(l)                                      “Governmental Authority” means any court, agency, department or other instrumentality of any foreign, federal, state, county, city or other political subdivision.

 

(m)                                “HSR Act” means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

(n)                                  “Incyte Change in Control” means that any of the following has occurred:

 

(i)                                      any Person or group becomes the beneficial owner, directly or indirectly, of fifty percent (50%) or more of the outstanding Voting Securities or voting power over Voting Securities of (x) the Company or (y) any one or more Persons which are direct or indirect parent holding companies of the Company or Affiliates controlling the Company (the Company, together with the Persons described in clause (y), each hereinafter referred to, individually, as an “Incyte Group Company” and, collectively, as the “Incyte Group Companies”); or

 

(ii)                                   any Incyte Group Company enters into an agreement with any Person or group providing for the sale or disposition of all or substantially all of the assets of the Incyte Group Companies, on a consolidated basis; or

 

(iii)                                any Incyte Group Company enters into an agreement with any Person or group providing for a merger, reorganization, consolidation or other similar transaction (or series of related transactions) of any Incyte Group Company with such Person or any Affiliate of such Person (other than with any of the Incyte Group Company’s Wholly-Owned Subsidiaries), that results in the shareholders of the applicable Incyte Group Company immediately before the occurrence of such transaction (or series of transactions) beneficially owning less than a majority of the outstanding Voting Securities or voting power over Voting Securities of the surviving or newly-created entity in such transaction (or series of transactions); or

 

(iv)                               a change in the board of directors of any Incyte Group Company  in which the individuals who constituted the board of directors of such Incyte Group Company at the beginning of the two (2)-year period immediately preceding such change (together with any other director whose election by the board of directors of such Incyte Group Company or whose nomination for election by the stockholders of such Incyte Group Company was approved by a vote of at least a majority of the directors then in office either who were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or

 

(v)                                  any Incyte Group Company enters into an agreement with any Person providing for the matters described in subsection (i), (ii) or (iv) above.

 

For purposes of this definition of “Incyte Change in Control” only: (A) references to any Incyte Group Company shall be deemed to include all successors in any merger, consolidation, reorganization or similar transaction (or series of related transactions) preceding any transaction (or series of related transactions) described above; (B) “beneficial ownership” (and other correlative terms) means beneficial ownership as defined in Rule 13d-3 under the Exchange Act; it being understood and agreed that “beneficial ownership” shall also include any securities which any Person or any of such Person’s Affiliates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement,

 

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arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; (C) “group” means group as defined in the Exchange Act and the rules of the SEC thereunder as in effect on the date hereof; and (D) “control” (including, with correlative meanings, “controlled by”, “controlling” and “under common control with”) of an entity means possession, direct or indirect, of  (I) the power to direct or cause direction of the management and policies of such entity (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), or (II) at least fifty percent (50%) of the voting securities (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests of such entity.

 

(o)                                  “Incyte Compound” has the meaning specified in Section 1.25 of the License Agreement.

 

(p)                                  “IND” shall mean an Investigational New Drug Application filed with the FDA or the analogous application or filing filed with any analogous agency or Government Authority outside of the United States (including any supra-national agency such as in the European Union) necessary to Commence human clinical trials in such jurisdiction, and including all regulations at 21 CFR § 312 et. seq. and analogous foreign regulations.  For purposes of this definition, “Commence” means the first dosing of the first patient for such trial.

 

(q)                                  “Initial Closing Date” has the meaning specified in Section 2.2(a).

 

(r)                                     “Initial Note” has the meaning specified in Section 2.1(a).

 

(s)                                   “Investor” has the meaning specified in the preamble to this Agreement.

 

(t)                                     “Law” or “Laws” means all laws, statutes, rules, regulations, orders, judgments and/or ordinances of any Governmental Authority.

 

(u)                                  “License Agreement” has the meaning specified in the preamble of this Agreement.

 

(v)                                  “License Agreement Effective Date” shall mean the date that the applicable waiting period under the HSR Act shall have expired or been terminated with respect to the License Agreement.

