Exhibit 10.1
--------------------------------------------------------------------------------
VAXGEN, INC.
$31,500,000
5 1/2% Convertible Senior Subordinated Notes due 2010
NOTE PURCHASE AGREEMENT
March 30, 2005
--------------------------------------------------------------------------------
<PAGE>
VAXGEN, INC.
NOTE PURCHASE AGREEMENT
THIS NOTE
PURCHASE AGREEMENT,
INCLUDING ANNEX I HERETO (this "Agreement")
is made as of the 30(th) day of March 2005 by and among VAXGEN, INC. (the
"Company"), a Delaware corporation, with its principal offices at 1000
Marina
Blvd., Suite 200, Brisbane, California, and ____________________
(the
"Purchaser").
In
consideration of the mutual covenants contained in this Agreement,
and
other good and valuable consideration,
the receipt and
sufficiency of which are
hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
A. The Company has authorized the sale and issuance of
$31,500,000
aggregate
principal amount of the Company's 5 1/2%
Convertible Senior
Subordinated Notes
due 2010 (the "Notes"), subject to adjustment by the Company's Board of
Directors, to certain investors in a
private placement (the "Offering").
B. The Notes are to be issued pursuant to an indenture to be
executed and dated
as of the Closing (as defined in Annex I)
(the "Indenture")
between the Company
and U.S. Bank, National Association, as
trustee (the "Trustee"), and the form of
such Notes will be an exhibit to the
Indenture.
The Indenture
will conform in
all material respects to the respective statements relating thereto in the
Memorandum (as defined below) and will be substantially in the form last
delivered to the Purchaser prior to the execution and delivery of this
Agreement.
C. The Notes will be convertible into shares of common stock,
par value $0.01
per share, of the Company (the "Common
Stock") in accordance
with the terms of
the Notes and the Indenture and will be subject to such other
terms as are set
forth herein and therein.
D. The Company and the Purchaser agree that
the Purchaser will purchase from the
Company and the Company will issue and sell to the
Purchaser,
a Note for the
principal amount of $___________, at a purchase price of one hundred
percent
(100%) of the principal amount, pursuant to the Terms and Conditions for
Purchase of the Notes attached hereto as Annex I and incorporated herein by
reference as if fully set forth
herein. The Purchaser acknowledges that the
offering is not being underwritten by CIBC
World Markets Corp. or Punk, Ziegel &
Company, L.P., who are each acting solely as placement agents in connection
herewith (the "Placement Agents").
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
2
<PAGE>
Please
confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided
below for that purpose.
AGREED AND ACCEPTED:
Purchaser: _____________________________
By:
_________________________
Name:
_________________________
Title:
_________________________
Address:
_________________________
Fax Number:
_________________________
Exact name that your Notes are to be
registered in (This is the name that
will
appear on your Note)*:
_________________________
(Registered Holder)
The Tax ID No. of the Registered Holder:
_________________________
Contact Name for Registered Holder (if
different than above):
_________________________
Mailing Address of Registered Holder
(if
different than above):
_________________________
Affiliated Purchasers:
_________________________
_________________________
VAXGEN, INC.,
a Delaware corporation
By: ____________________________
Name: __________________________
Title: _________________________
*Please use Annex II attached hereto if the Notes are to be
issued to more than
one Registered Holder.
3
<PAGE>
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF THE NOTES
1.
PURCHASE AND SALE OF NOTES.
1.1 Subject to the terms and conditions of the Agreement, on the
Closing Date (as defined herein), the Purchaser agrees to purchase and the
Company agrees to issue and sell to the
Purchaser,
at a purchase price of
one
hundred percent (100%) of the principal
amount, the principal amount of Notes
set forth in this Agreement.
2.
CLOSING.
2.1 Closing.
(a) The purchase
and sale of the
Notes upon the terms and
conditions hereof will take place at a
closing (the "Closing") to be held at the
offices of Cooley Godward LLP, 3175 Hanover
Street, Palo Alto, CA
94304, on the
date hereof or on such other date as may be agreed to by the parties (the
"Closing Date").
