View:
3 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K Current Report ___________________________________ Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: September 20, 1996 Commission file number 0-20772 CYPROS PHARMACEUTICAL CORPORATION (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation or organization) 2714 Loker Avenue West Carlsbad, California 92008 Address of principal executive offices) (Zip Code) 33-0476164 (I.R.S. Employer Identification No.) Registrant's telephone number,including area code: (619) 929-9500
NOTE PURCHASE AGREEMENT
THIS AGREEMENT is made this 11th day of July, 1996,
between CYPROS PHARMACEUTICAL CORPORATION, NASDAQ Symbol
("CYPR") (the "Company"), a California corporation, with its
principal office at 2714 Loker Avenue West, Carlsbad, CA 92008,
and PARESCO, INC. (the "Purchaser") , with its principal office
at 101 Hudson Street, Jersey City, NJ 07302.
IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Closing Date" means the date agreed to by the
parties for the execution and delivery of this Agreement
against a wire transfer of the funds to the Company.
"Closing" means the completion of the execution and
delivery of the Agreement and the receipt of the wire transfer
on the Closing Date.
"Common Stock" means the Common Stock of the Company,
no par value.
"Conversion Date" means the date on which the
Purchaser has telecopied the Notice of Conversion to the
Company.
"Convertible Note" means the promissory note of the
Company convertible into common stock of the Company as
hereinafter provided.
"Market Price" means the average of the closing price
per share of the Common Stock for the ten (10) NASDAQ Trading
Days immediately preceding the applicable Conversion Date as
quoted in Wall Street Journal.
"Note" means the convertible promissory note
purchased under this Agreement.
Section 2. Authorization and Execution of Agreement.
2.1 Authorization. Subject to the terms and
conditions of this Agreement, the Company has authorized the
execution and delivery of one or more note purchase agreements
in an aggregate principal amount of $2,000,000 (the
"Principal"), with a maturity date of 5:00 p.m. Eastern
Standard Time on July , 1999 (the "Maturity Date"). The Company
promises to pay to the Purchaser the Principal, if any remains
unconverted, without interest on the Maturity Date. The
Principal on this Note is payable only in shares of Common
Stock pursuant to the formula as described in Section 3.2
below.
2.2 Agreement to Execute and Deliver Note Agreement
and Note. On the Closing Date, the Company will borrow
$2,000,000 from the Purchaser, and, in reliance upon the
representations and warranties of the Company contained in this
Agreement, the Purchaser will lend such sum to the Company,
upon the terms and conditions hereinafter set forth.
2.3 Time and Place of Closing. The Closing shall
be held at the offices of Sheldon E. Goldstein, P.C., 65
Broadway, New York, NY 10006, as promptly as practicable as
agreed to by the parties to this Agreement.
2.4 Payment and Delivery. At or prior to the
Closing, the following shall occur:
(a) Purchaser shall remit by wire transfer
$2,000,000 to Escrow Agent as per separate Escrow Agreement.
(b) Company shall deliver or cause to be
delivered to Escrow Agent this Note Agreement and a Note,
substantially in the form set forth in Exhibit B hereto,
bearing the original signatures of an authorized officer of the
Company.
Section 3. General Representations and Warranties
of the Company. The Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true
and correct as of the date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Company is a
corporation duly organized and validly existing under the laws
of the State of California and is in good standing under such
laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets,
and to carry on its business as presently conducted. The
Company is qualified to do business as a foreign corporation in
each jurisdiction in which the ownership of its property or the
nature of its business requires such qualification, except
where failure to so qualify would not have a material adverse
effect on the Company.
3.2 Capitalization. The authorized capital stock of
the Company consists of 30,000,000 shares of Common Stock, no
par value, of which 11,613,748 shares are issued and
outstanding, and 1,000,000 shares of Convertible Preferred
Stock, none of which are issued and outstanding. All issued
and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. As of the Closing Date, the Company had
reserved sufficient shares of Common Stock for issuance upon
conversion of the Note, which is convertible at any time
beginning on the first anniversary of Closing, at Purchaser's
option, at a 25% discount from the Market Price as determined
on the Conversion Date (subject to a minimum conversion price
of $1.00 (the "Minimum Conversion Price")), and will be
automatically converted on the third anniversary of closing at
such discount (without the Minimum Conversion Price), if not
previously converted. Each such conversion shall reduce the
principal amount owing on the Note by the amount stated in the
Notice of Conversion and be reflected in a Convertible Note
Principal Reduction Schedule signed by an authorized officer of
the Company.
3.3 Authorization. The Company has all corporate
right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and
stockholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Note by the
Company, the authorization, sale, issuance and delivery of the
Common Stock and the performance of the Company's obligations
hereunder has been taken. This Agreement has been duly executed
and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules
of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy
as they may apply to the indemnification provisions set forth
in Section 7.4 of this Agreement. Upon their issuance and
delivery pursuant to this Agreement, the Common Stock will be validly issued,
fully paid and nonassessable and will be free of any liens or
encumbrances. The execution and delivery of this Agreement
will not give rise to any preemptive right or right of first
refusal or right of participation on behalf of any person.
3.4 No Conflict. The execution and delivery of this
Agreement do not, 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), or give rise to a right of termination,
cancellation or acceleration of any obligation or to a lose of
a material benefit, under, any provision of the Restated
Articles of Incorporation, as amended, or Bylaws of the Company
or any material mortgage, indenture, lease or other agreement
or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The
Company's Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All reports required to be filed by the
Company with the Securities and Exchange Commission ("SEC")
during the period from August 1, 1995 to the date of this
Agreement pursuant to Section 13 (a) or 15 (d) of the Exchange
Act, including the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1995 (the "Form 10-K"), have been
duly filed, were in compliance with the requirements of their
respective forms, were complete and correct in all material
respects as of the dates at which the information was furnished
and do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
made therein, in the light of the circumstances under which
they were made, not misleading. Copies of the Form 10-K and
the Form 10-Qs required to be filed by the Company with the SEC
during the period from August 1, 1995 to the date of this
Agreement pursuant to Section 13(a) or 15(d) of the Exchange
Act (the "SEC Reports") have been furnished to Sheldon E.
Goldstein. The Company is an issuer eligible to use Form S-3
under the Securities Act of 1933 (the "Securities Act") for the
resale of the Common Stock underlying the Shares.
3.6 Financial Statements and Changes. The audited
financial statements of the Company contained in the Form 10-K,
including the notes relating thereto (the "Financial
Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods covered by such statements and present
fairly the Company's financial condition and results of
operations and cash flows as of the respective dates and for
the periods indicated. Since April 30, 1996, there has not been
any change in the assets, liabilities, financial condition or
operations of the Company from that reflected in the Financial
Statements except changes in the ordinary course of business
which have not been, either in any individual case or in the
aggregate, materially adverse.
3.7 Absence of Undisclosed Liabilities. The Company
has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except as set
forth in the Financial Statements or as incurred in the
ordinary course of business after the date of the Financial
Statements.
