Exhibit 10.1
AKESIS PHARMACEUTICALS,
INC.
NOTE AND WARRANT PURCHASE
AGREEMENT
T HIS N OTE AND W ARRANT P URCHASE A GREEMENT (this “Agreement” ) is
made and entered into as of September 29, 2008 (the
“Effective Date” ) by and between Akesis
Pharmaceuticals, Inc., a Nevada corporation (the
“Company” ), and Avalon Ventures VII,
L.P. (the “Purchaser” ).
RECITALS
W HEREAS , in
order to provide the Company with additional resources to conduct
its business, the Purchaser is willing to lend to the Company
certain funds, as specified herein, pursuant to the terms and
subject to the conditions specified herein and the Notes and
Warrants (each as defined below).
N OW ,
T HEREFORE
, in consideration of the foregoing,
and the representations, warranties, covenants and conditions set
forth below, the Company and the Purchaser, intending to be legally
bound, hereby agree as follows:
AGREEMENT
1. S ALE AND I SSUANCE OF N OTES AND W ARRANTS .
1.1 Issuance of Notes.
Subject to the terms of this
Agreement, the Purchaser agrees to lend to the Company at the
Initial Closing and, if applicable, at the Subsequent Closing (each
as defined below) the amount set forth opposite the
Purchaser’s name on Exhibit A (each, a
“Loan Amount” and collectively, the
“Total Loan Amount” ) against the
issuance and delivery by the Company to the Purchaser at the
Initial Closing and, if applicable, at the Subsequent Closing of a
convertible promissory note, in substantially the form attached
hereto as Exhibit B (each, a
“Note” and collectively, the
“Notes” ), representing an initial
principal balance equal to such Loan Amount. The Note shall be
convertible into equity securities of the Company as provided in
such Note.
1.2 Issuance of the
Warrants. Subject to the
terms of this Agreement, at the Initial Closing and, if applicable,
at the Subsequent Closing, the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company, a
warrant, in substantially the form attached hereto as Exhibit
C (each, a “Warrant” and collectively
the “Warrants” ), for a purchase price
equal to $1.00 per Warrant (the “Warrant Purchase
Price” ).
1.3 Initial Closing.
The initial closing of the sale and
purchase of the Notes and the Warrants (the “Initial
Closing” ) shall take place at the offices of Paul,
Hastings, Janofsky & Walker LLP located at 3579 Valley
Centre Drive, San Diego, California 92130 at 10:00 a.m. on the
Effective Date, or at such other place and time as the Company and
the Purchaser shall mutually agree (the “Initial
Closing Date” ). At the Initial Closing: (i) the
Purchaser shall deliver to the Company, via wire transfer of
immediately available
1.
funds, cash in the amount of (a) the
Purchaser’s Loan Amount for the Initial Closing, as set forth
on Exhibit A , plus (b) the Warrant Purchase Price for
the Initial Closing; and (ii) the Company shall issue and
deliver to the Purchaser (a) a Note in favor of the Purchaser
representing an initial principal balance equal to the
Purchaser’s Loan Amount for the Initial Closing, as set forth
on Exhibit A and (b) a corresponding
Warrant.
1.4 Subsequent Closing
. If the Company determines that a
subsequent closing (the “Subsequent
Closing” ) shall occur, then the Company shall
promptly notify the Purchaser regarding such determination and
shall conduct a Subsequent Closing on a date mutually agreed by the
Company and the Purchaser (the “Subsequent Closing
Date” ) that is within ten (10) days of the date
of such determination. In the event of a Subsequent Closing:
(i) the sale of the Notes and Warrants at the Subsequent
Closing shall be made on the terms and conditions set forth in this
Agreement; (ii) the representations and warranties of the
Company set forth in Section 2 hereof shall speak only as of
the Initial Closing Date; and (iii) the representations and
warranties of the Purchaser in Section 3 hereof shall speak as
of such Subsequent Closing Date. At the Subsequent Closing:
(x) the Purchaser shall deliver to the Company, via wire
transfer of immediately available funds, cash in the amount of
(1) the Purchaser’s Loan Amount for the Subsequent
Closing, as set forth on Exhibit A , plus (2) the
Warrant Purchase Price for the Subsequent Closing; and (y) the
Company shall issue and deliver to the Purchaser (1) a Note in
favor of the Purchaser representing an initial principal balance
equal to the Purchaser’s Loan Amount for the Subsequent
Closing, as set forth on Exhibit A and (2) a
corresponding Warrant.