(b) The Company shall provide wire transfer instructions for
the payment of the purchase price for the
Notes prior to the Closing.
(c) At the Closing,
the Purchaser and the Company shall
satisfy all of the conditions set forth in Sections 2.2(a) and 2.2(b),
respectively.
2.2 Conditions to Closing.
(a) The Company's obligation to complete the purchase and sale
of the Notes and deliver the Notes to the Purchaser is subject to the
fulfillment to the Company's satisfaction on or prior to the Closing of the
following conditions, any of which may be
waived by the Company:
(i) The receipt by the
Company of an executed
copy of
this Agreement by the Purchaser;
(ii) The receipt by the Company of immediately available
funds in the full amount of the purchase
price for the Notes being purchased by
the Purchaser as set forth in the Agreement, in accordance with the wire
transfer instructions delivered by the
Company pursuant to Section 2.1(b);
(iii) The receipt by the Company of at least $31,500,000
for the Notes being purchased in the Offering by the Purchaser and other
purchasers (together the "Investors");
(iv) The Purchaser's performance, satisfaction, and
compliance, in all material respects, with all covenants, agreements and
conditions required by Section 4 of this
Agreement at or prior to the Closing
Date;
1.
<PAGE>
(v) The
representations and warranties of the Purchaser
made pursuant to Section 4 shall be true
and correct in all material respects as
of the Closing Date, except for representations and warranties that are
expressly made as of a particular
date, which shall be true and correct in
all
material respects as of such date; and
(vi) No statute,
regulation, executive
order, decree,
ruling or injunction shall have been
enacted, entered,
promulgated or
endorsed
by any court or governmental authority or
competent jurisdiction and shall be in
effect which prohibits the consummation of
the transactions contemplated by this
Agreement.
(b) The Purchaser's
obligation
to complete the
purchase and
sale of the Notes is subject to the
fulfillment to the Purchaser's satisfaction,
on or prior to the Closing, of all of the
following conditions, any of which may
be waived by the Purchaser:
(i) The receipt by the
Purchaser of an executed copy of
this Agreement by the Company;
(ii) The Company's performance, satisfaction, and
compliance, in all material respects, with all covenants, agreements and
conditions required by Section 3 of this
Agreement to be performed, at or prior
to the Closing Date;
(iii) The
representations and warranties of the Company
hereunder shall be true and correct in all
material respects as
of the Closing
Date as though made at that time, except
for representations and warranties that
speak as of a particular date, which shall be true and correct in
all material
respects as of such date;
(iv) The delivery by the Company to the Purchaser of an
opinion, dated as of the Closing Date, from
Cooley Godward LLP,
counsel to the
Company, in the form attached as Appendix A
hereto;
(v) The delivery by
the Company to the
Purchaser of an
opinion, dated as of the Closing Date, from
Covington & Burling LLP, regulatory
counsel to the Company, in the form
attached as Appendix B hereto;
(vi) The receipt by the Company of at least $31,500,000
for the Notes being purchased by all the
Investors;
(vii) The Company's
delivery of a Note in the principal
amount set forth in the Agreement to the Purchaser or, if requested by the
Purchaser, one or more Notes, in such denominations ($1,000 or integral
multiples thereof) and registered in such
names as the Purchaser may request in
writing at lease one full business day
before the Closing Date; and
(viii) No statute, regulation, executive order, decree,
ruling or injunction shall have been
enacted, entered,
promulgated or
endorsed
by any court or governmental authority of
competent jurisdiction and shall be in
effect which prohibits the consummation of
the transactions contemplated by this
Agreement.
2.
<PAGE>
3.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The
Company hereby
represents
and warrants to, and
covenants with,
the
Purchaser as of the Closing Date (or such other date specified below) as
follows:
3.1 No Material
Misstatements.
