Filing
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
Biokeys Pharmaceuticals, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
09060R108
(CUSIP Number)
Matthew Balk
245 Park Avenue - 44th Floor
New York, NY 10167
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
1/1/03
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Section 240.13d-7 for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
Matthew Balk
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a)
(b)
3. SEC Use Only
4. Source of Funds (See Instructions) PF
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e)
6. Citizenship or Place of Organization: United States of America
Number of 7. Sole Voting Power 3,205,162 shares
Shares
Beneficially 8. Shared Voting Power 651,263 shares
Owned by
Each 9. Sole Dispositive Power 3,205,162 shares
Reporting
Person With 10. Shared Dispositive Power 651,263 shares
11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,749,375 shares
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13. Percent of Class Represented by Amount in Row (11) 20.4%
14. Type of Reporting Person (See Instructions) IN
ITEM 1. Security and Issuer
Common Stock, par value $0.001 per share; Biokeys Pharmaceuticals, Inc.
("Biokeys"), 9948 Hibert Street, Suite 100, San Diego, California 92131.
ITEM 2. Identity and Background
(a) This statement is being filed by Matthew Balk.
(b) 245 Park Avenue - 44th Floor, New York, NY 10167
(c) (1) The principal occupation of Mr. Balk is investment banking at H.C.
Wainwright & Co. Inc., at 245 Park Avenue - 44th Floor, New York, NY 10167.
(2) The principal business of H.C. Wainwright & Co., Inc. is investment
banking.
(d) Mr. Balk has not been convicted in any criminal proceeding during the
last five years.
(e) Mr. Balk has not been subject to a judgment, decree or final order of a
judicial or administrative body of competent jurisdiction with respect to
federal or state securities laws during the last five years.
(f) Mr. Balk is a citizen of the United States of America.
ITEM 3. Source and Amount of Funds or Other Consideration
The shares of Common Stock reported herein consist of 251,512 shares held
by Mr. Balk personally, 251,263 shares held by his wife, Julia Balk, and 183,650
shares held by Mr. Balk as custodian for his two minor children. Mr. Balk also
holds a warrant (the "Warrant") to purchase 50,000 shares of Common Stock at an
exercise price of $0.50 per share that was issued to him by Biokeys in
consideration of his purchase of a promissory note with a principal amount of
$50,000 from Biokeys on November 1, 2001 (the "Note"). The Note was purchased
with personal funds. The remainder of the shares reported herein are represented
by 13,600 shares (the "Series C Shares") of Series C Convertible Preferred Stock
of Biokeys ("Series C Stock") which may be converted into 2,720,000 shares of
Common Stock after March 1, 2003; each Series C Share will automatically convert
into 200 shares of Common Stock on June 30, 2003, if not previously converted.
10,000 of the Series C Shares were purchased by Mr. Balk with $50,000 cash from
personal funds and the cancellation of all of the $50,000 of the principal
amount of the Note. 2,000 of the Series C Shares were purchased by Julia Balk's
Defined Contribution Retirement Plan with $20,000 of personal funds, 1,300 of
the Series C Shares were purchased by Mr. Balk as Custodian for each of his two
minor children with $13,000 of personal funds for each such child, and 1,000 of
the Series C Shares were purchased by Mr. Balk's IRA account with $10,000 of
personal IRA funds.
ITEM 4. Purpose of Transaction
The securities reported were acquired for investment purposes. Mr. Balk has
no plans or proposals which may relate to or would result in any of the matters
listed in paragraphs (a) through (j) of Item 4.
ITEM 5. Interest in Securities of the Issuer
(a) 3,856,425 shares (including rights to acquire 50,000 shares upon
exercise of Warrant and 2,720,000 shares upon conversion of the Series C Shares)
20.4%
(b) Sole Voting & Dispositive: 3,205,162 shares; Shared Voting and
Dispositive: 651,263 shares
(c) (i) On December 19, 2002, Mr. Balk made a gift of 100,000 shares of
Common stock to his brother Jonathan Balk, and 100,000 shares to his parents,
David Balk and Marilyn Balk, as joint tenants with right of survivorship.
(ii) On January 14, 2003, Mr. Balk made a gift of 100,000 shares of Common
stock to his brother Jonathan Balk, and 100,000 shares to his parents, David
Balk and Marilyn Balk, as joint tenants with right of survivorship.
(iii) On January 16, 2003, Mr. Balk made gifts of 10,000 shares to a
custodial account for his minor son Daniel Balk, 10,000 shares to a custodial
account for his minor son David Balk, and 5,000 shares to his office assistant,
Debra Adler.
(d) Not applicable.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
Not applicable.
ITEM 7. Material to Be Filed as Exhibits
Exhibit 1. Series C Convertible Preferred Stock Purchase Agreement
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
2/3/03
- -------------------------------------------------------------------------------
Date
/s/ Matthew Balk
------------------------------------------------------------------------------
Signature
Matthew Balk
------------------------------------------------------------------------------
Name/Title
Exhibit 1
BIOKEYS PHARMACEUTICALS, INC.
SERIES C CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"AGREEMENT") is dated as of the 27th day of September, 2002 by and among Biokeys
Pharmaceuticals, Inc., a Delaware corporation (the "COMPANY"), and each of the
individuals and entities listed on Exhibit A attached to this Agreement (each, a
"PURCHASER," and together, the "PURCHASERS").
WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, up to an aggregate of 100,000
authorized but unissued shares of the Company's Series C Convertible Preferred
Stock, $0.01 par value per share ("SERIES C SHARES"), convertible into the
Company's Common Stock, $0.001 par value per share ("COMMON STOCK"), for a per
share purchase price of $10.00, for a maximum aggregate purchase price of
$1,000,000.00, on the terms and subject to the conditions set forth in this
Agreement.
WHEREAS, in September 2001 and October 2001, the Company issued promissory
notes to certain individuals and entities (the "BRIDGE INVESTORS"), including
some of the Purchasers, in the aggregate principal amount of $450,000.00 (the
"BRIDGE NOTES") and issued warrants to purchase shares of Common Stock to each
of the Bridge Investors (the "BRIDGE WARRANTS").
WHEREAS, at the Closing, as such term is herein defined, certain of the
Bridge Investors will convert a portion of the Bridge Notes into Series C
Shares.
WHEREAS, at the Closing, each holder of a Bridge Warrant will be entitled
to a reduction of the exercise price to purchase Common Stock pursuant to such
warrants to fifty cents ($0.50) per share in exchange for waiving such holder's
right to repayment of principal, with respect to the sale and issuance of the
Series C Shares, pursuant to the terms of the Bridge Note held by such holder.
NOW THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
"AFFILIATE" means, with respect to any person or entity, any person or
entity that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such person or
entity.
"CLOSING" shall mean the Initial Closing and any Subsequent Closings.
"CLOSING DATE" means, with respect to each Closing, the date of such
Closing.
"CLOSING LOCATION" shall have the meaning set forth in Section 2.3.