3.8 Governmental Consent, etc. 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 consummation of any other transaction
contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 for the purpose of
registering the Common Stock underlying the Shares.
3.9 Intellectual Property Rights. Except as
disclosed in the Form 10-K, the Company has sufficient
trademarks, trade names, patent rights, copyrights and licenses
to conduct its business as contemplated in the Form 10-K. To
the Company's knowledge, neither the Company nor its products
is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar
right of others currently in existence; and there is no claim
being made against the Company regarding any trademark, trade
name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse
effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in
the Form 10-K, the agreements to which the Company is a party
described in the Form 10-K are valid agreements, in full force
and effect, the Company is not in material breach or material
default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge,
the other contracting party or parties thereto are not in
material breach or material default (with or without notice or
lapse of time, or both) under any of such agreements.
3.11 Litigation. There is no action, proceeding or
investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either
individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or
operations of the Company. The Company is not a party to or
subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the
Company currently intends to initiate.
3.12 Title to Assets. Except as set forth in Form 10
K, the Company has good and marketable title to all properties
and material assets described in the Form 10-K as owned by it,
free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are
not material to the business of the Company.
3.13 Subsidiaries. The Company does not presently
own or control, directly or indirectly, any interest in any
other corporation, partnership, association or other business
entity.
3.14 Required Governmental Permits. The Company is
in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities
which are material to the conduct of its business, all of which
are valid and in full force and effect.
Section 4. Representations, Warranties and Covenants
of the Purchaser. The Purchaser represents and warrants to,
and covenants with, the Company that the following are true and
correct as of the date hereof and as of the Closing Date.
4.1 Authority. The Purchaser has full right, power,
authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser
and constitutes a legal, valid and binding obligation of the
Purchaser enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and
to limitations of public policy as they may apply to the
indemnification provisions set forth in Section 7.4 of this
Agreement.
4.2 Investment Experience. Purchaser is an
"accredited investor" as defined in Rule 501(a) under the
Securities Act. Purchaser is aware of the Company's business
affairs and financial condition and has had access to and has
acquired sufficient information about the Company, including
the SEC Reports, to reach an informed and knowledgeable
decision to purchase the Note. Purchaser has such business and
financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of
the Note.
4.3 Investment Intent. Without limiting its
ability to resell the Common Stock pursuant to an effective
registration statement, Purchaser represents that it is
purchasing the Note for its own account as principal for
investment purposes. Purchaser understands that its acquisition
of the Note has not been registered under the Securities Act or
registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein. Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy,
purchaser or otherwise acquire or take a pledge of) the Note or
any part of it except in compliance with the Securities Act and
any applicable state securities laws, and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements.
Purchaser further acknowledges and understands that the Note
may not be resold or otherwise transferred except in a
transaction registered under the Securities Act and any
applicable state securities laws or unless an exemption from
such registration is available. Purchaser understands that the
Note will be imprinted with a legend that prohibits the
assignment of the Note unless (i) it is registered or such
registration is not required, and (ii) if the transfer is
pursuant to an exemption from registration other than Rule 144
under the Securities Act and, if the Company shall so request
in writing, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is
so exempt.
4.5 No Legal, Tax or Investment Advice.
Purchaser understands that nothing in this Agreement or any
other materials presented to Purchaser in connection with the
purchase of the Note constitutes legal, tax or investment
advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Note.
4.6 Purchaser Review. Purchaser hereby represents
and warrants that the Purchaser has carefully examined the SEC
Reports, including the Form 10-K and the financial statements
contained therein. The Purchaser acknowledges that the Company
has made available to the Purchaser all documents and
information that it has requested relating to the Company and
has provided answers to all of its questions concerning the
Company and the Note. Nothing stated in the previous two sentences, however,
shall be deemed to affect the representations and warranties of
the Company contained in this Agreement.
4.7 Legend. The Note hereby bears the following
legend:
"THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH NOTE
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER
SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE
COMPANY."
This legend shall be removed and the Company shall
issue a replacement Note without such legend to the Purchaser
if the Purchaser provides to the Company an opinion of counsel
to the effect that a public sale, transfer or assignment of
such Note may be made without registration.
Section 4.8 Limitations on Conversion and on
Voting Rights. The Purchaser agrees that conversions at the
Minimum Conversion Price shall be limited to 25% of the
remaining principal amount of the Notes and there will be a
minimum of 90 days between conversions at the Minimum
Conversion Price. The Purchaser also agrees to vote all of its
shares obtained through conversion of the Notes in accordance
with the wishes of the Company, so long as the closing price
per share of the Common Stock for any ten consecutive days is
not less than $3 per share and and further agrees to execute
any and all documents, instruments, proxies or similar
documents requested of it by the Company in furtherance of this
Section. In the event such average is less than $3 per share
for any consecutive ten-day period, then this limitation on
voting rights shall no longer be operative and the Purchaser
shall no longer be subject to any restriction on voting shares
obtained through conversion of the Notes.
Section 4.9 Limitation on Short Sales. The
Purchaser agrees that it will not sell short, directly or
indirectly, the common stock of the Company during the period
beginning fifteen business days prior to a Conversion Date and
ending on the Conversion Date.
Section 5. Conditions to Obligations of Purchasers at
Closing Date. The obligation of each Purchaser to execute the
Agreement and lend the principal to the Company is subject to
the fulfillment on or prior to the Closing Date of the
following conditions, any or all of which may be waived at the
option of such Purchaser:
5.1 Representations and Warranties Correct. The
representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects when
made and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had
been made on and as of said date.
5.2 Compliance Certificate. The Company shall have
delivered to the Purchaser a certificate executed on behalf of
the Company by its Chief Executive Officer or Chief Financial
officer and dated the Closing Date, certifying to the
fulfillment of the conditions specified in Section 5.1.
5.3 Legal Opinion. A legal opinion shall be
delivered by counsel to the Company representing that there is
no action, proceeding or investigation pending, or to such counsel's
knowledge, threatened against the Company which might result,
either individually or in the aggregate, in any material
adverse change in the business, prospects, conditions, affairs
or operations of the Company. To such counsel's knowledge, the
Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. To such counsel's
knowledge, there is no action, suit, proceeding or
investigation by the Company currently pending or which the
Company currently intends to initiate.
Section 6. Conditions to Obligations of Company. The
Company's obligation to execute and deliver this Agreement at
the Closing is subject to the fulfillment on or prior to the
Closing Date of the following conditions, any or all of which
may be waived at the option of the Company:
6.1 Representations and Warranties Correct. The
representations and warranties made by the Purchaser in Section
4 hereof shall be true and correct in all material respects
when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as
if they had been made on and as of said date.
6.2 Covenants. All covenants, agreements and
conditions contained in this Agreement to be performed by the
Purchaser on or prior to such Closing Date shall have been
performed or complied with in all material respects.
6.3 No Order Pending. There shall not then be in
effect any order enjoining or restraining the transactions
contemplated by this Agreement.