The Private
Placement Memorandum
dated March 30, 2005, relating to the offering of the Notes, including all
exhibits and annexes thereto, all documents incorporated by reference
therein,
as the same may be amended or supplemented
(the "Memorandum"), did not, as of
its date, and does not, as of the date
hereof, contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary in order to make the statements
therein, in light of the circumstances
under which they were made, not
misleading,
except that no
representation
is
given as to whether the absence of Summary Financial Statements, Selected
Financial Data, Supplementary Financial
Information,
Capitalization,
Dilution,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, Quantitative and Qualitative
Disclosures about
Market Risk, Annual
Financial Statements for the fiscal years
ended December 31, 2001, 2002, 2003
and 2004 and the notes thereto, and Quarterly Financial Statements for the
quarters ended March 31, 2004, June 30, 2004, and September 30,
2004, from the
Memorandum constitutes a material omission.
The Indenture,
registration
rights
contained in this Agreement and the Notes conform to
the descriptions
thereof
contained in the Memorandum.
3.2 SEC Filings. With
the exception of the financial statements and
related financial disclosure in the
Company's Annual report on Form 10-K for the
year ended December 31, 2003 (the "Form 10-K")
(including
but not limited to
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Selected Financial Data), the documents that the Company has
filed pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), since December 31, 2003
(including all
exhibits
included therein and documents incorporated by reference
therein hereinafter
being referred to as the "Reports" and together with the Form 10-K the "SEC
Documents") complied in all material respects with the requirements of the
Exchange Act, and the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated thereunder as of their
respective
filing
dates, and except as to the financial statements and related financial
disclosure (including but not limited to
Management's Discussion and Analysis of
Financial Condition and Results of
Operations and Selected Financial Data), none
of the SEC Documents, when filed, contained 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 light of the circumstances
under which they were made, not
misleading,
except that no
representation
is
given as to whether the absence of Summary Financial Statements, Selected
Financial Data, Supplementary Financial
Information, Management's Discussion and
Analysis of Financial Condition and Results of Operations, Quantitative and
Qualitative Disclosures about Market Risk,
Annual Financial
Statements for the
fiscal years ended December 31, 2001, 2002,
2003 and 2004 and the notes thereto,
and Quarterly Financial Statements for the quarters ended
March 31, 2004, June
30, 2004, and September 30, 2004,
from the Memorandum constitutes a material
omission. The Company agrees to use
reasonable best efforts to become current in
its reporting requirements under the
Exchange Act as soon as practicable, and it
will notify each Purchaser promptly after the Compliance Date (as defined in
Section 6.2(a)(i)).
3.
<PAGE>
3.3 Book and Records;
Internal Controls. The books, records and
accounts of the Company and its
subsidiary
accurately and fairly
reflect, in
reasonable detail, the transactions in, and
dispositions of, the assets of, and
the results of operations of, the Company and its
subsidiary.
The Company and
its subsidiary maintain a system of internal
accounting controls
sufficient to
provide reasonable assurances that (i) transactions
are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted
accounting
principles and to
maintain asset
accountability, (iii) access to assets is
permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared
with the existing
assets at reasonable
intervals and appropriate action is taken
with respect to any differences; with
respect to the Company's filed SEC
Documents, the chief
executive officer and
the chief financial officer of the Company
have made all certifications required
by the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and any related
rules and regulations promulgated by the SEC, and the
statements contained
in
any such certification are complete and correct; the Company maintains
"disclosure controls and procedures" (as defined in Rule 13a-14(c)
under the
Exchange Act).
3.4 Brokers or Finders. Based upon arrangements made by or on
behalf
of the Company, no broker, investment banker, financial advisor or other
individual, corporation, general or limited partnership, limited liability
company, firm, joint venture, association,
enterprise, joint securities company,
trust, unincorporated organization or other
entity (each a "Person"), other than
the Placement Agents, the fees and expenses of which will be paid by the
Company, is entitled to any broker's,
finder's, financial advisor's or other
similar fee or commission in connection
with the transactions contemplated by
this Agreement.
3.5 Use of Proceeds.
The Company
intends to use the net
proceeds
from the sale of the Notes hereunder as
described in the Memorandum.