1.5 Acknowledgements Regarding
Notes and Warrants. The
Company and the Purchaser, as a result of arm’s length
bargaining, acknowledge and agree that: (i) the Purchaser has
not rendered any services to the Company in connection with this
Agreement; (ii) the Warrants are not being issued as
compensation; (iii) the aggregate fair market value of the
Notes, if issued apart from the Warrants, is equal to the Total
Loan Amount; (iv) the aggregate fair market value of the
Warrants, if issued apart from the Notes, is equal to the aggregate
Warrant Purchase Price; (v) all tax returns and other
information return of each party relative to this Agreement and the
Notes and Warrants issued pursuant hereto shall consistently
reflect the acknowledgements set forth in this
Section 1.5.
2. R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY . Except as set forth in the Annual Reports on
Form 10-K or 10-KSB, Quarterly Reports on Form 10-Q or 10-QSB,
Current Reports on Form 8-K and Proxy Statements of the Company,
each as amended and supplemented through the date hereof, filed by
the Company with the U.S. Securities and Exchange Commission (the
“SEC” ) since January 1, 2007 (the
“SEC Documents” ), the Company hereby
represents and warrants to the Purchaser as of the Initial Closing
Date as follows:
2.1 Organization, Good Standing
and Qualification. The
Company is a corporation duly organized and validly existing and in
good standing under the laws of the State of Nevada. The Company is
duly qualified and is authorized to transact business and is in
good standing as a foreign corporation in each jurisdiction in
which the failure to so qualify would have a material adverse
effect on the Company’s financial condition or business as
now conducted (a “Material Adverse
Effect” ).
2.
2.2 Subsidiaries.
The Company has no subsidiaries (a
“Subsidiary” ) and does not own or
control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, trust, joint
venture, association, or other entity. The Company is not a
participant in any joint venture, partnership, or similar
arrangement.
2.3 Corporate Power.
The Company has, or as of the
Initial Closing will have, all requisite corporate power to execute
and deliver this Agreement, to issue the Notes and the Warrants and
to carry out and perform its obligations under the terms of this
Agreement, the Notes and the Warrants (collectively, the
“Loan Documents” ).
2.4 Authorization.
All corporate action on the part of
the Company, its directors and its stockholders necessary for the
authorization, execution, delivery and performance of this
Agreement by the Company and the performance of the Company’s
obligations hereunder, including the issuance and delivery of the
Notes and the Warrants and the reservation of the equity securities
issuable upon conversion of the Notes and exercise of the Warrants
(collectively, the “Company Equity
Securities” ) has been taken or will be taken prior
to the issuance of such Company Equity Securities. Each Loan
Document, when executed and delivered by the Company, shall
constitute the valid and binding obligation of the Company,
enforceable in accordance with its terms except: (i) as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally; (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies; and
(iii) to the extent the indemnification provisions contained
in any Loan Document may be limited by applicable federal or state
securities laws. The Company Equity Securities, when issued in
compliance with the provisions of the Loan Documents, will be
validly issued, fully paid and nonassessable, free of any liens or
encumbrances, and issued in compliance with all applicable federal
and securities laws.
2.5 Capitalization and Voting
Rights.
(a) The authorized capital of the Company consists,
or will consist immediately prior to the Initial Closing, of:
(i) 50,000,000 shares of common stock, par value $0.001 per
share, 24,933,826 of which shares are issued and outstanding; and
(ii) 10,000,000 shares of preferred stock, par value $0.001
per share, none of which shares are issued and
outstanding.