6.4 No Law Prohibiting or Restricting Such Sale.
There shall not be in effect any law, rule or regulation
prohibiting or restricting such sale, or requiring any consent
or approval of any person which shall not have been obtained to
issue the Shares (except as otherwise provided in this
Agreement).
6.5 Consents. The Company shall have obtained all
consents, permits, waivers and other authorizations necessary
or appropriate for consummation of the transactions
contemplated by this Agreement which need to be obtained prior
to the Closing.
Section 7. Registration of the Shares; Compliance
with the Securities Act.
7.1 Definitions. For the purpose of this Section
7:
(a) the term "Registration Statement" shall
mean any registration statement required to be filed by Section
7.2 below, and shall include any preliminary prospectus, final
prospectus, exhibit or amendment included in or relating to
such registration statement; and
(b) the term "untrue statement" shall include
any untrue statement or alleged untrue statement, or any
omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
7.2 Registration Procedures and Expenses. The
Company shall:
(a) prior to one year after the Closing Date
and in sufficient time to have such registration effective one
year from the Closing Date, file with the SEC a registration
statement under the Securities Act on a form which is
appropriate to register the Common Stock underlying the Note;
(b) use its best efforts, subject to receipt of
necessary information from the Purchaser, to cause such
Registration Statement to become effective as promptly after
filing as practicable;
(c) prepare and file with the SEC such
amendments and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective until termination
of such obligation as provided in Section 7.9 below;
(d) furnish to the Purchaser with respect to
Common Stock registered in the Registration Statement (and to
each underwriter, if any, of such Common Stock) such number of
copies of prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchaser
may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the Common Stock by the
Purchaser; provided, however, that the obligation of the
Company to deliver copies of prospectuses to the Purchaser
shall be subject to the receipt by the Company of reasonable
assurances from the Purchaser that the Purchaser will comply
with the applicable provisions of the Securities Act and of
such other securities laws as may be applicable in connection
with any use of such prospectuses;
(e) file such documents as may be required of
the Company for normal securities law clearance for the resale
of the Common Stock in which states of the United States as may
be reasonably requested by the Purchaser; provided, however,
that the Company shall not be required in connection with this
paragraph (e) to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction;
(f) bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 7.2
and the registration of the Common Stock on such Registration
Statement and the satisfaction of the blue sky laws of such
states, including the reasonable fees and expenses of legal
counsel to the Purchaser in connection with the procedures in
paragraph (a) through (e) of this Section 7.2 and other than
underwriting discounts and selling commissions or expenses
required by law to be borne by Purchaser; and
(g) in the event of the failure of Company to
procure registration of the Common Stock underlying the Note
within one year from the Closing Date, Company will pay
Purchaser by wire transfer, as liquidated damages for such
failure and not as a penalty, $40,000 for each month that the
registration statement is not effective beginning one year from
the Closing Date or does not remain effective pursuant to
Section 7.7 of this Agreement after such date. If the Company
does not remit the damages to the Purchaser as set forth above,
the Company will pay the Purchaser reasonable costs of
collection, including attorneys fees, in addition to the
liquidated damages. Such payment shall be made to the
Purchaser immediately if the registration of the Common Stock
is not effected; provided, however, that the payment of such
liquidated damages shall not relieve the Company from its
obligations to register the Common Stock pursuant to this
Section. The registration of the Common Stock pursuant to this
provision shall not affect or limit Purchaser's other rights or
remedies as set forth in this Agreement.
7.3 Underwriter. The Company understands that the
Purchaser disclaims being an "underwriter" (as such term is
defined under the Securities Act and the rules and regulations
promulgated thereunder (an "Underwriter") ), but Purchaser
being deemed an Underwriter shall not relieve the Company of
any obligation it has hereunder.
7.4 Indemnification.
(a) The Company agrees to indemnify and hold
harmless Purchaser (and each of its officers, directors,
partners or persons, if any, who controls such Purchaser within
the meaning of Section 15 of the Securities Act) from and
against any losses, claims, damages or liabilities to which
such Purchaser (and each of officers, directors, partners or
persons, if any, who controls such Purchaser with in the
meaning of Section 15 of the Securities Act) may become subject
(under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement or any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, in each case on the effective date thereof, or
arise out of any failure by the Company to fulfill any
undertaking included in the Registration Statement, and the
Company will, as incurred, reimburse such Purchaser (and each
of its officers, directors, partners or persons, if any, who
controls such Purchaser within the meaning of Section 15 of the
Securities Act) for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any
such action, proceeding or claim; provided, however, that the
Company shall not be liable in any such case to the extent that
such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement or omission or alleged untrue
statement or omission made in such Registration Statement in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration
Statement.
(b) The Purchaser agrees to indemnify and hold harmless
the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each
officer of the Company who signs the Registration Statement and
each director of the Company), from and against any losses,
claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as
such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based
upon, any untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in each
case, on the effective date thereof, if such untrue statement
was made in reliance upon and in conformity with written
information furnished by or on behalf of such Purchaser
specifically for use in preparation of the Registration
Statement, and such Purchaser will, as incurred, reimburse the
Company (and each of its officers, directors or controlling
persons) for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any
such action, proceeding or claim.
(c) Promptly after receipt by any indemnified
person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an
indemnifying person pursuant to thin Section 7.4, such
indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action,
and, subject to the provisions hereinafter stated, in case any
such action shall be brought against an indemnified person and
such indemnifying person shall have been notified thereof, such
indemnifying person shall be entitled to participate therein,
and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person
to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not he liable
to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified
person for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall he entitled to
retain its own counsel at the expense of such indemnifying
person.
(d) If the indemnification provided for in this
Section 7.4 is required by its terms but is for any reason held
to be unavailable to or otherwise insufficient to hold harmless
an indemnified party in respect of any losses, claims, damages
or liabilities referred to above, then each applicable
indemnifying party shall contribute to the amount paid or
payable by such indemnified party an a result of such losses,
claims, damages or liabilities.
7.5 Information Available. So long as any
registration statement is effective covering the resale of the
Common Stock underlying the Note, the Company will furnish to
Purchaser:
(a) as soon as possible after available (but in
the case of the Company's Annual Report to Stockholders, within
150 days after the end of each fiscal year of the Company), one
copy of its Annual Report to Stockholders (which Annual Report
shall contain financial statements audited in accordance with
generally accepted accounting principles in the United States
of America by a national firm of certified public accountants);
(ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K within 100 days
after the end of each fiscal year of the Company, (iii) its
quarterly report on Form 10Q, and (iv) a full copy of the
registration statement covering the Common Stock underlying the
Convertible Note (the foregoing, in each case, excluding
exhibits); and
(b) upon the reasonable request of Purchaser,
such other information that is generally available to the
public.