"COMPANY LICENSED INTELLECTUAL PROPERTY" means all (i) licenses of
Intellectual Property to the Company or the Subsidiary by any third party, and
(ii) licenses of Intellectual Property by the Company or the Subsidiary to any
third party.
"COMPANY OWNED INTELLECTUAL PROPERTY" means all Intellectual Property
owned by the Company or the Subsidiary.
"SUBSIDIARY" shall have the meaning set forth in Section 3.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
all of the rules and regulations promulgated thereunder.
"FDA" means the United States Food and Drug Administration, or any
successor entity.
"GOVERNMENTAL AUTHORITY" means any: (a) nation, state, commonwealth,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature.
"INITIAL CLOSING" shall have the meaning set forth in Section 2.3.
"INTELLECTUAL PROPERTY" means intellectual property or proprietary rights
of any description including (i) rights in any patent, patent application
(including any provisionals, continuations, divisions, continuations-in-part,
extensions, renewals, reissues, revivals and reexaminations, any national phase
PCT applications, any PCT international applications, and all foreign
counterparts), copyright, industrial design, URL, domain name, trademark,
service mark, logo, trade dress or trade name, (ii) related registrations and
applications for registration, (iii) trade secrets, moral rights or publicity
rights, (iv) inventions, discoveries, or improvements, modification, know-how,
technique, methodology, writing, work of authorship, design or data, whether or
not patented, patentable, copyrightable or reduced to practice, including any
inventions, discoveries, improvements, modification, know-how, technique,
methodology, writing, work of authorship, design or data embodied or disclosed
in any: (1) computer source codes (human readable format) and object codes
(machine readable format); (2) specifications; (3) manufacturing, assembly,
test, installation, service and inspection instructions and procedures; (4)
engineering, programming, service and maintenance notes and logs; (5) technical,
operating and service and maintenance manuals and data; (6) hardware reference
manuals; and (7) user documentation, help files or training materials, and (v)
good will related to any of the foregoing.
"MATERIAL ADVERSE EFFECT" shall mean, any event, circumstance, change or
effect that, when taken individually or together with all other adverse events,
circumstances, changes or effects, is or is reasonably likely to be materially
adverse to the business, results of operations, financial condition or prospects
of the Company and the Subsidiary.
"PERSON" (whether such term is capitalized or not) means an individual,
corporation, partnership, limited liability company, joint venture, syndicate,
person (including, without limitation, a "person" as defined in Section 13(d)(3)
of the Exchange Act), trust, association or entity.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and all
of the rules and regulations promulgated thereunder.
"SUBSEQUENT CLOSING" shall have the meaning set forth in Section 2.3.
2. PURCHASE AND SALE OF SHARES; CLOSINGS.
2.1 CERTIFICATE OF DESIGNATION. The Company shall adopt and file on or
before the Closing Date (defined below) the Certificate of Designation of Series
C Convertible Preferred Stock in substantially the form attached hereto as
Exhibit B (the "SERIES C CERTIFICATE OF DESIGNATION") with the Secretary of
State of the state of Delaware.
2.2 SALE AND ISSUANCE OF SERIES C CONVERTIBLE PREFERRED STOCK. Subject to
the terms and conditions of this Agreement, each Purchaser agrees to purchase at
the Closing, and the Company agrees to sell and issue to each Purchaser, the
number of Series C Shares specified opposite such Purchaser's name on Exhibit A
attached hereto at a purchase price of Ten Dollars ($10.00) per share. The
Company's agreement with each Purchaser is a separate agreement, and the sale of
the Series C Shares to each of the Purchasers is a separate sale.
2.3 CLOSING. The initial closing of the purchase and sale of the Series C
Shares shall take place at the offices of Bingham McCutchen LLP, 1900 University
Avenue, East Palo Alto, California, (the "CLOSING LOCATION") at 10:00 a.m., on
September 27, 2002, or at such other time and place as the Company and the
Purchasers mutually agree upon, orally or in writing (which time and place are
designated as the "INITIAL CLOSING"). Subject to the terms and conditions set
forth in this Agreement, the Company may issue and sell up to the balance of the
Series C Shares not sold at the initial Closing at any time, but in any event
not later than October 4, 2002, to such purchasers as shall be approved by the
Board of Directors (the "BOARD") of the Company (each a "SUBSEQUENT PURCHASER").
Any such issuance and sale shall be made upon the same terms and conditions as
those set forth herein, and each Subsequent Purchaser shall become a party to
this Agreement (and Exhibit A hereto shall be amended to include such Subsequent
Purchaser) and shall have the rights and obligations of a Purchaser hereunder.
Each and any subsequent closing of the sale and purchase of the Series C Shares
to a Subsequent Purchaser and shall be held at the Closing Location (such
closings are referred to as "SUBSEQUENT CLOSINGS," and each, with the Initial
Closing, a "CLOSING").
2.4 MAXIMUM PURCHASE. No Purchaser may, together with its affiliates,
purchase more than 10,000 Series C Shares pursuant to the terms of this
Agreement for consideration other than the conversion or cancellation of Bridge
Notes.
2.5 DELIVERY. Subject to the terms of this Agreement, at each Closing the
Company will deliver to each Purchaser (or, upon written request of such
Purchaser, to such Purchaser's custodian) a stock certificate representing the
number of Series C Shares to be purchased by such Purchaser at the Closing from
the Company, against payment of the purchase price therefor by check, wire
transfer (pursuant to the wire transfer instructions attached hereto as Exhibit
C), cancellation or conversion of indebtedness of the Company or by such other
form of payment as may be mutually agreed upon by the Company and that
Purchaser. In the event that payment by a Purchaser is made, in whole or in
part, by cancellation or conversion of indebtedness, then such Purchaser shall
surrender to the Company for cancellation at the Closing any evidence of such
indebtedness or shall execute an instrument of cancellation in form and
substance reasonably acceptable to the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser as follows as of the date hereof and
as of each Closing Date:
3.1 INCORPORATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, is
qualified to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification, and has
all requisite corporate power and authority and all authorizations, licenses and
permits necessary to own its properties and to carry on its businesses as now
conducted, except where the failure to hold such authorizations, licenses and
permits would not have a Material Adverse Effect.
3.2 SUBSIDIARIES. The Company does not have any subsidiaries except for its
wholly-owned subsidiary Biokeys, Inc. (the "SUBSIDIARY"). The Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware and has all requisite corporate power and authority and
all authorizations, licenses and permits necessary to own its properties and to
carry on its businesses as now conducted, except where the failure to hold such
authorizations, licenses and permits or to be so qualified would not have a
Material Adverse Effect. The Subsidiary is duly qualified to do business and is
in good standing in each jurisdiction in which the character of its properties
or the nature of its business requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect. Except as set
forth on Schedule 3.2 hereto, neither the Company nor the Subsidiary owns,
beneficially or otherwise, or holds the right to acquire any stock, partnership
interest or joint venture interest or other equity ownership interest in any
other Person. The Company owns all of the issued and outstanding capital stock
of the Subsidiary. The Company has made available to each Purchaser complete and
correct copies of the charter, by-laws, minute books and other applicable
organizational documents of the Company and the Subsidiary, in each case with
all amendments thereto.