 

(w)                                “Lien” means, with respect to any asset, any mortgage, pledge, security interest, encumbrance, lien or charge of any kind in respect of such asset.

 

(x)                                    “Material Adverse Effect” shall mean individually or collectively, a material adverse effect on, or a material adverse change in, or group of such effects on or changes in, (i) the business, financial condition, results of operations, assets or liabilities of the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the Company to perform its obligations under or with respect to this Agreement or any Note.

 

(y)                                  “Note” or “Notes” shall mean, as the context requires, the Initial Note and/or the Additional Note.

 

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(z)                                    “Person” means a corporation, an association, a partnership, a limited liability company, an individual, a joint venture, a joint stock company, a trust, an unincorporated organization or a Governmental Authority.

 

(aa)                             “Plans” has the meaning specified in Section 3.3.

 

(bb)                           “Preferred Stock” shall mean the preferred stock, $.001 par value, of the Company.

 

(cc)                             “Purchase Price” has the meaning specified in Section 2.1(a).

 

(dd)                           “Research Plan” shall have the meaning set forth in the License Agreement.

 

(ee)                             “Restricted Securities” means (1) the Shares and (2) any other securities of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, such Shares.

 

(ff)                                 “SEC” has the meaning specified in Section 3.8.

 

(gg)                           “Second Tranche Trigger Date” has the meaning specified in Section 2.1(b).

 

(hh)                           “Securities Act” means the Securities Act of 1933, as amended

 

(ii)                                   “Security Agreement” shall mean the Security Agreement dated as of the date hereof by and between Pfizer Inc. and the Company.

 

(jj)                                   “Shares” shall mean the Common Stock issuable upon conversion of the Notes.

 

(kk)                             “Subsequent Closing” has the meaning specified in Section 2.2(b).

 

(ll)                                   “Subsequent Closing Date” has the meaning specified in Section 2.2(b).

 

(mm)                       “Subsidiary” means, with respect to any entity, any other entity of which securities or other ownership interest having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are owned directly or indirectly by such entity.

 

(nn)                           “3½% Notes” has the meaning specified in Section 3.3.

 

(oo)                           “Transition Plan” shall have the meaning set forth in the License Agreement.

 

(pp)                           “2005 Forms 10-Q” has the meaning specified in Section 3.8.

 

(qq)                           “Voting Securities” means securities of any class or series of a corporation, association or other entity the holders of which are ordinarily, in the absence of contingencies, entitled to vote generally in matters put before the shareholders or members of such corporation, association or other entity.

 

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(rr)                                 “Voting Security Equivalents” means securities convertible into or exchangeable for Voting Securities or options to purchase such securities or Voting Securities.

 

(ss)                             “Wholly-Owned Subsidiary” shall mean, with respect to any entity, a Subsidiary, all of the outstanding Voting Securities of which are owned, directly or indirectly, by such entity.

 

2.                                        Purchase and Sale of Notes .

 

2.1                                  Sale and Issuance of Notes .

 

(a)                                   Purchase and Sale of Initial Note .  Subject to and upon the terms and conditions of this Agreement, at the Initial Closing, the Company agrees to issue and sell to the Investor, and the Investor agrees to purchase from the Company, a convertible subordinated promissory note (the “Initial Note”), in the aggregate principal amount of Ten Million Dollars ($10,000,000) (the “Purchase Price”), and to pay the Purchase Price therefor.  The Initial Note shall have a maturity date seven years from the date of its original issuance, shall be in substantially the form attached hereto as Exhibit A, and shall be convertible into Common Stock of the Company at the conversion price determined in accordance with, and subject to adjustment pursuant to, the terms of such Initial Note.