7.6 Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the
SEC which may at any time permit the sale of the Common Stock
to the public without registration, the Company agrees to use
its best efforts to:
(a) make and keep public information available,
as those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the effective date on which
the Company becomes subject to the reporting requirements of
the Securities Act or the Exchange Act;
(b) use its best efforts to file with the SEC
in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon
request a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in
the possession of or reasonably obtainable by the Company as
Purchaser may reasonably request in availing itself of any rule
or regulation of the SEC allowing Purchaser to sell any such
Common Stock without registration.
7.7 Temporary Cessation of Offers and Sales by
Purchaser. The Purchaser acknowledges that there may
occasionally be times when the Company may be required to
suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the
Registration Statement has been filed by the Company and
declared effective by the Commission, until the prospectus is
supplemented or amended to comply with the Securities Act, or
until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. The Company
agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances.
Purchaser hereby covenants that it will not sell any Common
Stock pursuant to said prospectus during a period of not more
than 45 days commencing at the time at which the Company gives
the Purchaser notice of the suspension of the use of said
prospectus and ending at the time the Company gives the
Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus, as the same may have been
supplemented or amended.
7.8 Transfer of Common Stock After Registration.
Purchaser hereby covenants with the Company not to make any
sale of the Common Stock except either in accordance with the
Registration Statement, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus,
or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.9 Termination of Obligations. The obligations of
the Company pursuant to Sections 7.2, 7.3 and 7.6 hereof shall
cease and terminate upon the earlier to occur of (i) such time
as all of the Common Stock have been re-sold, or (ii) such time
as all of the Common Stock may be re-sold in any three-month
period pursuant to Rule 144 under the Securities Act.
Section 8. Legal Fees and Expenses. Each of the
parties shall pay its own fees and expenses (including the fees
of any attorneys, accountants, appraisers or others engaged by
such party) in connection with this Agreement and the
transactions contemplated hereby.
Section 9. Notice of Conversion. Conversion of
the Note to Common Stock may be exercised in whole or in part
by Purchasers telecopying an executed and completed Notice of
Conversion (in the form annexed hereto as Exhibit A) to the
Company and delivering the original Notice of Conversion to the
Company by express courier within three (3) business days of
exercise. Each date on which a Notice of Conversion is
telecopied to and received by the Company in accordance with
the provisions hereof shall be deemed a Conversion Date. The
Company will transmit the certificates representing the Common
Stock issuable upon conversion of all or any part of the Note
(together with a Convertible Note Principal Reduction Schedule
signed by an officer of the Company reflecting the remaining
Principal owing on the Note, which shall be deemed to be an
amendment to the Agreement) to the Purchaser via express
courier within three (3) business days after the Company has
received the original Notice of Conversion. The Notice of
Conversion shall be delivered to the Company as follows:
Cypros Pharmaceutical Corporation
2714 Loker Avenue West
Carlsbad, CA 92008
Attn: Chief Financial Officer
or to such other person at such other place as the Company
shall designate to the Purchaser in writing. No fractional
shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be
rounded to the nearest whole share.
Section 10. Notices. All notices, requests, consents
and other communications hereunder shall be in writing, shall
be mailed by first class registered or certified airmail,
postage prepaid, and shall be deemed given when so mailed:
(a) if to the Company, to
Cypros Pharmaceutical Corporation
2714 Loker Avenue West
Carlsbad, CA 92008
Attn: Chief Financial Officer
or to such other person at such other place as the Company
shall designate to the Purchaser in writing;
(b) if to the Purchaser, to such Purchaser
PARESCO, INC.
101 Hudson Street
Jersey City, NJ 07302
Attn: George Hartigan
with a copy to:
Sheldon E. Goldstein, P.C.
65 Broadway, 10th Fl.
New York, NY 10006
Attn: Sheldon E. Goldstein
or at such other address or addresses as may have been
furnished to the Company in writing; or
(c) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the
Company at the time of the transfer or transfers, or at such
other address or addresses as may have been furnished by such
transferee or transferees to the Company in writing.
Section 11. Miscellaneous.
11.1 Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to
the subject matter hereof. No statement, representation,
warranty, covenant or agreement or any kind not expressly set
forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this
Agreement.
11.2 Amendments. This Agreement may not be modified
or amended except pursuant to an instrument in writing signed by
the Company and by Purchaser.
11.3 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
11.4 Severability. In case any provision contained
in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
11.5 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
New York governing contracts entered into solely between
residents of such state and to be performed wholly within such
state.
11.6 Jurisdiction. The parties to this Agreement
each hereby consent to the jurisdiction of the State Courts of New
York or the Federal District Court for the Southern District of
New York, with respect to any action. Service of process in
any such action may be made by certified mail directed to the
parties addresses set forth herein.
11.7 Recovery of Attorney's Fees. Should any party
bring an action to enforce the terms of this Agreement then, if
Purchaser prevails in such action it should be entitled to
recovery of its attorney's fees from the Company, and if the
Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
11.8 Fees. Notwithstanding Section 11.7, the Company
acknowledges that Purchaser shall have no responsibility for
the payment of any of its fees in connection with this
offering.
11.9 Listing. The Company will use its best efforts
to maintain the listing of its Common Stock on the NASDAQ National
Market System.
11.10 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto
and delivered to the other party.
11.11 Publicity. The Purchaser shall not issue any
press releases or otherwise make any public statement with
respect to the transactions contemplated by this Agreement
without the prior written consent of the Company, except as may
be required by applicable law or regulation.
11.12 Survival. The representations and warranties
in this Agreement shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by their duly authorized
representatives the day and year first above written.
CYPROS PHARMACEUTICAL CORPORATION
(Signature)
Officer
PARESCO, INC.
(Signature)
Officer
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby irrevocable elects to convert
$___________ in principal amount of the Convertible Note into
Shares of Common Stock of CYPROS PHARMACEUTICAL CORPORATION
(the "Company") according to the conditions of the Note
Purchase Agreement, as of the date written below.
Date of Conversion:
(This Notice of Conversion must be delivered by overnight
courier within three (3) business days following the Date of
Conversion.)
$ Value of Principal Amount Converted: $
Applicable (10 Day) Average Closing Price: $
Applicable Conversion Price (75%): $
Number of Common Shares Issued by this Conversion:
PARESCO, INC.
(Signature)
Officer
EXHIBIT B
NOTE NO. 1
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH NOTE
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER
SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE
COMPANY.
CONVERTIBLE NOTE DUE JULY -, 1999
This Note is one of a duly authorized issue of Convertible
Notes of Cypros Pharmaceutical Corporation, a corporation duly
organized and existing under the laws of the State of
California (the "Company"), designated as its Convertible Note
Due July -, 1999 in an aggregate principal amount of up to
$2,000,000.