3.3 CAPITALIZATION. The authorized capital stock of the Company is
50,000,000 shares of Common Stock, $0.001 per share par value, and 1,000,000
shares of Preferred Stock, $0.01 per share par value, of which 8,000 shares have
been designated Series A 8% Convertible Preferred Stock ("SERIES A STOCK"),
200,000 shares have been designated Series B Convertible Preferred Stock and
140,000 shares have been designated Series C Convertible Preferred Stock.
Immediately prior to the time of the Initial Closing, there were issued and
outstanding 15,574,965 shares of the Company's Common Stock, 3,337 shares of
Series A Stock, 200,000 shares of Series B Convertible Preferred Stock and no
shares of Series C Convertible Preferred Stock. In addition, the Company has
issued warrants to purchase an aggregate of 3,166,992 shares of Common Stock.
The Company has reserved for issuance 834,250 shares of Common Stock upon
conversion of the outstanding Series A 8% Convertible Preferred Stock, 200,000
shares of Common Stock upon conversion of the outstanding Series B Convertible
Preferred Stock and 3,166,992 shares of Common Stock upon exercise of
outstanding warrants to purchase Common Stock. All outstanding shares of the
capital stock of the Company have been duly authorized and are validly issued,
fully paid and nonassessable. Except as set forth on Schedule 3.3 hereto, as of
the date hereof, there are no existing options, warrants, calls, preemptive (or
similar) rights, subscriptions or other rights, agreements, arrangements or
commitments of any character obligating the Company to issue, transfer or sell,
or cause to be issued, transferred or sold, any shares of the capital stock of
the Company or other equity interests in the Company or any securities
convertible into or exchangeable for such shares of capital stock or other
equity interests, and there are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of its capital
stock or other equity interests.
3.4 AUTHORIZATION.
(a) All corporate action on the part of the Company and its officers,
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein has been taken. When executed and delivered by the Company
and each of the other parties hereto, this Agreement shall constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and by general equitable principles. The Company has full legal right,
all requisite corporate power and all authority and approvals required to
execute and deliver this Agreement and to carry out and perform fully the
obligations of the Company hereunder. This Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery hereof by the
other parties hereto, this Agreement will be legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms.
(b) The execution and delivery by the Company of this Agreement, the
consummation of the transactions contemplated hereby, and the performance by the
Company of this Agreement in accordance with their respective terms and
conditions will not:
(i) violate the Company's Certificate of Incorporation, including the
Company's Certificate of Designations, Preferences, Rights and Limitations of
Series A 8% Convertible Preferred Stock, or Bylaws (or corporate instruments);
(ii) require the Company to obtain any consents, approvals, authorizations
or actions of, or make any filings with or give any notices to, any Governmental
Authority or any other Person, except as set forth on Schedule 3.4(b) hereto
(the "COMPANY CONSENTS AND NOTICES");
(iii) if the Company Consents and Notices are obtained or made, violate,
conflict with or result in the breach of any of the terms and conditions of,
otherwise cause the termination of or give any other contracting party the right
to terminate, or constitute (or with notice or lapse of time or both constitute)
a default under, or accelerate any rights of any party to, any material
indenture, mortgage, lease, loan agreement or other material agreement or
instrument to which the Company is bound; or
(iv) if the Company Consents and Notices are obtained or made, violate any
laws or orders of any Governmental Authority applicable to the Company.
3.5 VALID ISSUANCE OF THE SHARES. The Series C Shares to be purchased by
the Purchasers hereunder will, upon issuance pursuant to the terms hereof, be
duly authorized and validly issued, fully paid and nonassessable and not subject
to any liens, encumbrances, preemptive rights or any other similar contractual
rights of the stockholders of the Company or others, and will be issued in
compliance with applicable federal and state securities laws.
3.6 FINANCIAL STATEMENTS; SEC DOCUMENTS.
(a) The Company has made available to each Purchaser its audited Statements
of Income, Stockholders' Equity and Cash Flows for each of its three most
recently completed fiscal years ending prior to the date hereof, its audited
Consolidated Balance Sheet as of the end of each of its two most recently
completed fiscal years ending prior to the date hereof, its unaudited Statements
of Income, Stockholders' Equity and Cash Flows for the period covering its two
most recently completed fiscal quarters ending prior to the date hereof, and its
unaudited Balance Sheet as of its most recently completed fiscal quarter ending
prior to the date hereof (all such financial statements are hereinafter referred
to collectively as the "FINANCIAL STATEMENTS"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, and fairly present,
in all material respects, the financial position of the Company and the
Subsidiary and the results of their operations as of the date and for the
periods indicated thereon, except that the unaudited financial statements may
not be in accordance with generally accepted accounting principles because of
the absence of footnotes normally contained therein and are subject to normal
year-end audit adjustments which, individually and in the aggregate, will not be
material.
(b) The Company has made available to each Purchaser a true and complete
copy of the Company's Annual Report on Form 10-KSB for its most recently
completed fiscal year ending prior to the date hereof (the "LATEST 10-KSB"), the
Company's Quarterly Reports on Form 10-QSB for the two most recently completed
fiscal quarters ending prior to the date hereof (collectively the "PRIOR TWO
10-QSBS"), and any amendments thereto, and any other statement, report,
registration statement (other than registration statements on Form S-8) or
definitive proxy statement filed by the Company with the SEC during the period
commencing as of the start of its most recently completed fiscal year and ending
on the date hereof. The Company will, promptly upon the filing thereof, also
make available to each Purchaser all statements, reports (including, without
limitation, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K),
registration statements and definitive proxy statements filed by the Company
with the SEC during the period commencing on the date hereof and ending on each
Closing Date (all such materials required to be furnished to the Purchasers
pursuant to this sentence or pursuant to the next preceding sentence of this
Section 3.6 being called, collectively, the "SEC DOCUMENTS"). As of their
respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable, and none of the SEC Documents
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
made therein, in light of the circumstances under which they were made, not
misleading, as of their respective filing dates. Except as set forth on Schedule
3.6 hereto, the Company has, during the period that the Company has been subject
to the requirements of Section 12 or 15(d) of the Exchange Act, filed in a
timely manner all reports and other material required to be filed by it pursuant
to Sections 13, 14 or 15(d) of the Exchange Act. Except as set forth on Schedule
3.6 hereto, the Company has not filed any amendment to its Latest 10-KSB or
either of its Prior Two 10-QSBs. The Company has not filed any Current Reports
on Form 8-K with the SEC.
3.7 CONSENTS. All consents, approvals, orders and authorizations required
on the part of the Company and each Subsidiary in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated herein have been obtained and will be effective as of
each Closing Date.
3.8 NO CONFLICT. The execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the organizational documents of the Company
or the Subsidiary or (ii) any agreement or instrument, permit, franchise,
license, judgment, order, statute, law, ordinance, rule or regulations,
applicable to the Company, the Subsidiary or their respective properties or
assets.