 

(b)                                  Purchase and Sale of Additional Note .  Subject to and upon the terms and conditions of this Agreement, at the Subsequent Closing, the Company shall have the option (but shall not be obligated) to issue and sell to the Investor, and upon exercise by the Company of such option, the Investor agrees to purchase from the Company, a convertible subordinated promissory note (the “Additional Note”), in the aggregate principal amount of Ten Million Dollars ($10,000,000), and to pay the Purchase Price therefor.  The Additional Note shall have a maturity date seven years from the date of its original issuance, shall be in substantially the form attached hereto as Exhibit A, and shall be convertible into Common Stock of the Company at the conversion price determined in accordance with, and subject to adjustment pursuant to, the terms of such Additional Note.   The Company shall have the right to exercise its option pursuant to this Section 2.1(b) at any time within ten (10) business days following (x) the first date on which the Company can lawfully test a given indication in humans pursuant to the filing of the first IND for an Incyte Compound under the License Agreement and (y) the delivery by the Company to the Investor of written confirmation that the Company will use commercially reasonable efforts to continue clinical development of the Incyte Compound referred to in clause (x) (the satisfaction of the matters specified in clauses (x) and (y), the “Second Tranche Trigger Date”) by delivering to the Investor written notice of its election to issue the Additional Note on or prior to the third anniversary of the Initial Closing Date (as defined below).

 

2.2                                  Closing(s) .

 

(a)                                   The closing of the purchase and sale of the Initial Note (the “Initial Closing”) shall take place at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1540 Broadway, New York, New York, at 10:00 a.m. local time, or at such other time and place as the Company and the Investor mutually agree upon.  The Initial Closing shall occur on such date (the “Initial Closing Date”) that the Company and the Investor mutually agree upon, but in any event within twenty (20) business days after the License Agreement Effective Date.

 

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(b)                                  If the Company chooses to exercise its option pursuant to Section 2.1(b), the closing of the purchase and sale of the Additional Note (the “Subsequent Closing”) shall take place at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1540 Broadway, New York, New York, at 10:00 a.m. local time, or at such other time and place as the Company and the Investor mutually agree upon.  The Subsequent Closing shall occur on such date (the “Subsequent Closing Date”) that the Company and the Investor mutually agree upon, but in any event within twenty (20) business days after the Second Tranche Trigger Date.    The Initial Closing and the Subsequent Closing are sometimes referred to herein as a “Closing.”

 

(c)                                   At each Closing, the Company shall deliver to the Investor the Initial Note or the Additional Note, as the case may be, against payment of the Purchase Price, by wire transfer in immediately available funds to the account set forth in Schedule 2.2(c) (or such other account designated in writing by the Company at least three Business Days prior to any applicable payment date).

 

3.                                        Representations, Warranties and Agreements of the Company .  The Company hereby represents and warrants to, and agrees with, the Investor that:

 

3.1                                  Organization .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to own, lease and operate its properties and to carry on its business as currently conducted, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified would not have a Material Adverse Effect.  The Company has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as currently conducted.

 

3.2                                  Subsidiaries .  Each Subsidiary of the Company has been duly incorporated or formed or organized, is validly existing and in good standing under the laws of the jurisdiction of its incorporation or other formation, has the corporate or other power and authority to own, lease and operate its properties and to carry on its business as currently conducted, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.

 

3.3                                  Capitalization .  The authorized capital of the Company consists of 5,000,000 shares of Preferred Stock and 200,000,000 shares of Common Stock.  As of November 4, 2005, (a) there were outstanding no shares of Preferred Stock, 83,540,699 shares of Common Stock, and options and restricted stock units to purchase or acquire an aggregate of 7,836,438 shares of Common Stock, (b) 6,811,516 shares of Common Stock were reserved for future issuance pursuant to the Company’s 1991 Stock Plan, 1993 Directors’ Stock Option Plan, and 1997 Employee Stock Purchase Plan (collectively, the “Plans”), (c) 1,470,109 shares of Common Stock were reserved for issuance pursuant to the Company’s 5.5% Convertible Subordinated Notes Due 2007 (the “5.5% Notes”), and (d) 22,284,625 shares of Common Stock were reserved for issuance pursuant to the Company’s 3½% Convertible Subordinated Notes due 2011 (the “3½% Notes”).  Associated with each outstanding share of Common Stock are Series A