(b) Other than: (i) the Notes, Warrants and
Company Equity Securities issued pursuant to this Agreement;
(ii) the warrant to purchase shares issued pursuant to the
Security Purchase Agreement dated March 25, 2008;
(iii) options and rights to purchase shares of the
Company’s common stock pursuant to the Company’s 2005
Stock Plan; (iv) options to purchase shares pursuant to
Stand-Alone Stock Option Agreements between the Company and each of
John T. Hendrick, Carl LeBel, Jay Lichter, Kevin Sayer, Michael
Scaife and Christos Mantzoros; (v) the warrant to purchase
shares issued pursuant to the Common Stock and Warrant Purchase
Agreement dated December 30, 2005; (vi) the warrant to
purchase shares issued pursuant to the Finder Agreements, dated
January 5, 2006, between the Company and VRIM, Inc.;
(vii) the warrant to purchase shares issued pursuant to the
Finder Agreement, dated January 5, 2006, between the Company
and Phil McConkey;
3.
(viii) the warrant to purchase
shares issued to former employees of the Company; (ix) the
warrant to purchase shares issued pursuant to the Common Stock and
Warrant Purchase Agreement dated March 31, 2006; (x) the
warrant to purchase shares issued pursuant to the Securities
Purchase Agreement dated November 21, 2006; (xi) the
warrant to purchase shares issued pursuant to the Securities
Purchase Agreement dated December 15, 2006; and (xii) the
warrant to purchase shares issued pursuant to the Loan and Security
Agreement, dated December 15, 2006, between the Company and
Square 1 Bank, there are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any of its securities.
The Company is not a party or subject to any agreement or
understanding, and, to the Company’s knowledge, there is no
agreement or understanding between any persons that affects or
relates to the voting or giving of written consents with respect to
any security or the voting by a director of the Company.
2.6 Valid Issuance of
Securities. The Company
Equity Securities, when issued and paid for in compliance with the
Loan Documents, will be duly authorized and validly issued, fully
paid, and nonassessable. The Company Equity Securities have been or
will be, as applicable, duly and validly reserved for issuance and
upon issuance in accordance with the Loan Documents will be duly
authorized and validly issued, fully paid, and nonassessable, and
will be free of any liens, encumbrances, or restrictions on
transfer (other than those created by applicable state and/or
federal securities laws).
2.7 Offering.
Subject in part to the truth and
accuracy of the Purchaser’s representations set forth in
Section 3 of this Agreement, the offer, sale and issuance of
the Notes, Warrants and Company Equity Securities as contemplated
by the Loan Documents are exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the
“Securities Act” ), and neither the
Company nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such
exemption.
2.8 Compliance with Other
Instruments. The Company
is not in violation or default of any provision of its charter or
bylaws (both as amended to date) or of any provision of any
mortgage, indenture, agreement, instrument or contract to which it
is a party or by which it is bound or, to its knowledge, of any
federal or state judgment, order, writ, decree, statute, rule or
regulation applicable to the Company. The execution, delivery and
performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby, will not result in any
such violation or be in conflict with or constitute, with or
without the passage of time or giving of notice, either a default
under any such provision or an event that results in the creation
of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal
of any material permit, license, authorization or approval
applicable to the Company, its business or operations or any of its
assets or properties.
2.9 Intellectual
Property.
(a) To the knowledge of the Company, the Company
owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses (software or otherwise), information, processes and
similar proprietary rights ( “Intellectual
Property” ) necessary to the business of the Company
as presently conducted, the lack of which could reasonably be
expected to have a Material Adverse Effect. Except as disclosed in
the SEC Documents, there
4.
are no outstanding options, licenses
or agreements relating to the Intellectual Property, and the
Company is not bound by or a party to any options, licenses or
agreements with respect to the Intellectual Property of any other
person or entity. The Company has not received any material written
communication alleging that the Company has violated any of the
Intellectual Property of any other person or entity, nor is the
Company aware of any basis therefor. The Company is not obligated
to make any payments by way of royalties, fees or otherwise to any
owner or licensor of or claimant to any Intellectual Property with
respect to the use thereof in connection with the conduct of its
business as presently conducted.
(b) The Company is not aware that any of its
employees is obligated under any contract or other agreement, or
subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with the use
of his or her efforts to promote the interests of the Company or
that would conflict with the Company’s business as presently
conducted. Neither the