3.9 INSURANCE. All the insurable properties of the Company and of the
Subsidiary are insured for the benefit of the Company or the Subsidiary, as the
case may be, against all risks usually insured against by persons operating
similar properties in the locality where such properties are located under valid
and enforceable policies issued by insurance companies of recognized
responsibility in sufficient amounts.
3.10 OVER THE COUNTER BULLETIN BOARD. The Common Stock is currently quoted
and traded on the OTC Bulletin Board (the "OTCBB"), the Company has maintained
all requirements for the continued quotation of the Common Stock on the OTCBB,
and there are no proceedings to revoke or suspend such continued quotation. The
sale of the Series C Shares as contemplated hereby will not result in a
violation of any rules or regulations applicable to issuers that quote shares of
their capital stock on the OTCBB and will not require any stockholder approval
under any rules or regulations applicable to issuers that quote shares of their
capital stock on the OTCBB.
3.11 PRIVATE OFFERING. The offer, sale and issuance of the Series C Shares
will not be integrated with any other offer, sale or issuance of the Company's
securities. During the six months preceding the date of this Agreement, neither
the Company nor any person acting on its behalf has offered or sold any Series C
Shares by means of any general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act. Assuming the accuracy of the
Purchasers' representations in Section 4 hereof, the offering and sale of the
Series C Shares will satisfy the requirements of Rule 506 under the Securities
Act.
3.12 ABSENCE OF LITIGATION. There is no action, suit or proceeding or, to
the Company's knowledge, any investigation, pending, or to the Company's
knowledge, threatened against the Company or the Subsidiary and in which an
unfavorable outcome, ruling or finding in any said matter, or for all matters
taken as a whole, might have a Material Adverse Effect. The foregoing includes,
without limitation, any such action, suit, proceeding or investigation that
questions this Agreement or the right of the Company to execute, deliver and
perform under the same.
3.13 TITLE TO PROPERTIES AND ASSETS, LIENS, ETC. The Company has good and
marketable title to its properties and assets, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance,
or charge, other than (i) those resulting from taxes which have not yet become
delinquent, (ii) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or have a Material Adverse
Effect, and (iii) those that have otherwise arisen in the ordinary course of
business.
3.14 COMPLIANCE WITH LAWS. Each of the Company and the Subsidiary has
complied, and is in compliance with, all federal, state, county, local and
foreign laws, rules, regulations, ordinances, decrees and orders applicable to
the operation of its business or to the real property or personal property that
it owns or leases (including, without limitation, all such laws, rules,
ordinances, decrees and orders relating to antitrust, consumer protection,
currency exchange, environmental protection, equal opportunity, health,
occupational safety, pension, securities and trading-with-the-enemy matters),
the failure to comply with which would, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor the Subsidiary has received any
notification of any asserted present or past unremedied failure by it to comply
with any of such laws, rules, regulations, ordinances, decrees or orders.
3.15 NO UNDISCLOSED LIABILITIES. Since June 30, 2002, neither the Company
nor the Subsidiary has incurred any liabilities or obligations, fixed or
contingent, matured or unmatured or otherwise, except for liabilities or
obligations that, individually or in the aggregate, do not or would not have a
Material Adverse Effect.
3.16 CHANGES. Except as set forth on Schedule 3.16 hereto, since the end of
the Company's last completed fiscal quarter, there has not been with respect to
the Company and the Subsidiary:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company or the Subsidiary from that reflected in the Financial
Statements, other than changes in the ordinary course consistent with past
practices, none of which individually or in the aggregate constitutes a Material
Adverse Effect;
(b) Any resignation or termination of any key officers or employees of the
Company or the Subsidiary; and to the knowledge of the Company, there is no
impending resignation or termination of employment of any such officer or
employee;
(c) Any material change, except in the ordinary course consistent with past
practices, in the contingent obligations of the Company or the Subsidiary by way
of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
which constitutes a Material Adverse Effect;
(e) Any waiver by the Company or the Subsidiary of a right or of a debt
owed to it other than in the ordinary course consistent with past practices;
(f) Any direct or indirect loans made by the Company or the Subsidiary to
any stockholder, employee, officer or director of the Company or the Subsidiary,
other than advances made in the ordinary course consistent with past practices;
(g) Any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder other than in the ordinary course
consistent with past practices;
(h) Any declaration or payment of any dividend or other distribution of the
assets of the Company or the Subsidiary;
(i) Any labor organization activity;
(j) Any indebtedness for borrowed money, obligation or liability incurred,
assumed or guaranteed by the Company or the Subsidiary, except those for
immaterial amounts and for current liabilities incurred in the ordinary course
consistent with past practices;
(k) Any sale, assignment, license or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets except in the ordinary
course consistent with past practices;
(l) Any change in any material agreement to which the Company or the
Subsidiary is a party or by which it is bound that constitutes or could with the
passage of time constitute a Material Adverse Effect; or
(m) Any other event or condition of any character that constitutes a
Material Adverse Effect with respect to the Company or the Subsidiary.
3.17 LABOR MATTERS. The Company has no collective bargaining agreement with
any of its employees and, to the Company's knowledge, there is no labor union
organizing activity pending or threatened with respect to the Company or the
Subsidiary. There are no disputes pending or, to the knowledge of the Company,
threatened between the Company or the Subsidiary, on the one hand, and any
employees, on the other hand, other than employee grievances arising in the
ordinary course of business which would not, individually or in the aggregate,
have a Material Adverse Effect.
3.18 MATERIAL CONTRACTS. Except as set forth on Schedule 3.18 hereto, the
contracts listed as exhibits to the SEC Documents are all of the material
contracts (as defined in the Exchange Act) to which the Company is a party or by
which it or its assets may be bound. The Company is, and, to the best of the
Company's knowledge, all other parties to such material contracts are, in
compliance in all material respects with their obligations thereunder.
3.19 INTELLECTUAL PROPERTY.
(a) Schedule 3.19(a) hereto sets forth a complete and accurate list of (i)
all Intellectual Property owned, licensed or used by the Company or the
Subsidiary, all applications therefor, and all licenses, assignments and other
agreements relating thereto to which the Company is a party, and (ii) all
written agreements relating to technology, know-how and processes which the
Company or the Subsidiary has licensed or authorized for use by others.
(b) The operation of the business of each of the Company and the Subsidiary
as currently conducted or as currently contemplated by the Company or the
Subsidiary to be conducted does not interfere with, conflict with, infringe
upon, misappropriate or otherwise violate the Intellectual Property rights of
any third party, and no action or claim is pending or threatened alleging that
the operation of such business interferes with, conflicts with, infringes upon,
misappropriates or otherwise violates the Intellectual Property rights of any
third party and, to the knowledge of the Company, there is no basis therefor.