For value received, the Company promises to pay to Purchaser
(as that term is defined in the Note Purchase Agreement dated
July -, 1996 (the "Agreement") hereof the principal sum of
$2,000,000 no later than July -, 1999, without interest, in
Common Stock of the Company pursuant to the terms set forth
herein. This Note is convertible at any time beginning on the
first anniversary of Closing (as that term is defined in the
Agreement), at Purchaser's option, at a 25% discount from the
Market Price (as that term is defined in the Agreement) as
determined on the Conversion Date (as that term is defined in
the Agreement), subject to a minimum conversion price of $1.00,
and will be automatically converted on the third anniversary of
closing at such discount (without any minimum conversion
price), if not previously converted. Each such conversion shall
reduce the principal amount owing on the Note by the amount
stated in the Notice of Conversion and be reflected in a
Convertible Note Principal Reduction Schedule signed by an
authorized officer of the Company.
This Note is subject to the following additional provisions:
1. Conversion of the Note to Common Stock may be
exercised in whole or in part by Purchaser telecopying an
executed and completed Notice of Conversion (in the form
annexed to the Note Agreement as Exhibit A) to the Company and
delivering the original Notice of Conversion to the Company by
express courier within three (3) business days of exercise.
Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions
hereof shall be deemed a Conversion Date. The Company will
transmit the certificates representing the Common Stock
issuable upon conversion of all or any part of the Note
(together with a Convertible Note Principal Reduction Schedule
signed by an officer of the Company reflecting the remaining
Principal owing on the Note, which shall be deemed to be an
amendment to the Agreement) to the Purchaser via express
courier within three (3) business days after the Company has
received the original Notice of Conversion. The Notice of
Conversion shall be delivered as follows:
To the Company:
Cypros Pharmaceutical Corporation
2714 Loker Avenue West
Carlsbad, CA 92008
Attn: Chief Financial Officer
or to such other person at such other place as the Company
shall designate to the Purchaser in writing. No fractional
shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be
rounded to the nearest whole share.
2. This Note may not be resold or otherwise transferred
except in a transaction registered under the Securities Act of
1933 ("Securities Act") and any applicable state securities
laws or unless an exemption from such registration is
available. Purchaser understands that the Note may not be
assigned unless (i) it is registered or such registration is
not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the
Securities Act and, if the Company shall so request in writing,
an opinion of counsel reasonably satisfactory to the Company is
obtained to the effect that the transaction is so exempt.
3. This Note and the Agreement constitute the full and
entire understanding and agreement between the Company and the
Purchaser with respect to the subject hereof and the provisions
of the Agreement are deemed to be incorporated by reference
herein. Neither this Note nor any term hereof may be amended,
waived discharged or terminated other than by a written
instrument signed by the Company and the Purchaser.
4. This Note shall be governed by and construed in
accordance with the laws of the state of New York.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed by an officer thereunto duly
authorized.
CYPROS PHARMACEUTICAL CORPORATION
(Signature)
Its Chief Financial Officer
PARESCO, INC.
(Signature)
Its__________________________
NOTE PURCHASE AGREEMENT
THIS AGREEMENT is made this 31st day of July, 1996,
between CYPROS PHARMACEUTICAL CORPORATION, NASDAQ Symbol
("CYPR") (the "Company"), a California corporation, with its
principal office at 2714 Loker Avenue West, Carlsbad, CA 92008,
and CAMERON CAPITAL LTD. (the "Purchaser") , with its principal
office at 10 Cavendish Road, Hamilton HM 19, Bermuda.
IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Closing Date" means the date agreed to by the
parties for the execution and delivery of this Agreement and
the Convertible Note against a wire transfer of the funds to
the Company.
"Closing" means the completion of the execution and
delivery of the Agreement and the Convertible Note and the
receipt of the wire transfer on the Closing Date.
"Common Stock" means the Common Stock of the Company,
no par value.
"Conversion Date" means the date on which the
Purchaser has telecopied the Notice of Conversion to the
Company.
"Convertible Note" or "Note" means the promissory
note of the Company, in the form attached hereto as Exhibit A,
which is mandatorily convertible into Common Stock as provided
therein.
"Market Price" means the average of the closing bid
price per share of the Common Stock for the ten (10) NASDAQ
Trading Days immediately preceding the applicable Conversion
Date.
"NASDAQ Trading Days" means a day on which the NASDAQ
National Market System is executing securities trades.
"Notice of Conversion" means the notice of
conversion, substantially in the form of the one attached to
Exhibit A hereto, that is to be completed and executed by
Purchaser each time it wishes to convert some of the principal
amount of the Convertible Note into Common Stock.
Section 2. Authorization and Execution of Agreement.
2.1 Authorization. Subject to the terms and
conditions of this Agreement, the Company has authorized the
execution and delivery of one or more Convertible Notes in an
aggregate principal amount of $5,000,000 (the "Principal"),
with a maturity date of 5:00 p.m. Eastern Standard Time on July
31, 1999 (the "Maturity Date").
2.2 Agreement to Execute and Deliver Note Agreement
and Note. On the Closing Date, subject to the terms and
conditions of this Agreement the Company will issue and sell to
the Purchaser, and, in reliance upon the representations and
warranties of the Company contained in this Agreement, the
Purchaser will purchase from the Company a Convertible Note or
Notes having an aggregate original principal amount of
$5,000,000 for a purchase price equal to such original
principal amount.
2.3 Time of Closing. The Closing shall be held on
July 31, 1996, or such other date as may be agreed to by the
parties to this Agreement.
2.4 Payment and Delivery. At the Closing, the
following shall occur:
(a) Purchaser shall remit by wire transfer
$5,000,000 to the Company pursuant to wire transfer
instructions to be delivered by the Company to the Purchaser at
least one day prior to the Closing.
(b) Company shall deliver or cause to be
delivered to the Purchaser's counsel, Freeborn & Peters, 950
17th Street, Denver, Colorado, this Note Agreement, a
Convertible Note or Notes, in the form set forth in Exhibit A
hereto, bearing the original signatures of an authorized
officer of the Company, and the opinion of Cooley Godward,
counsel to the Company, in the form attached hereto as Exhibit
B.
Section 3. General Representations and Warranties
of the Company. The Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true
and correct as of the date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Company is a
corporation duly organized and validly existing under the laws
of the State of California and is in good standing under such
laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets,
and to carry on its business as presently conducted. The
Company is qualified to do business as a foreign corporation in
each jurisdiction in which the ownership of its property or the
nature of its business requires such qualification, except
where failure to so qualify would not have a material adverse
effect on the Company.
3.2 Capitalization. The authorized capital stock of
the Company consists of 30,000,000 shares of Common Stock, no
par value, of which 11,613,748 shares are issued and
outstanding, and 1,000,000 shares of Convertible Preferred
Stock, none of which are issued and outstanding. All issued
and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. The Company has reserved sufficient shares of
Common Stock for issuance upon conversion of the Note.
3.3 Authorization. The Company has all corporate
right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and
stockholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Convertible
Note by the Company, the authorization, sale, issuance and
delivery of the Common Stock upon conversion of the Note and
the performance of the Company's obligations hereunder has been
taken. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its
terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of
law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they
may apply to the indemnification provisions set forth in
Section 7.4 of this Agreement. Upon issuance and delivery
upon conversion of the Convertible Note in accordance with its
terms, the Common Stock so issued will be validly issued,
fully paid and nonassessable and will be free of any liens or
encumbrances. The execution and delivery of this Agreement, and
the Convertible Note will not give rise to any preemptive right or
right of first refusal or right of participation on behalf of any person.