 

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Participating Preferred Stock Purchase Rights (the “Rights”) issued pursuant to a Rights Agreement dated as of September 25, 1998 between the Company and ChaseMellon Shareholder Services, L.L.C.  Except for options and other rights to acquire shares issued pursuant to the Plans, the 5.5% Notes, the 3½% Notes, and the Rights, and for the potential issuance of additional shares of Common Stock pursuant to the Agreement and Plan of Merger dated as of November 11, 2002 among the Company, Maxia Pharmaceuticals, Inc. and the other parties signatory thereto, as of November 4, 2005, the Company had outstanding no other securities convertible into or exchangeable for its capital stock, and there were no other outstanding options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock.

 

3.4                                  Authorization .  All corporate action on the part of the Company necessary for the authorization, execution and delivery of this Agreement and the Initial Note, the performance of all obligations of the Company hereunder and thereunder, and the issuance and delivery of the Shares upon conversion of the Initial Note, has been taken.  All corporate action on the part of the Company necessary for the authorization, execution and delivery of the Additional Note, the performance of all obligations of the Company thereunder, and the issuance and delivery of the Shares upon conversion of the Additional Note, has been taken or will be taken on or prior to the Additional Closing.  This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except for the effect of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the rights of creditors generally and by equitable principles of general applicability.   At or prior to the Initial Closing, the Company will have reserved for issuance the Shares initially issuable upon conversion of the Initial Note and at or prior to the Subsequent Closing, the Company will have reserved for issuance the Shares initially issuable upon conversion of the Additional Note.

 

3.5                                  Valid Issuance . When delivered to and paid for by the Investor in accordance with the terms of this Agreement, each Note will be a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except for the effect of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the rights of creditors generally and by equitable principles of general applicability.  Upon their issuance in accordance with the terms of the Notes, the Shares will be duly authorized and validly issued, fully paid and nonassessable.  Based in part upon the representations of the Investor in this Agreement, the Notes, and the Shares issuable upon conversion thereof, will be issued in compliance with all applicable federal and state securities laws.

 

3.6                                  Non-Contravention .  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby will not (a) conflict with, or result in any breach or violation of the Certificate of Incorporation or the Bylaws of the Company or (b) conflict with or constitute a breach of, or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of the Company or any of its Subsidiaries pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company or any of its Subsidiaries is a party or by which it or any of its properties may be bound, or (c) to the Company’s knowledge violate any law, administrative regulation or court decree, except in the

 

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case of clauses (b) and (c) for conflicts, breaches, defaults, violations or Liens which, either individually or in the aggregate, would not have a Material Adverse Effect.

 

3.7                                  Governmental Consents .  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for such filings as may be required to be made pursuant to applicable federal or state securities laws or with any stock exchange or market on which the Shares will be listed, and except for such consents, approvals, authorizations or orders the absence of which, either individually or in the aggregate, would not have a Material Adverse Effect and except for any consent required under the HSR Act with respect to the License Agreement Effective Date.

 

3.8                                  Litigation .  Except as disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2004 (the “Form 10-K”), the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005 and June 30, 2005 (the “2005 Forms 10-Q”), or any subsequent period 10-Q or 10-K report or other filings by the Company with the SEC (the “Subsequent Filings”), there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or adversely affecting the Company and its Subsidiaries that would, if determined adversely to the Company or any Subsidiary, have a Material Adverse Effect.