(c) The Company is the sole owner of the entire right, title and interest
in and to, or has a valid license or other legal right under, Company Owned
Intellectual Property and the Company Licensed Intellectual Property used in or
necessary to the operation of its business as presently conducted or as
currently contemplated by the Company to be conducted, subject to the terms of
the license agreements governing the Company Licensed Intellectual Property.
(d) Except as set forth on Schedule 3.19(d) hereto, there are no
outstanding options, licenses, or agreements of any kind relating to the
Company's Intellectual Property, nor is the Company or the Subsidiary bound by
or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity.
(e) The Company has no present knowledge from which it could reasonably
conclude that the Company Owned Intellectual Property and any Intellectual
Property licensed to the Company under the Company Licensed Intellectual
Property, are invalid or unenforceable, and the same have not been adjudged
invalid or unenforceable in whole or in part. The Company Owned Intellectual
Property and the Company Licensed Intellectual Property constitute all of the
Intellectual Property necessary for the operation of the business of the Company
and the Subsidiary as currently conducted or as currently contemplated by the
Company to be conducted. The Company has complied with all of its obligations of
confidentiality in respect of the claimed trade secrets or proprietary
information of others and knows of no violation of such obligations of
confidentiality as are owed to it.
(f) No claims or actions have been asserted, are pending or, to the
Company's knowledge, threatened against the Company or the Subsidiary (i) based
upon or challenging or seeking to deny or restrict the ownership by or license
rights of the Company or the of the Subsidiary of any of the Company Owned
Intellectual Property or Company Licensed Intellectual Property, (ii) alleging
that any services provided by, processes used by, or products manufactured or
sold by the Company or the Subsidiary infringe or misappropriate any
Intellectual Property right of any third party, or (iii) alleging that the
Company Licensed Intellectual Property is being licensed or sublicensed in
conflict with the terms of any license or other agreement, and, to the knowledge
of the Company, there is no basis for such a claim.
(g) As of the date hereof, to the knowledge of the Company, no person is
engaging in any activity that infringes or misappropriates the Company Owned
Intellectual Property or Company Licensed Intellectual Property. Except as set
forth on Schedule 3.19(g) hereto, neither the Company nor the Subsidiary has
granted any license or other right to any third party with respect to the
Company Owned Intellectual Property or Company Licensed Intellectual Property.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated herein by the Company will not breach, violate
or conflict with any instrument or agreement concerning the Company Owned
Intellectual Property, or cause the forfeiture or termination or give rise to a
right of forfeiture or termination of any of the Company Owned Intellectual
Property.
(h) The Company has made available to each Purchaser correct and complete
copies of all the licenses of the Company Licensed Intellectual Property, except
that such copies shall have redacted from them certain confidential trace secret
information, other than licenses of commercial off-the-shelf computer software.
With respect to each such license:
(i) such license is valid and binding and in full force and effect and
represents the entire agreement between the respective licensor and licensee
with respect to the subject matter of such license;
(ii) such license will not cease to be valid and binding and in full force
and effect on terms identical in all material respects to those currently in
effect as a result of the consummation of the transactions contemplated by this
Agreement, nor will the consummation of the transactions contemplated hereby
constitute a material breach or default under such license or otherwise so as to
give the licensor a right to terminate such license; neither the Company nor the
Subsidiary has (A) received any notice of termination or cancellation under such
license, (B) received any notice of breach or default under such license, which
breach has not been cured, or (C) granted to any other third party any rights,
adverse or otherwise, under such license that would constitute a material breach
of such license; and neither the Company nor, to the knowledge of the Company,
any other party to such license (including the Subsidiary) is in material breach
or default thereof, and, to the knowledge of the Company, no event has occurred
that, with notice or lapse of time, would constitute such a material breach or
default or permit termination, modification or acceleration under such license.
<
Except as set forth on Schedule 3.19(h) hereto, the Company is not aware
that any of the respective employees, officers, directors, agents or consultants
of the Company or the Subsidiary is (i) subject to confidentiality restrictions
in favor of any third person the breach of which could subject the Company or
the Subsidiary to any liability, or (ii) obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to the Company or the Subsidiary, as
applicable, or that would conflict with the Company's or the Subsidiary's
business as presently proposed to be conducted. Each employee, officer and
consultant of the Company and the Subsidiary has executed a proprietary
information and inventions agreement in the form of Exhibit D attached hereto.
No current or former employee, officer or consultant of the Company or the
Subsidiary has excluded works or inventions made prior to his or her employment
or relationship with the Company or the Subsidiary from his or her assignment of
inventions pursuant to such employee, officer or consultant's proprietary
information and inventions agreement.
(i) Each of the Company and the Subsidiary has taken reasonable steps in
accordance with normal industry practice to maintain the confidentiality of its
trade secrets and other confidential Intellectual Property. To the knowledge of
the Company, (i) there has been no misappropriation of any material trade
secrets or other material confidential Company Owned Intellectual Property by
any person; (ii) no employee, independent contractor or agent of the Company or
the Subsidiary has misappropriated any trade secrets of any other person in the
course of such performance as an employee, independent contractor or agent; and
(iii) no employee, independent contractor or agent of the Company or the
Subsidiary is in material default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Company Owned Intellectual Property.
(j) Neither the execution nor delivery of this Agreement nor the carrying
on of the Company's or the Subsidiary's business by the employees and
consultants of the Company or the Subsidiary, as the case may be, nor the
conduct of the Company's or the Subsidiary's business as presently conducted or
as proposed to be conducted, will, to the knowledge of the Company, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
of such employees is now obligated. Except to the extent already assigned to the
Company or the Subsidiary, neither the Company nor the Subsidiary believes that
it is or will be necessary to utilize any inventions or proprietary information
of any of its respective employees (or people it currently intends to hire) made
prior to their employment by the Company or the Subsidiary, as the case may be.
3.20 FDA MATTERS.
(a) Neither the Company nor the Subsidiary has sold any products anywhere
in the world prior to receiving any required or necessary approvals or consents
from any Governmental Authority, including but not limited to the FDA under the
Food, Drug & Cosmetics Act of 1976, as amended, and the regulations promulgated
thereunder, or any corollary entity in any other jurisdiction. Except as set
forth on Schedule 3.20(a) hereto, each of the Company and each Subsidiary has
obtained in the United States and in all countries where it is currently
marketing its products, all applicable licenses, registrations, approvals,
consents, clearances and authorizations required by local, state or federal
agencies in such countries regulating the safety, effectiveness and market
clearance of such products to sell, promote and market such products. Neither
the Company nor the Subsidiary has received any notice of, and the Company is
not aware of, any outstanding, pending or threatened actions, citations,
decisions, product recalls, medical device reports, information requests,
warning letters or Section 305 notices from the FDA or similar issues or
notifications from any corollary entity in any other jurisdiction.
(b) Except as set forth on Schedule 3.20(b) hereto, each of the Company and
each Subsidiary has (i) complied in all material respects with all applicable
laws, regulations and specifications with respect to the design, manufacture,
labeling, testing and inspection of all of its products and the operation of
manufacturing facilities promulgated by the FDA or any corollary entity in any
other jurisdiction, and (ii) conducted all of its clinical trials with
reasonable care and in accordance with all applicable laws in all material
respects and in accordance with the stated protocols for such clinical trials.