3.4 No Conflict. The execution and delivery of this
Agreement, and the Convertible Note do not, 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), or give rise to a
right of termination, cancellation or acceleration of any
obligation or to a lose of a material benefit, under, any
provision of the Restated Articles of Incorporation, as
amended, or Bylaws of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the
Company, its properties or assets.
3.5 Accuracy of Reports and Information. The
Company's Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All reports required to be filed by the
Company with the Securities and Exchange Commission ("SEC")
during the period from August 1, 1995 to the date of this
Agreement pursuant to Section 13 (a) or 15 (d) of the Exchange
Act, including the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1995 (the "Form 10-K"), have been
duly and timely filed, were in compliance with the requirements
of their respective forms, were complete and correct in all
material respects as of the dates at which the information was
furnished and do not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements made therein, in the light of the circumstances
under which they were made, not misleading. Copies of the Form
10-K and the Form 10-Qs required to be filed by the Company
with the SEC during the period from August 1, 1995 to the date
of this Agreement pursuant to Section 13(a) or 15(d) of the
Exchange Act (the "SEC Reports") have been furnished to the
Purchaser. The Company is an issuer eligible to use Form S-3
under the Securities Act of 1933 (the "Securities Act") for the
registration of the resale of the Registrable Shares (as that
term is defined below in Section 7.1 (c)).
3.6 Financial Statements and Changes. The audited
financial statements of the Company contained in the Form 10-K,
and the unaudited financial statements contained in the
Company's Form 10-Q for the period ended April 30, 1996,
including the notes relating thereto (the "Financial
Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods covered by such statements (except for
normal year end audit adjustments in the case of the unaudited
financials) and present fairly the Company's financial
condition and results of operations and cash flows as of the
respective dates and for the periods indicated. Since April
30, 1996, there has not been any change in the assets,
liabilities, financial condition or operations of the Company
from that reflected in the Financial Statements except changes
in the ordinary course of business which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 Absence of Undisclosed Liabilities. The Company
has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except as set
forth in the Financial Statements or as incurred in the
ordinary course of business after the date of the Financial
Statements.
3.8 Governmental Consent, etc. 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 consummation of any other transaction
contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 for the purpose of
registering the Common Stock underlying the Shares and the
filing of a Form D with the SEC.
3.9 Intellectual Property Rights. Except as
disclosed in the Form 10-K, the Company has sufficient trademarks, trade
names, patent rights, copyrights and licenses to conduct its
business as contemplated in the Form 10-K. To the Company's
knowledge, neither the Company nor its products is infringing
or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of
others currently in existence; and there is no claim being made
against the Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual
property right which could have a material adverse effect on
the condition (financial or otherwise), business, results of
operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in the
Form 10-K, the agreements to which the Company is a party
described in the Form 10-K are valid agreements, in full force
and effect, the Company is not in material breach or material
default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge,
the other contracting party or parties thereto are not in
material breach or material default (with or without notice or
lapse of time, or both) under any of such agreements.
3.11 Litigation. There is no action, proceeding or
investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either
individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or
operations of the Company. The Company is not a party to or
subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the
Company currently intends to initiate.
3.12 Title to Assets. Except as set forth in Form
10-K, the Company has good and marketable title to all properties
and material assets described in the Form 10-K as owned by it,
free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are
not material to the business of the Company.
3.13 Subsidiaries. The Company does not presently
own or control, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity.
3.14 Required Governmental Permits. The Company is
in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities
which are material to the conduct of its business, all of which
are valid and in full force and effect.
3.15 Securities Act Exemption. Assuming and relying
in part on the truth and accuracy of Purchaser's
representations and warranties in Section 4 of this Agreement,
the offer, sale and issuance of the Convertible Note is exempt from
registration under the Securities Act of 1933, as amended.
Section 4. Representations, Warranties and Covenants
of the Purchaser. The Purchaser represents and warrants to,
and covenants with, the Company that the following are true and
correct as of the date hereof and as of the Closing Date.
4.1 Authority. Purchaser has full right, power,
authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the
Purchaser and constitutes a legal, valid and binding obligation
of the Purchaser enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable
remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.4 of
this Agreement.
4.2 Investment Experience. Purchaser is an
"accredited investor" as defined in Rule 501(a) under the
Securities Act. Purchaser is aware of the Company's business
affairs and financial condition and has had access to and has
acquired sufficient information about the Company, including
the SEC Reports, to reach an informed and knowledgeable
decision to purchase the Note. Purchaser has such business and
financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of
the Convertible Note.
4.3 Investment Intent. Without limiting its
ability to resell the Common Stock issuable upon conversion of
the Convertible Note pursuant to an effective registration
statement, Purchaser represents that it is purchasing the Note
for its own account as principal for investment purposes.
Purchaser understands that its acquisition of the Note has not
been registered under the Securities Act or registered or
qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend
upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchaser
or otherwise acquire or take a pledge of) the Note or any part
thereof of except in compliance with the Securities Act and any
applicable state securities laws, and the rules and regulations
promulgated thereunder.
4.4 Registration or Exemption Requirements.
Purchaser further acknowledges and understands that neither the
Note may be resold or otherwise transferred except in a
transaction registered under the Securities Act and any
applicable state securities laws or unless an exemption from
such registration is available. Purchaser understands that the
Note will be imprinted with a legend that prohibits the
assignment of the Note unless (i) it is registered or such
registration is not required, and (ii) if the transfer is
pursuant to an exemption from registration other than Rule 144
under the Securities Act and, if the Company shall so request
in writing, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is
so exempt.
4.5 No Legal, Tax or Investment Advice.
Purchaser understands that nothing in this Agreement or any
other materials presented to Purchaser in connection with the
purchase of the Note constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Note.
4.6 Purchaser Review. Purchaser hereby represents
and warrants that it has carefully examined the SEC Reports,
including the Form 10-K and the financial statements contained
therein and acknowledges that the Company has made available to
it all documents and information that it has requested relating
to the Company and has provided answers to all of its questions
concerning the Company and the Note. Nothing stated in the
previous two sentences, however, shall be deemed to affect the
representations and warranties of the Company contained in this
Agreement.
4.7 Legend. The Note shall bear the following
legend:
"THE NOTE REPRESENTED HEREBY HAS BEEN ACQUIRED FOR
INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION
SATISFACTORY TO THE COMPANY."
This legend shall be removed and the Company shall
issue a replacement Note without such legend to the Purchaser
if the Purchaser provides to the Company an opinion of counsel
to the effect that a public sale, transfer or assignment of
such Note may be made without registration.