3.6 Organization; Good Standing. The Company and its subsidiary,
are
duly incorporated, validly existing and in
good standing under the laws of their
respective jurisdictions of incorporation or
organization. The
Company and its
subsidiary are duly qualified to do business and are in good standing as a
foreign corporation in each jurisdiction in which the nature of the
business
conducted by them or location of the assets or properties owned, leased or
licensed by them requires such qualification, except for such jurisdictions
where the failure to so qualify individually or in the aggregate would not
result in a material adverse effect on the assets, properties, condition,
financial or otherwise, or in the results of operations, business affairs or
business prospects of the Company and its
subsidiary
considered as a whole
(a
"Material Adverse Effect"); and to the Company's knowledge, no proceeding has
been instituted in any such jurisdiction
revoking, limiting or curtailing,
or
seeking to revoke, limit or curtail, such
power and authority or qualification.
3.7 Absence of Litigation. Except as set forth in the
Memorandum or
SEC Documents, there is no action, suit,
proceeding,
inquiry or
investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the actual knowledge of the executive
officers of the Company or its subsidiary, threatened in writing against the
Company or its subsidiary or any of the
Company's or the
subsidiary's
officers
or
4.
<PAGE>
directors in their capacities as such, that, either individually or in the
aggregate, would result in a Material
Adverse Effect.
3.8 Due Authorization and Delivery. All necessary corporate action
has been duly and validly taken by the Company to authorize the execution,
delivery and performance of this Agreement,
the Indenture, and the
issuance and
sale of the Notes by the Company. The
Agreement, the
Indenture, and Notes
have
been duly and validly authorized, executed
and delivered by the Company and will
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with
their terms, except as the enforceability
thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or
other similar laws affecting the
enforcement of creditors' rights generally and
by general equitable principles.
3.9
Authentication of
Notes; TIA. The Notes have been duly
authenticated in accordance with the provisions of the Indenture and when
delivered and paid for by the Investor in accordance with the terms of this
Agreement, the Notes will be entitled to the
benefits of the Indenture. On the
Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of
1939, as amended (the "TIA" or "Trust
Indenture Act"), and the rules and regulations of the SEC applicable to an
indenture which is qualified
thereunder.
3.10 Conversion of Notes; Authorization and Reservation of Shares.
The Notes are convertible into Common Stock in accordance
with the terms of the
Indenture; the shares of Common Stock
initially issuable upon conversion of the
Notes have been duly authorized and reserved for
issuance upon such
conversion
and, when issued upon such conversion, will be validly issued,
fully paid and
nonassessable, will conform in all material
respects to the description thereof
contained in the Memorandum, and we will use our reasonable best efforts to
cause the shares of Common Stock
issuable upon conversion of the Notes to be
duly authorized for listing on the Nasdaq
National Market or list its Common
Stock on any national exchange or the
Nasdaq SmallCap Market, subject to notice
of official issuance, as reasonably as practicable following the Compliance
Date. The stockholders of the Company or other holders of the Company's
securities have no pre-emptive or similar rights with respect to
the Notes or
the shares of Common Stock issuable upon conversion of the Notes. The
certificates evidencing the shares of Common
Stock issuable upon
conversion of
the Notes will be in due and proper legal
form.
3.11 Exemption
from Registration. Assuming the accuracy of the
representations and warranties of the Purchaser
contained in Section 4
hereof,
the sale and issuance of the Notes (and the
shares of Common Stock issuable upon
conversion thereof) in accordance with the terms of this
Agreement will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act").
3.12 No Default. Neither the execution, delivery and performance of
this Agreement, the Notes or the Indenture by the
Company nor the
consummation
of any of the transactions contemplated hereby (including,
without
limitation,
the issuance and sale by the Company
of the Notes or the issuance of the shares
of Common Stock issuable upon conversion thereof) will give rise to a right
to
terminate or accelerate the due date of any
payment due under,
5.