(c) All of the Company's submissions to the FDA and any corollary entity in
any other jurisdiction whether oral, written or electronically delivered were
true, accurate and complete in all material respects as of the date made, and
together with any amendments to such submissions or supplemental information
provided to the FDA or such other corollary entity, remain true, accurate and
complete in all material respects as of the date hereof, and do not materially
misstate any of the statements or information included therein, or omit to state
a material fact necessary to make the statements therein not misleading.
3.21 TAX MATTERS. Except as set forth on Schedule 3.21 hereto, the Company
and each Subsidiary has filed all federal, state, local, foreign and other tax
returns which were required to be filed on or before the date hereof and has
paid all taxes which have become due and payable. All such reports and returns
(copies of which have been made available to the Purchasers) were materially
accurate and complete when filed and reflect all taxes required to be paid by
the Company and the Subsidiary for the periods reported therein. No tax returns
or reports of the Company or the Subsidiary are or ever have been under audit.
3.22 ENVIRONMENTAL COMPLIANCE. Neither the Company nor the Subsidiary has
generated, stored, treated, discharged or disposed of any hazardous substances
or hazardous waste in violation of any applicable law or regulation, nor is the
Company aware of any allegations that any such violations have occurred. The
Company is not aware of any claims, investigations, litigation or administrative
15 proceedings, whether actual or threatened, against the Company or the
Subsidiary relating to any environmental contamination of any property owned,
used or leased by any of them or arising out of any alleged violation of any
environmental law or regulation.
3.23 FULL DISCLOSURE. The representations and warranties of the Company set
forth in this Agreement do not contain any untrue statement of a material fact
or omit any material fact necessary to make the statements contained herein, in
the light of the circumstances under which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
represents and warrants to the Company as follows as of the date hereof and as
of the Closing Date:
4.1 AUTHORITY. The Purchaser has the full right, power, authority and
capacity to enter into and perform this Agreement, and this Agreement
constitutes valid and binding obligations of the Purchaser enforceable in
accordance with its terms, except as the same may be limited by equitable
principles and by bankruptcy, insolvency, moratorium, and other laws of general
application affecting the enforcement of creditors' rights, and except to the
extent limited by applicable federal or state securities laws.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Purchaser is acquiring the
Series C Shares being purchased by the Purchaser hereunder for the Purchaser's
own account for investment and not for resale or with a view to distribution
thereof in violation of the Securities Act.
4.3 INVESTOR STATUS. The Purchaser certifies and represents to the Company
that it is an "Accredited Investor" as defined in Rule 501 of Regulation D
promulgated under the Securities Act, experienced and knowledgeable in financial
and business matters and capable of evaluating the merits and risks of
Purchaser's purchase of Series C Shares.
4.4 SHARES NOT REGISTERED. The Purchaser understands that the Series C
Shares have not been registered under the Securities Act, by reason of their
issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that the Series C Shares must continue
to be held by the Purchaser unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration.
4.5 NO CONFLICT. The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby will not
conflict with or result in any violation of or default by the Purchaser (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to a loss of a
material benefit under any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to the
Purchaser or its respective properties or assets.
4.6 CONSENTS. All consents, approvals, orders and authorizations required
on the part of the Purchaser in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein have been obtained and will be effective as of the Closing
Date.
5. CONDITIONS PRECEDENT.
5.1 CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CONSUMMATE THE
CLOSINGS. The obligation of the Purchasers to consummate a Closing and to
purchase and pay for those Series C Shares being purchased by it pursuant to
such Closing is subject to the satisfaction of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained herein of the Company shall be true and correct in all material
respects on and as of such Closing Date with the same force and effect as though
made on and as of such Closing Date.
(b) PERFORMANCE. The Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to such
Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change (actual or threatened) in the assets, liabilities (contingent or other),
affairs, operations, prospects or condition (financial or other) of the Company
and the Subsidiary, taken as a whole, prior to such Closing Date; and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by the Company on or prior to such Closing Date.
(d) COMPLIANCE CERTIFICATE. The Chief Executive Officer and Chief Financial
Officer of the Company shall deliver to the Purchasers at the Initial Closing a
certificate certifying that the conditions specified in Sections 5.1(a) to (c)
have been fulfilled.
(e) PROCEEDINGS AND DOCUMENTS. All instruments and corporate proceedings in
connection with the transactions contemplated by this Agreement to be
consummated at the Closing shall be satisfactory in form and substance to the
Purchasers, and each Purchaser shall have received copies (executed or
certified, as may be appropriate) of all documents which the Purchaser may have
reasonably requested in connection with such transactions.
(f) OTCBB LISTING. The Common Stock shall be listed and eligible for
trading on the OTCBB, the Company shall have maintained all requirements for
such continued listing on the OTCBB, and there shall be no proceedings to revoke
or suspend such eligibility.
(g) EXCHANGE ACT COMPLIANCE. The Common Stock shall be registered under
Section 12 of the Exchange Act and the Company shall be in full compliance with
all reporting requirements of the Exchange Act.
(h) OPINION OF COUNSEL. Each Purchaser shall have received from Kurzman
Eisenberg Corbin Lever & Goodman, LLP, counsel to the Company, an opinion
addressed to the Purchasers, dated as of such Closing Date and in the form of
Exhibit E hereto.
(i) CERTIFICATE OF DESIGNATION. The Company shall have filed the Series C
Certificate of Designation with the Secretary of State of the state of Delaware
on or prior to the Initial Closing, which shall continue to be in full force and
effect as of the Closing.
(j) SECRETARY'S CERTIFICATE. The Secretary of the Company shall deliver to
the Purchasers at the Initial Closing a certificate certifying (i) the Company's
Certificate of Incorporation, (ii) the Bylaws, and (iii) resolutions of the
Board approving this Agreement and the transactions contemplated hereby.
(k) GOOD STANDING CERTIFICATES. The Company shall have delivered to the
Purchasers a certificate dated as of a recent date issued by the Secretary of
State of the state of Delaware to the effect that the Company is legally
existing and in good standing in such state. The Company shall have delivered to
the Purchasers a certificate dated as of a recent date issued by the Secretary
of State of the states of California and Texas to the effect that the Company is
legally qualified as a foreign corporation and in good standing in such states.
(l) BOARD COMPOSITION. Prior to the Initial Closing, Louis Reif, Robert
Whitworth, and Warren Lau shall resolve, that effective immediately after the
Initial Closing the size of the Board shall be fixed at six, and the Board shall
consist of Louis Reif, Warren Lau, Robert Whitworth, Ross Johnson, Nick Virca
and Evan Levine and that Ross Johnson is appointed Chairman of the Board. Robert
Whitworth shall have resigned from the Board effective October 5, 2002 (the
"RESIGNATION") and the Board shall have accepted such Resignation.