 

3.9                                  SEC Filings and Financial Statements .  The Company has previously made available to the Investor true and complete copies of the Form 10-K and the 2005 Forms 10-Q.  The financial statements included in such reports and any Subsequent Filings are hereafter collectively referred to as the “Financial Statements.”  Each of the balance sheets included in the Financial Statements (including any related notes and schedules) presents fairly the financial position of the Company as of its date, and the other financial statements included in the Financial Statements (including any related notes and schedules) present fairly the results of operations or other information included therein of the Company for the periods or as of the dates therein set forth (subject, in the case of interim financial statements, to changes resulting from audits and year-end adjustments), and each of the Financial Statements was prepared in accordance with generally accepted accounting principles consistently applied during the periods involved (except as otherwise stated therein and except, in the case of interim financial statements, to the extent they may not include footnotes or may be condensed or summary statements).  None of the documents filed with the SEC and referred to in this Section 3.9 contained, as of its date, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

3.10                            No Material Adverse Change .  Since December 31, 2004, except as otherwise disclosed by the Company in writing to the Investor or as set forth in the Company’s SEC filings, in each case on or prior to the date hereof or thereafter in any Subsequent Filings, (a) there has been no change or development that individually or in the aggregate would have a Material Adverse Effect, (b) there have been no material transactions entered into by the Company, and

 

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(c) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

 

3.11                            General Solicitation .  Neither the Company nor any other person or entity authorized by the Company to act on its behalf has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Notes.

 

4.                                        Representations and Warranties of the Investor .  The Investor hereby represents and warrants to, and agrees with, the Company that:

 

4.1                                  Organization .  The Investor is an unlimited liability company duly organized under the laws of Ireland.  The Investor has all requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted.

 

4.2                                  Authorization .  All action on the part of the Investor necessary for the authorization, execution and delivery of this Agreement and for the performance of all obligations of the Investor hereunder has been taken.  This Agreement constitutes a legal, valid and binding agreement of the Investor, enforceable against the Investor in accordance with its terms, except for the effect of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the rights of creditors generally and by equitable principles of general applicability.

 

4.3                                  Non-Contravention .  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby will not (a) conflict with, or result in any breach or violation of the organizational documents of the Investor or (b) conflict with or constitute a breach of, or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of the Investor pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Investor or any of its Subsidiaries is a party or by which it or any of its properties may be bound, or (c) to the Investor’s knowledge, violate any Irish law, administrative regulation or court decree, except in the case of clauses (b) and (c) for conflicts, breaches, defaults, violations or Liens which, either individually or in the aggregate, would not be reasonably expected to materially and adversely impair or restrict the Investor’s ability to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

4.4                                  Governmental Consents .  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Investor is required in connection with the consummation of the transactions contemplated by this Agreement, except for such filings as may be required to be made pursuant to applicable federal or state securities laws or with any stock exchange or market on which the Shares will be listed, and except for such consents, approvals, authorizations or orders the absence of which, either individually or in the aggregate, would not reasonably be expected to materially and adversely impair the Investor’s ability to perform its obligations hereunder or to consummate the transactions contemplated hereby and except for any consent required under the HSR Act with respect to the License Agreement Effective Date.

 

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4.5                                  Purchase Entirely for Own Account .  This Agreement is made with the Investor in reliance upon the Investor’s representation to the Company, which by the Investor’s execution of this Agreement the Investor hereby confirms, that each Note, and the Shares issuable upon conversion thereof, will be acquired for investment for the Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, the Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Notes or any of the Shares.

 

4.6                                  Restricted Securities .

 

(a)                                   The Investor understands that each Note, and the Shares issuable upon conversion thereof, it is or may be purchasing are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations may be resold without registration under the Securities Act only in certain limited circumstances.  In addition to the restrictions on transfer or assignment set forth in the Notes, the Investor agrees that it will not sell or otherwise dispose of the Note(s) or any of the Shares unless such sale or other disposition has been registered or is exempt from registration under the Securities Act and has been registered or qualified or is exempt from registration or qualification under applicable state securities laws.

 

(b)                                  Legends .  The Investor understands and agrees that the Note(s), and any securities issued in respect thereof or exchange therefor, including without limitation, the Shares, may bear one or all of the following legends (appropriately modified in the case of a legend on a certificate representing any Shares):

 

(i)                                      “THIS SECURITY AND THE SECURITIES ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.  THEY MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.  THE TRANSFER OF THIS SECURITY AND THE SECURITIES ISSUABLE UPON ITS CONVERSION ARE ALSO SUBJECT TO CERTAIN TRANSFER RESTRICTIONS CONTAINED IN THAT CERTAIN NOTE PURCHASE AGREEMENT, DATED AS OF NOVEMBER 18, 2005, BETWEEN THE COMPANY AND THE HOLDER.”