<PAGE>
or conflict with or result in the breach of any term or provision of, or
constitute a default (or an event which with notice or lapse of time or
both
would constitute a default) under, or require any consent or waiver
under, or
result in the execution or imposition of
any lien, charge or
encumbrance
upon
any properties or assets of the Company or its subsidiary, or result in any
dilutive adjustments to securities or
instruments of the Company or trigger the
requirement to register any securities of
the Company with the SEC, pursuant to
the terms of, any indenture, mortgage, deed of trust or other
agreement or
instrument to which the Company or its
subsidiary are a party or by which either
the Company or its subsidiary or any of
their properties or businesses is bound,
or any franchise, license, permit, judgment, decree, order, statute, rule
or
regulation applicable to the Company or its
subsidiary or violate any provision
of the certificate of incorporation or
by-laws of the Company or its subsidiary.
3.13 Consents.
No consent, approval or authorization of or
designation, declaration or filing with any
governmental authority
on the part
of the Company is required in connection
with the valid
execution and
delivery
of this Agreement or the offer, sale or issuance of the Notes or the
consummation of any other transaction
contemplated by this Agreement (other than
any filings which may be required to be made by the Company
with the SEC, or
pursuant to any state or "blue sky"
securities
laws, and, any registration
statement which may be filed pursuant to
this Agreement).
3.14 Listing. As soon as reasonably practicable after the
Compliance
Date, the Company shall file an
application to re-list
its Common Stock on the
Nasdaq National Market or list its Common
Stock on any national
exchange or the
Nasdaq SmallCap Market, and shall use all
reasonable commercial
efforts to have
such application approved and have its Common Stock listed on the Nasdaq
National Market or any national exchange or
the Nasdaq SmallCap Market, and will
comply in all material respects with the
Company's reporting,
filing and other
obligations under the bylaws or rules of the Nasdaq National Market or any
national exchange or the Nasdaq SmallCap
Market. The Company will notify each
Purchaser when its Common Stock is
re-listed on the Nasdaq National Market or is
listed on any national exchange or the
Nasdaq SmallCap Market.
3.15 Licenses;
Leases. The Company and its subsidiary have all
requisite corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses,
certificates and
permits of and from all
governmental or regulatory bodies or any other person or
entity
(collectively,
the "Permits"), to own, lease and license its
assets and properties and conduct
its business, all of which are valid and in full
force and effect, except where
the lack of such Permits, individually or in the aggregate,
would not result in
a Material Adverse Effect. The Company and its subsidiary
have fulfilled and
performed in all material respects all of its obligations
with respect to
such
Permits and no event has occurred that
allows, or after
notice or lapse of time
would allow, revocation or termination thereof
or results in any other material
impairment of the rights of the Company
thereunder.
Except as may be
required
under the Securities Act and state and foreign Blue Sky
laws, no other Permits
are required to enter into, deliver and perform this Agreement
and to issue and
sell the Notes.
3.16 Intellectual Property. (i) To the Company's knowledge,
each of
the Company and its subsidiary own, or hold
under license, and
will have on and
after the Closing Date full, legally enforceable rights to use, all patents,
patent rights, patent applications, licenses,
6.
<PAGE>
trade secrets, know-how, copyrights (whether registered or unregistered),
trademarks (whether registered or
unregistered), trademark applications, service
marks and trade names (collectively, the "Intellectual Property") that are
material and necessary to conduct and operate the
business of the
Company as
currently conducted and as proposed to be conducted, as described in the
Memorandum (the "Company Business"),
(ii) to the Company's
knowledge,
neither
the conduct and operations of the Company
Business, nor the use
or exploitation
of any of the Intellectual Property owned by the Company or, to the
Company's
knowledge, the use or exploitation of any
Intellectual Property licensed by the
Company, infringes upon, misappropriates,
violates or conflicts
in any way with
the Intellectual Property rights of any other Person,
(iii) to the
Company's
knowledge, neither the conduct and
operation of the Company Business nor the use
or exploitation of any of the Intellectual
Property owned by the Company, or, to
the Company's knowledge, the use or exploitation of the
Intellectual
Property
licensed by the Company will infringe upon,
misappropriate,
violate or conflict
in any way with the Intellectual Property
rights of any other Person, (iv) there
is no pending or, to the Company's knowledge, threatened assertion or claim
related to the use or exploitation of the Intellectual Property used in the
conduct or operation of the Company Business involving the infringement,
misappropriation, or violation of, or
conflict with, in any way the Intellectual
Property rights of any other Person, (v) the Company is not a party to any
action, suit, proceeding or investigation
which involves a claim of infringement
or misappropriation of any Intellectual
Property of any Person, (vi) the Company
has no actual knowledge of, any claims which challenge the validity,
enforceability or ownership of any of its
Intellectual Property and (vii) to the
Company's knowledge, there have been no unauthorized uses, disclosures,
infringements, or misappropriations by any Person of any of the
Intellectual
Property used in the conduct or operation of the Company Business or any
breaches by any Person, including the Company, of any licenses or other
agreements involving its Intellectual
Property.