(m) RESTRUCTURING OF INDEBTEDNESS AND WAIVER. The Company and each Bridge
Investor that is not canceling its Bridge Note in consideration of the purchase
of Series C Shares hereby shall have executed and delivered an Amendment to
Promissory Note and Waiver substantially in the form attached hereto as Exhibit
F.
(n) AMENDMENT OF BRIDGE WARRANTS. The Company and each Bridge Investor that
is a Purchaser shall have executed and delivered an Amendment to Warrant
substantially in the form attached hereto as Exhibit G.
(o) DIRECTORS AND OFFICERS INSURANCE. The Company shall have obtained
directors and officers liability insurance in the amount of $1,000,000 or shall
deliver to the Purchasers reasonable evidence of its best efforts to obtain such
insurance.
5.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CONSUMMATE THE CLOSING.
The obligation of the Company to consummate each Closing and to issue and sell
the Series C Shares to the Purchasers to be purchased by it at such Closing is
subject to the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained herein of the Purchasers shall be true and correct in all material
respects on and as of such Closing Date with the same force and effect as though
made on and as of such Closing Date.
(b) PERFORMANCE. The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to such
Closing Date.
(c) CERTIFICATE OF DESIGNATION. The Company shall have filed the Series C
Certificate of Designation with the Secretary of State of the state of Delaware
on or prior to the Initial Closing, which shall continue to be in full force and
effect as of the Closing.
6. TRANSFER, LEGENDS.
6.1 TRANSFER OF SECURITIES. Each of the Purchasers shall not sell, assign,
pledge, transfer or otherwise dispose or encumber any of those Series C Shares
being purchased by it hereunder, except (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to an available
exemption from registration under the Securities Act and applicable state
securities laws and, if requested by the Company, upon delivery by the Purchaser
of either an opinion of counsel of the Purchaser reasonably satisfactory to the
Company to the effect that the proposed transfer is exempt from registration
under the Securities Act and applicable state securities laws or a
representation letter of the Purchaser reasonably satisfactory to the Company
setting forth a factual basis for concluding that such proposed transfer is
exempt from registration under the Securities Act and applicable state
securities laws. Any transfer or purported transfer of the Series C Shares in
violation of this Section 6.1 shall be void. The Company shall not register any
transfer of the Series C Shares in violation of this Section 6.1. The Company
may, and may instruct any transfer agent for the Company, to place such stop
transfer orders as may be required on the transfer books of the Company in order
to ensure compliance with the provisions of this Section 6.1.
6.2 LEGENDS. To the extent applicable, each certificate or other document
evidencing any of the Series C Shares shall be endorsed with the legend set
forth below, and each of the Purchasers covenants that, except to the extent
such restrictions are waived by the Company, the Purchaser shall not transfer
the shares represented by any such certificate without complying with the
restrictions on transfer described in this Agreement and the legends endorsed on
such certificate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT
AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF EITHER AN OPINION OF
COUNSEL REASONABLE SATISFACTORY TO THE COMPANY THAT THE PROPOSED
TRANSFER IS EXEMPT FROM SAID ACT OR OF A REPRESENTATION LETTER SETTING
FORTH A FACTUAL BASIS FOR CONCLUDING THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID ACT."
7. MISCELLANEOUS PROVISIONS.
7.1 RIGHTS CUMULATIVE. Each and all of the various rights, powers and
remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
7.2 NOTICES.
(a) Any notices, reports or other correspondence (hereinafter collectively
referred to as "CORRESPONDENCE") required or permitted to be given hereunder
shall be sent by postage prepaid first class mail, courier or telecopy or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
(b) All correspondence to the Company shall be addressed as follows:
Biokeys Pharmaceuticals, Inc.
9948 Hibert Street, Suite 100
San Diego, CA 92131
Attention: ______________________
Fax:___________________________
(c) All correspondence to the Purchasers shall be sent to their respective
addresses as set forth on the Purchaser Signature Pages attached to this
Agreement.
7.3 CAPTIONS. The captions and paragraph headings of this Agreement are
solely for the convenience of reference and shall not affect its interpretation.
7.4 SEVERABILITY. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.
7.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of the state of California and
without regard to any conflicts of laws concepts that would apply the
substantive law of some other jurisdiction.
7.6 WAIVERS AND AMENDMENTS. This Agreement or any provision hereof may be
amended, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of the amendment, waiver, discharge or
termination is sought; provided, however, that Purchasers holding not less than
50 percent of the Series C Shares sold under this Agreement may waive or amend
any provision of this Agreement on behalf of all Purchasers and all Purchasers
will be bound thereby.
7.7 ASSIGNMENT. The rights and obligations of any party hereto shall inure
to the benefit of and shall be binding upon the authorized successors and
permitted assigns of such party whether so expressed or not.
7.8 EXPENSES. The Company and the Purchasers shall each bear their own
expenses and legal fees in connection with the consummation of this transaction,
provided, however, that the Company will pay the reasonable legal fees and
expenses of Bingham McCutchen LLP, counsel to the Purchasers, upon receipt of a
reasonably detailed invoice therefor.
7.9 SURVIVAL OF WARRANTIES. The warranties, representations and covenants
of the Company and the Purchasers contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Purchasers or the Company. All
statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
7.10 COUNTERPARTS AND FACSIMILE DELIVERY. This Agreement may be executed in
counterparts. Any signature page delivered by electronic facsimile shall be
binding to the same extent as an original signature page, with regard to any
agreement subject to the terms hereof or any amendment thereto. Any party who
delivers such a signature page agrees to later deliver an original counterpart
to any party who requests it.
7.11 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to the Company or to any holder of any securities issued or
to be issued hereunder shall impair any such right, power or remedy of the
Company or such holder, nor shall it be construed to be a waiver of any breach
or default under this Agreement, or an acquiescence therein, or any similar
breach or default thereafter occurring; nor shall any delay or omission to
exercise any right, power or remedy or any waiver of any single breach or
default be deemed a waiver of any other right, power or remedy or breach or
default theretofore or thereafter occurring. All remedies, either under this
Agreement or by law otherwise afforded to the Company or any holder, shall be
cumulative and not alternative.
7.12 FINDER'S FEES AND OTHER FEES.
(a) The Company (i) represents and warrants that it has retained no finder
or broker in connection with the transactions contemplated by this Agreement and
(ii) hereby agrees to indemnify and to hold the Purchasers harmless from and
against any liability for commission or compensation in the nature of a finder's
fee to any broker or other person or firm (and the costs and expenses of
defending against such liability or asserted liability) for which the Company,
or any of its employees or representatives, is responsible.
(b) Each of the Purchasers (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
from and against any liability for any commission or compensation in the nature
of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
such Purchaser is responsible.
7.13 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
7.14 SIZE OF THE BOARD. The Company covenants that promptly after October
5, 2002 the Board will resolve to fix the size of the Board at five members.
7.15 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto respecting the subject matter hereof and supersedes
all prior agreements, negotiations, understandings, representations and
statements respecting the subject matter hereof, whether written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by the parties hereto.