Section 4.8 Limitation on Short Sales. The Purchaser
agrees that neither the Purchaser nor any of its affiliates
will sell short the Common Stock of the Company during the
period beginning fifteen business days prior to a Conversion
Date and ending on the Conversion Date.
Section 5. Conditions to Obligations of Purchaser at
Closing Date. The obligation of the Purchaser to purchase the
Convertible Note is subject to the fulfillment on or prior to
the Closing Date of the following conditions, any or all of
which may be waived in writing at the option of the Purchaser:
5.1 Representations and Warranties Correct. The
representations and warranties made by the Company in Section 3
hereof shall be true and correct when made and shall be true
and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of
said date.
5.2 Compliance Certificate. The Company shall have
delivered to the Purchaser a certificate executed on behalf of
the Company by its Chief Executive Officer or Chief Financial
officer and dated the Closing Date, certifying to the
fulfillment of the conditions specified in Section 5.1.
5.3 Legal Opinion. A legal opinion shall be
delivered by counsel to the Company substantially in the form
of Exhibit B hereto.
5.4 Covenants. All covenants, agreements and
conditions contained in this Agreement to be performed by the
Purchaser on or prior to such Closing Date shall have been
performed or complied with in all material respects.
5.5 No Order Pending. There shall not then be in
effect any order enjoining or restraining the transactions
contemplated by this Agreement.
5.6 No Law Prohibiting or Restricting Such Sale.
There shall not be in effect any law, rule or regulation
prohibiting or restricting such sale, or requiring any consent
or approval of any person which shall not have been obtained to
issue the Note (except as otherwise provided in this
Agreement).
5.7 Consents. The Company shall have obtained all
consents, permits, waivers and other authorizations necessary
or appropriate for consummation of the transactions
contemplated by this Agreement which need to be obtained prior
to the Closing.
Section 6. Conditions to Obligations of Company. The
Company's obligation to execute and deliver the Convertible
Note at the Closing is subject to the fulfillment on or prior
to the Closing Date of the following conditions, any or all of
which may be waived in writing at the option of the Company:
6.1 Representations and Warranties Correct. The
representations and warranties made by the Purchaser in Section
4 hereof shall be true and correct when made, and shall be
true and correct in all material respects on the Closing Date
with the same force and effect as if they had been made on and
as of said date.
Section 7. Registration of the Shares; Compliance
with the Securities Act.
7.1 Definitions. For the purpose of this Section
7:
(a) the term "Registration Statement" shall
mean any registration statement required to be filed by Section
7.2 below, and shall include any preliminary prospectus, final
prospectus, exhibit or amendment included in or relating to
such registration statement; and
(b) the term "untrue statement" shall include
any untrue statement or alleged untrue statement, or any
omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) the term "Registrable Shares" shall mean
the shares of Common Stock issued or issuable upon conversion
of the Convertible Note.
7.2 Registration Procedures and Expenses. The
Company shall:
(a) prior to 180 days after the Closing Date
and in sufficient time to have such registration effective no
later than 140 days after the Closing Date, file with the SEC a
registration statement under the Securities Act on a form which
is appropriate to register all of the Registrable Shares;
(b) use its best efforts, subject to receipt of
necessary information from the Purchaser, to cause such
Registration Statement to become effective as promptly after
filing as practicable;
(c) prepare and file with the SEC such
amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective until termination of
such obligation as provided in Section 7.9 below;
(d) furnish to the Purchaser (and to each
underwriter, if any, of such Common Stock) such number of
copies of prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchaser
may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the Registrable Shares by
the Purchaser;
(e) file such documents as may be required of
the Company for normal securities law clearance for the resale
of the Registrable Shares in which states of the United States
as may be reasonably requested by the Purchaser provided,
however, that the Company shall not be required in connection
with this paragraph (e) to qualify as a foreign corporation or
execute a general consent to service of process in any
jurisdiction;
(f) bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 7.2
and the registration of the Registrable Shares on such
Registration Statement and the satisfaction of the blue sky
laws of such states, including the reasonable fees and expenses
of legal counsel to the Purchaser in connection with the
procedures in paragraph (a) through (e) of this Section 7.2 and
other than underwriting discounts and selling commissions; and
(g) in the event of the failure of Company to
procure registration of the Registrable Shares underlying the
Note within 140 days of the Closing Date, Company will use its
best efforts to assist the Purchaser in obtaining an exemption
from registration under the Securities Act (such that a
purchaser of such shares would not receive a restricted
security within the meaning of Rule 144 under the Securities
Act) in order to give the Purchaser the right to sell the
Common Stock underlying the Note. If an exemption is not
available within 181 days of the Closing Date, Company will pay
Purchaser by wire transfer, as liquidated damages for such
failure and not as a penalty, $100,000 for each month
thereafter that either an exemption from registration is not
available (such that a purchaser of such shares would not
receive a restricted security with the meaning of Rule 144
under the Securities Act) or a registration statement has not
become effective. If the Company does not remit the damages to
the Purchaser as set forth above, the Company will pay the
Purchaser reasonable costs of collection, including attorneys
fees, in addition to the liquidated damages.
7.3 Indemnification.
(a) The Company agrees to indemnify and hold
harmless Purchaser (and each of its officers, directors,
partners or persons, if any, who controls such Purchaser within
the meaning of Section 15 of the Securities Act) from and
against any losses, claims, damages or liabilities to which
such Purchaser (and each of officers, directors, partners or
persons, if any, who controls such Purchaser with in the
meaning of Section 15 of the Securities Act) may become subject
(under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement or any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make
the statements therein not misleading, in each case on the
effective date thereof, or arise out of any failure by the
Company to fulfill any undertaking included in the Registration
Statement, and the Company will, as incurred, reimburse such
Purchaser (and each of its officers, directors, partners or
persons, if any, who controls such Purchaser within the meaning
of Section 15 of the Securities Act) for any legal or other
expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim;
provided, however, that the Company shall not be liable in any
such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement
or omission or alleged untrue statement or omission made in
such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on
behalf of such Purchaser specifically for use in preparation of
the Registration Statement.
(b) The Purchaser agrees to indemnify and hold harmless
the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each
officer of the Company who signs the Registration Statement and
each director of the Company), from and against any losses,
claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as
such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based
upon, any untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in each
case, on the effective date thereof, if, and to the extent,
such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf
of such Purchaser specifically for use in preparation of the
Registration Statement, and such Purchaser will, as incurred,
reimburse the Company (and each of its officers, directors or
controlling persons) for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any
such action, proceeding or claim.
(c) Promptly after receipt by any indemnified
person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an
indemnifying person pursuant to thin Section 7.4, such
indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action,
and, subject to the provisions hereinafter stated, in case any
such action shall be brought against an indemnified person and
such indemnifying person shall have been notified thereof, such
indemnifying person shall be entitled to participate therein,
and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person
to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not he liable
to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified
person for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall he entitled to
retain its own counsel at the expense of such indemnifying
person.