3.17 Real Property.
The Company and its
subsidiary
have good and
marketable title in fee simple to all real
property, and good and marketable
title to all other property owned by it, in each case free and clear of all
liens, encumbrances, claims, security interests and
defects, except such as do
not materially affect the value of such
property and do not materially interfere
with the use made or proposed to be made of
such property by the Company and its
subsidiary. All property held under lease by
the Company and its subsidiary are
held by them under valid, existing and
enforceable leases, free and clear of all
liens, encumbrances, claims, security interests and
defects, except such as are
not material and do not materially
interfere with the use made or proposed to be
made of such property by the Company and
its subsidiary. Neither the Company nor
its subsidiary have sustained any loss or interference with its assets,
businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by
insurance, or
from any labor dispute or any court or
legislative or other governmental action,
order or decree which would result in a
Material Adverse Effect.
3.18 Issuance of Securities. Except for the exchange of the
warrants
to purchase shares of the Company's
Common Stock issued in
connection with the
sale of the Company's Series A Preferred Stock for new warrants to purchase
common stock on September 21, 2004, and the sale of 3,018,870
shares of the
Company's Common Stock to certain
investors on November
22, 2004 and except as
disclosed in the SEC Documents,
since the filing date
of the Form 10-K, neither
the Company nor its subsidiary have (i) issued any unregistered securities
7.
<PAGE>
or incurred any liability or obligation, direct or contingent, for borrowed
money, except such liabilities or
obligations incurred in the ordinary course of
business, (ii) entered into any transaction not in the ordinary course of
business or (iii) declared or paid any
dividend or made any
distribution on any
shares of its stock or redeemed,
purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any
shares of its capital stock.
3.19 Material
Contracts.
With
the exception of Contract No.
HHSO100200500001C between the Company and the Department of Health and Human
Services, dated November 4, 2004 (the "Anthrax Contract"), all material
documents, contracts or other agreements
are included in the exhibits to the SEC
Documents. Each description of such contracts,
documents or other
agreements
reflects in all material respects the terms
of the underlying contract, document
or other agreement and is in full force and
effect and is valid and enforceable
by and against the Company or its
subsidiary, as the
case may be, in accordance
with its terms. Neither the Company nor its
subsidiary, if the
subsidiary is a
party, is in default in the observance or
performance of any term or obligation
to be performed by it under any such
agreement, and no
event has occurred which
with notice or lapse of time or both
would constitute
such a default,
in any
such case which default or event,
individually or in the aggregate, would result
in a Material Adverse Effect. No default
exists, and no event has occurred which
with notice or lapse of time or both
would constitute
a default, in the due
performance and observance of any term,
covenant or condition, by the Company of
the Anthrax Contract, which default or
event, individually or
in the aggregate,
would result in a Material Adverse
Effect.
3.20 No Violation.
With the exception of
the Company's failure
to
file its amended Annual Report on Form 10-K for the
fiscal year ended
December
31, 2003, its Annual Report on Form 10-K for
the fiscal year ended December 31,
2004, and its Quarterly Reports for the quarters ended
March 31, 2004, June 30,
2004 and September 30, 2004, neither the Company nor its subsidiary is in
violation of any term or provision of its charter or by-laws or of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation, individually or in the
aggregate, would result in a Material
Adverse Effect.