 

(ii)                                   Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the Shares represented by the certificate so legended.

 

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4.7                                  Investor Status .  The Investor certifies and represents to the Company that, as of the date hereof and at the time the Investor acquires any Note, the Investor is and will be an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.  The Investor’s financial condition is such that it is able to bear the risk of holding the Notes and Shares for an indefinite period of time and the risk of loss of its entire investment.  The Investor has been afforded the opportunity to ask questions of and receive answers from the management of the Company concerning this investment and is able to evaluate the risks and merits of its investment in the Company.

 

5.                                        Conditions to Closing .

 

5.1                                  Conditions of the Investor’s Obligations at the Initial Closing .  The obligations of the Investor to purchase from the Company the Initial Note and to consummate the transactions to be consummated at the Initial Closing are subject to the fulfillment on or before the Initial Closing of each of the following conditions, any of which may be waived in writing in whole or in part by the Investor:

 

(a)                                   The Company and the Investor shall have executed and delivered the License Agreement and the Security Agreement.

 

(b)                                  The representations and warranties of the Company contained herein shall be true and correct on and as of the Initial Closing Date with the same force and effect as though made on and as of the Initial Closing Date (it being understood and agreed that, in the case of any representation and warranty of the Company contained herein that is made as of a specific date, such representation and warranty need be true and correct only as of such specific date and it being further understood and agreed that, in the case of any representation and warranty of the Company contained herein that is not hereinabove qualified by application thereto of a materiality standard, such representation and warranty need be true and correct only in all material respects in order to satisfy as to such representation and warranty the condition precedent set forth in the foregoing provision of this Section 5.1(b)).

 

(c)                                   The Company shall have performed in all material respects all obligations, agreements, covenants and conditions herein required to be performed or observed by the Company under this Agreement, the License Agreement and the Security Agreement on or prior to the Initial Closing Date.  No event shall have occurred that (with or without the delivery of notice or passage of time) may result in the termination of this Agreement or the License Agreement or an Event of Default (as defined in the Security Agreement) under the Security Agreement, which event shall not have been cured (if capable of being cured) within the time period specified in the applicable agreement.

 

(d)                                  The Investor shall have received a certificate, dated the Initial Closing Date, signed by an executive officer of the Company, certifying on behalf of the Company that the conditions specified in the foregoing Sections 5.1(b) and (c) have been fulfilled.

 

(e)                                   No order enjoining or restraining the transactions contemplated by this Agreement or the License Agreement shall be in effect and no action or proceeding before any Governmental Authority shall have been instituted or pending that challenges the acquisition of,

 

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or payment for, the Initial Note by the Investor or otherwise seeks to restrain or prohibit consummation of the transactions contemplated by this Agreement or the License Agreement or seeking to impose any  limitations on any provisions of this Agreement or the License Agreement.

 

(f)                                     The Investor shall have received from Pillsbury Winthrop Shaw Pittman LLP, counsel for the Company, an opinion, dated as of the Initial Closing Date, in form and substance reasonably satisfactory to counsel for the Investor, to substantially the effect set forth in Exhibit B hereto.

 

(g)                                  The License Agreement Effective Date shall have occurred.

 

5.2                                  Conditions of the Company’s Obligations at the Initial Closing .  The obligations of the Company to issue and sell to the Investor the Initial Note and to consummate the transactions to be consummated at the Initial Closing are subject to the fulfillment on or before the Initial Closing of each of the following conditions by the Investor, any of which may be waived in writing in whole or in part by the Company:

 

(a)                                   The Company and the Investor shall have executed and delivered the License Agreement and Security Agreement.

 

(b)                                  The representations and warranties of the Investor contained herein shall be true and co