[signature page immediately follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
BIOKEYS PHARMACEUTICALS, INC.
By: ___________________________________
Name: ________________________________
Title: ________________________________
PURCHASER
Name: ________________________________
By: ___________________________________
Name: ________________________________
Title: _______________________________
EXHIBIT A
SCHEDULE OF PURCHASERS
NUMBER OF
NAME AND ADDRESS SERIES C SHARES TOTAL PURCHASE PRICE
- ---------------- --------------- --------------------
Mark Capital, LLC
c/o Evan Levine
300 Felton Drive 20,000 $200,000(1)
Menlo Park, CA 94025
Matthew Balk
c/o H.C. Wainwright & Co., Inc. 10,000 $100,000(2)
245 Park Avenue, 44th Floor
New York, NY 10167
Julia Balk
BS Master Def Contti MIP Plan
c/o Matthew Balk
H.C. Wainwright & Co., Inc. 2,000 $20,000
245 Park Avenue, 44th Floor
New York, NY 10167
Matthew Balk c/f Daniel Edgar Balk
UGMA/NY
c/o H.C. Wainwright & Co., Inc. 1,300 $13,000
245 Park Avenue, 44th Floor
New York, NY 10167
Matthew Balk c/f David Michael Balk
UGMA/NY
c/o H.C. Wainwright & Co., Inc. 1,300 $13,000
245 Park Avenue, 44th Floor
New York, NY 10167
Guarantee & Trust Co TTEE FBO Matthew Balk
GTC IRA Rollover
c/o H.C. Wainwright & Co., Inc. 1,000 $10,000
245 Park Avenue, 44th Floor
New York, NY 10167
(1) The purchase price for Mark Capital, LLC will be paid as follows: (i)
$100,000 by cash; and (ii) $100,000 by conversion of all of the outstanding
principal amount on the 12% Promissory Note issued by the Company to Mark
Capital, LLC, on November 1, 2001 into Series C Shares.
(2) The purchase price for Matthew Balk will be paid as follows: (i) $50,000
by cash; and (ii) $50,000 by conversion of all of the outstanding principal
amount on the 12% Promissory Note issued by the Company to Matthew Balk on
November 1, 2001 into Series C Shares.
NUMBER OF
NAME AND ADDRESS SERIES C SHARES TOTAL PURCHASE PRICE
- ---------------- --------------- -------------------
Robert J. Neborsky, M.D., Inc.
317 14th Street 6,000 $60,000(3)
Del Mar, CA 92014-2554
Ross Johnson
53524 Bickett 6,000 $60,000(4)
Chapel Hill, NC 27514
David Wiener
10 Iron Canyon Court 5,000 $50,000
Park City UT 84060-6557
Jason Adelman
900 Park Avenue, Apt. 15A 3,000 $30,000(5)
New York, NY 10021-0231
Cass Gunther Adelman, trustee
for Philippa Gunther Adelman UGMA
900 Park Avenue, Apt. 15A 1,000 $10,000
New York, NY 10021-0231
Edward D. Ball and Susan E. Ball,
trustees of the Ball Family
Trust under trust agreement dated
October 23, 2001
c/o Edward D. Ball, M.D. 2,000 $20,000
13360 Glenn Cliff Way
San Diego, CA 92130
(3) The purchase price for Robert J. Neborsky, M.D., Inc. will be paid as
follows: (i) $30,000 by cash; and (ii) $30,000 by conversion of a portion of the
outstanding principal amount on the 12% Promissory Note issued by the Company to
Robert J. Neborsky, M.D., Inc. on November 1, 2001 into Series C Shares.
(4) The purchase price for Ross Johnson will be paid as follows: (i) $30,000
by cash; and (ii) $30,000 by conversion of all of the outstanding principal
amount on the 12% Promissory Note issued by the Company to Ross Johnson on
November 1, 2001 into Series C Shares.
(5) The purchase price for Jason Adelman will be paid as follows: (i)
$20,000 by cash; and (ii) $10,000 by conversion of all of the outstanding
principal amount on the 12% Promissory Note issued by the Company to Jason
Adelman on November 1, 2001 into Series C Shares.
NUMBER OF
NAME AND ADDRESS SERIES C SHARES TOTAL PURCHASE PRICE
- ---------------- --------------- --------------------
Barry Alter
488 Melrose Avenue 1,000 $10,000
Toronto, Ontario M5M2A2
Emisphere Technologies, Inc.
765 Old Saw Mill River Road 1,000 $10,000
Tarrytown, NY 10591
Roland Hartmann
Auf der Haltan 18 600 $6,000
CH -- 8706 Meilen
Switzerland
Bank Sal. Oppenheim jr. & Cie.
(Schweiz)
AG, Zurich
c/o Swiss American Securities Inc.
12 East 49th Street 100 $1,000
New York, NY 10017
TOTALS: 61,300 $613,000
EXHIBIT B
CERTIFICATE OF DESIGNATION OF SERIES C CONVERTIBLE PREFERRED STOCK
EXHIBIT C
SILICON VALLEY BANK
WIRE TRANSFER INSTRUCTIONS
The following information is provided to assist clients in routing wire
transfers TO Silicon Valley Bank in the most expeditious manner.
For all incoming FOREIGN CURRENCY wires, please contact our INTERNATIONAL
DEPARTMENT AT (408)654-7774 for settlement instructions.
DOMESTIC WIRE TRANSFER:
Instruct the paying financial institution or the payor to route all domestic
wire transfers via FEDWIRE to the following ABA number:
TO: SIL VLY BK SJ
ROUTING & TRANSIT #: 121140399
FOR CREDIT OF: Biokeys, Inc.
CREDIT ACCOUNT #: 3300340922
BY ORDER OF: [NAME OF SENDER]
INTERNATIONAL WIRE TRANSFER:
Instruct the paying financial institution to advise their U.S. correspondent to
pay as follows:
PAY TO: FC - SILICON VALLEY BANK
3003 TASMAN DRIVE
SANTA CLARA, CA 95054, USA
ROUTING & TRANSIT #: \\FW121140399
SWIFT CODE: SVBKUS6S
FOR CREDIT OF: Biokeys, Inc.
FINAL CREDIT ACCOUNT #: FNC - 3300340922
BY ORDER OF: [NAME OF SENDER]
IMPORTANT!!!!
Wire instructions MUST designate your FULL TEN DIGIT ACCOUNT NUMBER. Wires
received by Silicon Valley Bank with INCOMPLETE or INVALID ACCOUNT NUMBERS may
be delayed and could possibly require return to the sending bank due to new
regulations.
EXHIBIT D
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
Not applicable.
EXHIBIT E
FORM OF OPINION OF COUNSEL TO THE COMPANY
EXHIBIT F
AMENDMENT TO PROMISSORY NOTE AND WAIVER
EXHIBIT G
AMENDMENT TO WARRANT
Email Alerts
Enter your e-mail address to receive alerts whenever certain new company information is posted to this site