3.21 Capitalization.
The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Common Stock, of which
29,606,523
shares
were outstanding as of February 28, 2005
and (ii) 20,000,000 shares of Preferred
Stock, none of which are outstanding. As of February 28, 2005, we had
options
and warrants exercisable for 5,701,855
shares of common stock, 2,586,490 shares
of our common stock reserved for future
grant under our stock option plans; and
472,356 shares of our common stock
reserved for future
issuance under our
2001
Employee Stock Purchase Plan. The Notes are in due and proper
legal form and
have been duly authorized for issuance by the Company. All of the issued and
outstanding shares of Common Stock have been duly and
validly issued and are
fully paid and nonassessable. Except for warrants to purchase
959,331 shares of
Common Stock (the "Warrants") and as set forth in this Agreement and the
Company's filings with the SEC, as of the
date hereof, no shares of Common Stock
are entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, rights to subscribe to, or
securities or rights
convertible into, any shares of capital
stock of the Company,
other than rights
granted to employees or consultants of the
Company pursuant to
equity incentive
and stock purchase plans adopted by the Company's
8.
<PAGE>
board of directors and disclosed in the Company's filings with the SEC.
Furthermore, except for the Warrants, and
as set forth in this Agreement and the
Company's filings with the SEC, as of the
date hereof, there are
no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the
Company or
options, securities or rights convertible into shares of capital stock of
the
Company, other than rights granted to employees or
consultants of the
Company
pursuant to equity incentive and stock purchase plans adopted by the
Company's
board of directors and disclosed in the SEC
Documents, and except
for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities, as of
the date hereof, the Company is not a
party to any agreement granting
registration
rights to any person
with respect
to any of its equity or debt securities.
All outstanding shares of capital stock
of the Company's subsidiary have been duly
authorized and validly
issued, and
are fully paid and nonassessable and are owned
directly by the Company free and
clear of any security interests, liens,
encumbrances, equities or claims.
3.22 Employees.
Neither the Company
nor its subsidiary is involved
in any labor dispute nor, to the
knowledge of the
Company, is any such
dispute
threatened, which dispute would result in a
Material Adverse Effect. The Company
is not aware of any existing or imminent
labor disturbance by the employees
of
any of its principal suppliers or contractors
which would result in
a Material
Adverse Effect.
3.23 Market
Stabilization. The
Company has not taken,
nor will it
take, directly or indirectly,
any action designed to
or which might reasonably
be expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute,
the stabilization or manipulation of
the
price of the Common Stock or any security
of the Company to facilitate the sale
of the Notes.
3.24 Taxes. The
Company and its
subsidiary has filed
all federal,
state, local and foreign tax returns
which are required to be filed through the
date hereof, which returns are true and correct
in all material respects or has
received timely extensions thereof, and has
paid all taxes shown on such returns
and all assessments received by it to the extent that
the same are material and
have become due. There are no tax audits or
investigations
pending, which if
adversely determined would result in a
Material Adverse
Effect; nor are
there
any material proposed additional tax assessments against the Company or its
subsidiary.
3.25 Insurance.
The Company and its subsidiary are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are customary in the businesses in which they are
engaged; all policies of insurance and fidelity or surety bonds
insuring the
Company or its subsidiary or the Company's or its subsidiary's respective
businesses, assets, employees, officers and directors are in full force and
effect; the Company and its subsidiary are
in compliance with the terms of such
policies and instruments in all material
respects; and neither the Company nor
any subsidiary of the Company has any
reason to believe that it will not be able
to renew its existing insurance coverage as
and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue
its business at a cost that is not
materially greater than the current cost.
9.