(d) If the indemnification provided for in this
Section 7.4 is required by its terms but is for any reason held
to be unavailable to or otherwise insufficient to hold harmless
an indemnified party in respect of any losses, claims, damages
or liabilities referred to above, then each applicable
indemnifying party shall contribute to the amount paid or
payable by such indemnified party an a result of such losses,
claims, damages or liabilities.
7.5 Information Available. So long as any
registration statement is effective covering the resale of the
Registrable Shares, the Company will furnish to Purchaser:
(a) as soon as possible after available (but in
the case of the Company's Annual Report to Stockholders, within
150 days after the end of each fiscal year of the Company), one
copy of its Annual Report to Stockholders (which Annual Report
shall contain financial statements audited in accordance with
generally accepted accounting principles in the United States
of America by a national firm of certified public accountants);
(ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K within 100 days
after the end of each fiscal year of the Company, (iii) its
quarterly report on Form 10-Q, and (iv) a full copy of the
registration statement covering the Common Stock underlying the
Convertible Note (the foregoing, in each case, excluding
exhibits); and
(b) upon the reasonable request of Purchaser,
such other information that is generally available to the
public.
7.6 Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the
SEC which may at any time permit the sale of the Common Stock
to the public without registration, the Company agrees to use
its best efforts to:
(a) make and keep public information available,
as those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the effective date on which
the Company becomes subject to the reporting requirements of
the Securities Act or the Exchange Act;
(b) use its best efforts to file with the SEC
in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon
request a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in
the possession of or reasonably obtainable by the Company as
Purchaser may reasonably request in availing itself of any rule
or regulation of the SEC allowing Purchaser to sell any such
Common Stock without registration.
7.7 Temporary Cessation of Offers and Sales by
Purchaser. The Purchaser acknowledges that there may
occasionally be times when the Company may be required to
suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the
Registration Statement has been filed by the Company and
declared effective by the Commission, until the prospectus is
supplemented or amended to comply with the Securities Act, or
until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. The Company
agrees to file any necessary amendments, supplements and reports
as soon as practicable under the circumstances. Purchaser hereby
covenants that it will not sell any Common Stock pursuant to
said prospectus during a period of not more than 30 days
commencing at the time at which the Company gives the Purchaser
notice of the suspension of the use of said prospectus and
ending at the time the Company gives the Purchaser notice that
the Purchaser may thereafter effect sales pursuant to said
prospectus, as the same may have been supplemented or amended.
7.8 Prospectus Delivery. Purchaser hereby covenants
with the Company to comply with the prospectus delivery
requirements in connection with the resale of the Registrable
Shares.
7.9 Termination of Obligations. The obligations of
the Company pursuant to Sections 7.2, 7.3 and 7.6 hereof shall
cease and terminate upon the earlier to occur of (i) such time
as all of the Registrable Shares have been re-sold, or (ii)
such time as all of the Registrable Shares may be re-sold
pursuant to Rule 144(k).
Section 8. Legal Fees and Expenses. Each of the
parties shall pay its own fees and expenses (including the fees
of any attorneys, accountants, appraisers or others engaged by
such party) in connection with this Agreement and the
transactions contemplated hereby.
Section 9. Notices. All notices, requests,
consents and other communications hereunder shall be in
writing, shall be telecopied or mailed by first class
registered or certified airmail, postage prepaid, and shall be
deemed given when so telecopied or mailed:
(a) if to the Company, to
Cypros Pharmaceutical Corporation
2714 Loker Avenue West
Carlsbad, CA 92008
Attn: Chief Financial Officer
Telecopier No.: 619/929-8038
or to such other person at such other place as the Company
shall designate to the Purchaser in writing;
(b) if to the Purchaser, to
CAMERON CAPITAL LTD.
10 Cavendish Road
Hamilton HM 19, Bermuda
Attn: Mr. Nic Snelling
Telecopier No.: 441/295-9022
or at such other address or addresses as may have been
furnished to the Company in writing; or
(c) if to any transferee or transferees of the Purchaser,
at such address or addresses as shall have been furnished to
the Company at the time of the transfer or transfers, or at
such other address or addresses as may have been furnished by
such transferee or transferees to the Company in writing.
Section 10. Miscellaneous.
10.1 Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to
the subject matter hereof. No statement, representation,
warranty, covenant or agreement or any kind not expressly set
forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this
Agreement.
10.2 Amendments. This Agreement may not be modified
or amended except pursuant to an instrument in writing signed by
the Company and by Purchaser.
10.3 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
10.4 Severability. In case any provision contained
in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
10.5 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
New York governing contracts entered into solely between
residents of such state and to be performed wholly within such
state.
10.6 Recovery of Attorney's Fees. Should any party
bring an action to enforce the terms of this Agreement then, if
Purchaser prevails in such action it should be entitled to
recovery of its attorney's fees from the Company, and if the
Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
10.7 Fees. Notwithstanding Section 10.7, the Company
acknowledges that Purchaser shall have no responsibility for
the payment of any of the Company's fees in connection with
this offering.
10.8 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto
and delivered to the other party.
10.9 Publicity. The Purchaser shall not issue any
press releases or otherwise make any public statement with
respect to the transactions contemplated by this Agreement
without the prior written consent of the Company, except as may
be required by applicable law or regulation.
10.10 Survival. The representations and warranties
in this Agreement shall survive Closing. All statements as to
factual matters contained in this Agreement or 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 to be representations and
warranties by the Company hereunder solely as of the date of
such Agreement, certificate or instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives
the day and year first above written.
CYPROS PHARMACEUTICAL CORPORATION
(Signature)
Its Chief Financial Officer1
CAMERON CAPITAL LTD.
(Signature)
Its Chief Financial Officer
NOTE NO. 1
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH NOTE
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER
SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE
COMPANY.
CONVERTIBLE NOTE DUE JULY 31, 1999
This Note is one of a duly authorized issue of Convertible
Notes of Cypros Pharmaceutical Corporation, a corporation duly
organized and existing under the laws of the State of
California (the "Company"), designated as its Convertible Notes
Due July 31, 1999 in an aggregate principal amount of up to
$5,000,000. For value received, the Company promises to pay
to the order of Purchaser (as that term is defined in the Note Purchase
Agreement dated July 31, 1996 (the "Agreement")) hereof the
principal sum of $5,000,000 no later than July 31, 1999 (or
such lesser amount as reduced by partial conversions of this
Note prior to such date), without interest, only in Common
Stock of the Company pursuant to the terms set forth herein.
This Note is convertible at any time in minimum principal
amounts of $100,000 beginning 180 days after the date hereof,
at Purchaser's option, into the number of shares of Company's
Common Stock arrived at by dividing the principal amount which
is the subject of the conversion request by the lesser of (i)
the product of the Market Price (as defined below) as
determined on the Conversion Date (as defined below) multiplied
by the applicable Discounted Market Price pursuant to the
following schedule or (ii) $8.00 (as adjusted for any stock
dividends, stock splits, combinations or similar
recapitalizations affecting the Common Stock):