting of, or
obtain the written consent of, the stockholders of the Company to approve an
amendment (the "Amendment") to the Corporation's Certificate of Incorporation to
increase its authorized Common Stock so as to provide sufficient shares of
Common Stock for issuance on conversion of the 1996 Convertible Preferred Stock
(on a basis as if all of the authorized shares of 1996 Convertible Preferred
Stock were then outstanding), (b) obtain stockholder approval of such Amendment,
and (c) file the Amendment. The "Conversion Date" shall be the date of the last
to occur of (d) the filing of the Amendment and (e) the day after the closing of
the issuance of the Fourth Shares or the termination of the Purchase Agreement
as a result of a default by the Purchaser on its obligations to purchase the
Second Shares, Third Shares, or Fourth Shares. The Company shall give each
holder of 1996 Convertible Preferred Stock prompt notice of the filing of the
Amendment.
3.6 As soon as practicable after receiving notice from the Corporation of
the Conversion Date, each holder of 1996 Convertible Preferred Stock shall
surrender his certificate(s) evidencing such shares to the Corporation or its
transfer agent at the place designated in such notice and shall
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thereupon be entitled to receive certificates for the Conversion Shares into
which such shares of 1996 Convertible Preferred Stock have been converted.
Notwithstanding that the certificates evidencing any shares of 1996 Convertible
Preferred Stock shall not have been surrendered, from and after the Conversion
Date, the shares of 1996 Convertible Preferred Stock shall no longer be deemed
outstanding, the holders thereof shall cease to be holders of the shares of 1996
Convertible Preferred Stock, all rights whatsoever with respect to such shares
shall forthwith terminate except only the right of the holders to receive the
Conversion Shares deliverable on conversion, upon surrender of their
certificates therefor, and such holders shall for all purposes be deemed holders
of such Conversion Shares. The issuance of certificates for shares of Common
Stock upon the conversion of shares of 1996 Convertible Preferred Stock shall be
made without charge to the holders of shares of 1996 Convertible Preferred Stock
for any issue or stamp tax in respect of the issuance of such certificates, and
such certificates shall be issued in the respective names of, or in such names
as may be directed by, the holders of shares of 1996 Convertible Preferred Stock
converted; provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of
shares of 1996 Convertible Preferred Stock converted, and the Corporation shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Corporation
the amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
4. Dividends. Each holder of shares of the 1996 Convertible Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, but only out of surplus and capital legally available for the payment
of dividends, such dividends as would have been received by such holder with
respect to the Conversion Shares underlying such shares of 1996 Convertible
Preferred Stock if the Conversion Date had occurred on the record date for such
dividend. The 1996 Convertible Preferred Stock shall be entitled to receive no
other or preferred dividends. The Series 2 Stock and Series 3 Stock shall rank
pari passu in right to dividends and junior to any series of capital stock of
the Corporation which ranks senior to the 1996 Convertible Preferred Stock.
5. Voting Rights.
5.1 The holders of the shares of 1996 Convertible Preferred Stock shall be
entitled to cast a number of votes per share held equal to the number of shares
of Common Stock into which such share of 1996 Convertible Preferred Stock would
have been converted if the Conversion Date had occurred on the record date for
any such vote, voting on all matters submitted to a vote of the Corporation's
stockholders.
5.2 Except as otherwise provided herein or by law, the holders of 1996
Convertible Preferred Stock and the holders of Common Stock shall vote together
as one class on all matters submitted to a vote of the Corporation's
stockholders.
6. Holders; Notices. The term "holder" or "holders" wherever used
herein with respect
to a holder or holders of shares of 1996 Convertible Preferred Stock shall mean
the holder or holders
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of record of such shares as set forth on the stock transfer records of the
Corporation. Whenever any notice is required to be given under this Certificate
of Designation, such notice may be given personally or by mail. Any notice given
to a holder of any share of 1996 Convertible Preferred Stock shall be sufficient
if given to the holder of record of such share at the last address set forth for
such holder on the stock transfer records of the Corporation. Any notice given
by mail shall be deemed to have been given when deposited in the United States
mail with postage thereon prepaid. The Company shall send to the holders of the
1996 Convertible Preferred Stock copies of any notices, statements, or other
communications sent to the holders of the Common Stock and of the setting of a
record date for the holders of the Common Stock for any purpose.
IN WITNESS WHEREOF, Xechem International, Inc. has caused this Amended
Certificate of Designation, Preferences, and Rights of the Class C Series 2
Voting Convertible Preferred Stock and Class C Series 3 Voting Convertible
Preferred Stock to be executed by its duly authorized officer this 18th day of
November, 1996.
XECHEM INTERNATIONAL, INC.
By: /s/ Ramesh C. Pandey
Ramesh C. Pandey, President
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