<PAGE>
3.26 Environmental
Laws. Except where failure to comply
would not
result in a Material Adverse Effect (i) each of the Company and
its subsidiary
is in compliance in all material
respects with all
rules, laws and
regulation
relating to the use, treatment, storage and disposal of toxic
substances
and
protection of health or the environment ("Environmental Laws") which are
applicable to its business; (ii) neither the Company nor its
subsidiary
has
received any notice from any governmental authority or third party of an
asserted claim under Environmental Laws; (iii) each of the Company and its
subsidiary has received all permits,
licenses or other
approvals required of it
under applicable Environmental Laws to conduct its
business as described in the
Memorandum and is in compliance with all terms and conditions of any such
permit, license or approval; and (iv) no property which is or has been owned,
leased or occupied by the Company or its
subsidiary
has been designated as a
Superfund site pursuant to the Comprehensive Environmental Response,
Compensation of Liability Act of 1980, as
amended (42 U.S.C.
Section 9601, et.
seq.) or otherwise designated as a contaminated
site under applicable
state or
local law. Neither the Company nor its subsidiary has been named as a
"potentially responsible party" under the
CERCLA 1980.
3.27
Regulatory
Compliance.
The human clinical trials, animal
studies and other preclinical tests conducted by the Company or in which the
Company has participated or that are described in the Memorandum or SEC
Documents or the results of which are referred to in the Memorandum or SEC
Documents, and such studies and tests
conducted on behalf of the Company or that
the Company intends to rely on in support of
regulatory approval by
the United
States Food and Drug Administration (the
"FDA") or foreign regulatory agencies,
were and, if still pending, are being conducted in all material respects in
accordance with experimental protocols, procedures and controls generally
used
by qualified experts in the preclinical or clinical study of new drugs or
diagnostics as applied to comparable
products to those
being developed by
the
Company; the descriptions of the results of such studies, test and trials
contained in the SEC Documents are accurate and complete in all material
respects, and, except as set forth in the SEC
Documents,
the Company has no
knowledge of any other trials, studies or tests, the results of which the
Company believes reasonably call into question the clinical trial results
described or referred to in the SEC Documents when viewed in the context in
which such results are described and the
clinical state of development; and the
Company has not received any notices or
correspondence from the FDA or any other
domestic or foreign governmental agency
requiring the termination, suspension or
material modification of any animal studies, preclinical tests or clinical
trials conducted by or on behalf of the
Company or in which
the Company
has
participated that are described in the SEC
Documents or the results of which are
referred to in the SEC Documents.
3.28 Investment Company. The Company is not and, after giving
effect
to the offering and sale of the Notes, will not be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
3.29 Solicitation;
Other Issuances of Securities. Neither the
Company nor its subsidiary or affiliate,
(i) has engaged in any
form of general
solicitation or general advertising (within the meaning of Regulation
D under
the Securities Act) in connection with the
offer or sale of the Notes, (ii) has,
within the last 6 months directly or
indirectly, made any offers or sales of any
security or solicited any offers to buy any security,
under any circumstances
that would require registration of the Notes under the Securities
Act or (iii)
has taken or will take any action
10.
<PAGE>
or steps that would require registration of any of the Notes, or the shares
of
Common Stock issuable upon conversion
thereof, under the Securities Act.
3.30 Lock-Ups
(a) For a period of one hundred twenty (120) days from the
date on which the Securities are priced,
the Company will not, without the prior
written consent of CIBC World Markets, sell, contract to sell or otherwise
dispose of or issue any equity or equity-linked securities of the Company,
except pursuant to previously issued options or warrants, any agreements
providing for anti-dilution or other stock
purchase or share issuance rights in
existence on the date hereof, any employee benefit or similar plan of the
Company in existence on the date hereof or duly adopted hereafter, or any
technology license agreement, strategic alliance or joint
venture in existence
on the date hereof or which the Company may
enter into hereafter.
(b) The Company
shall, prior to or concurrently with the
execution of this Agreement, deliver an agreement executed by each of the
directors and executive officers of the Company to the
effect that such person
will not, during the period commencing on the date such person signs such
agreement and ending one hundred twenty (120) days after the date hereof,
without the prior written consent of the
Purchaser, directly or indirectly, make
any offer, sale, assignment, transfer,
