-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CjBXPD2wWvbiI4II96OHI4TIHPOnzRXPxui9/+1G0+2Jgq9JMSDAM/1Ho2ixFZiU 0IfgHNB/y3YgItGiEOzjCA== 0001048477-01-000006.txt : 20010130 0001048477-01-000006.hdr.sgml : 20010130 ACCESSION NUMBER: 0001048477-01-000006 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20010129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOMARIN PHARMACEUTICAL INC CENTRAL INDEX KEY: 0001048477 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 680397820 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-48800 FILM NUMBER: 1516885 BUSINESS ADDRESS: STREET 1: 11 PIMENTEL COURT CITY: NOVATO STATE: CA ZIP: 94949 MAIL ADDRESS: STREET 1: 11 PIMENTEL COURT STREET 2: 11 PIMENTEL COURT CITY: NOVATO STATE: CA ZIP: 94949 S-3/A 1 0001.txt BIOMARIN PHARMACEUTICAL INC. FORM S-3/A As filed with the Securities and Exchange Commission on January 29, 2001 Registration No. 333-48800 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- Amendment No. 2 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 BioMarin Pharmaceutical Inc. (Exact name of registrant as specified in its charter) Delaware 68-0397820 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 371 Bel Marin Keys Boulevard, Suite 210 Novato, California 94949 (415) 884-6700 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------------------------- Raymond W. Anderson Chief Financial Officer BioMarin Pharmaceutical Inc. 371 Bel Marin Keys Boulevard, Suite 210 Novato, California 94949 (415) 884-6700 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------------------------- Copy to: Siobhan McBreen Burke Paul, Hastings, Janofsky & Walker LLP 555 South Flower Street, 23rd Floor Los Angeles, California 90071-2371 (213) 683-6000 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check thefollowing box. |X| If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ PROSPECTUS 4,000,000 Shares BioMarin Pharmaceutical Inc. Common Stock --------------------- This prospectus will allow us to issue up to 4,000,000 shares of our common stock over time. On January 26, 2001, we entered into a common stock purchase agreement with Acqua Wellington North American Equities Fund, Ltd. pursuant to which, we may sell them shares of our common stock from time to time as described in the "Plan of Distribution." o We will provide a prospectus supplement each time we issue shares of our common stock; o The prospectus supplement will inform you about the specific terms of the offering and also may add, update or change information contained in this document; and o You should read this document and any prospectus supplement carefully before you invest. Our common stock currently trades on the Nasdaq National Market and the Swiss SWX New Market under the symbol "BMRN." See "Risk Factors" beginning on page 3 to read about risks that you should consider before buying shares of our common stock. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is January 29, 2001 TABLE OF CONTENTS Summary........................................................................1 The Offering...................................................................2 Risk Factors...................................................................3 Forward Looking Statements....................................................14 Material Changes to Our Company...............................................15 Use of Proceeds...............................................................16 Plan of Distribution..........................................................17 Legal Matters.................................................................18 Experts .....................................................................18 WHERE YOU CAN FIND MORE INFORMATION We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC's public reference rooms in Washington, D.C., New York, NY and Chicago, IL. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available at the SEC's Web site at "http://www.sec.gov." In addition, you can read and copy our SEC filings at the office of the National Association of Securities Dealers, Inc. at 1735 K Street, Washington, D.C. 20006. The SEC allows us to "incorporate by reference" information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. Further, all filings we make under the Securities Exchange Act of 1934 after the date of the initial registration statement and prior to effectiveness of the registration statement shall be deemed to be incorporated by reference into this prospectus. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934: 1. Our Annual Report on Form 10-K for the year ended December 31, 1999; 2. Our Definitive Proxy Statement dated April 20, 2000 filed in connection with our 2000 Annual Meeting of Stockholders; 3. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and September 30, 2000; 4. Our current report on Form 8-K as filed on November 7, 2000; and 5. The description of our common stock set forth in our Amendment No. 4 Registration Statement on Form S-1, filed with the SEC on July 22, 1999 We will provide to you at no cost a copy of any and all of the information incorporated by reference into the registration statement of which this prospectus is a part. You may make a request for copies of this information in writing or by telephone. Requests should be directed to: BioMarin Pharmaceutical Inc. Attention: Investor Relations 371 Bel Marin Keys Boulevard, Suite 210 Novato, CA 94949 (415) 884-6700 SUMMARY This prospectus contains forward looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward looking statements as a result of certain factors appearing under "Risk Factors" and elsewhere in this prospectus. The following summary does not contain all the information that may be important to you. You should read the entire Prospectus, including the financial statements and other information incorporated by reference in this prospectus, before making an investment decision. BioMarin Pharmaceutical Inc. (BioMarin) is a developer of carbohydrate enzyme therapies for debilitating, life-threatening, chronic genetic disorders and other diseases and conditions. In April 1999, we completed a twelve-month patient evaluation for the initial clinical trial of our lead drug product, Aldurazyme(TM), for the treatment of mucopolysaccharidosis-I or MPS-I, a serious genetic disorder. The results were presented at the American Society for Human Genetics in October 1999. We continue to collect data from the ongoing treatment of these original patients. In September 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of Aldurazyme. Aldurazyme has received fast track designation for the treatment of the more severe forms of MPS-I. The U.S. Food and Drug Administration (FDA) has granted Aldurazyme an orphan drug designation giving us exclusive rights to market Aldurazyme to treat MPS-I for seven years from the date of FDA approval if Aldurazyme is the first product to be approved by the FDA for the treatment of MPS-I. MPS-I is a life-threatening genetic disorder caused by the lack of a sufficient quantity of the enzyme (alpha)-L-iduronidase, which affects about 3,400 patients in developed countries, including approximately 1,000 in the United States and Canada. Patients with MPS-I have multiple debilitating symptoms resulting from the buildup of carbohydrate residues in all tissues in the body. These symptoms include delayed physical and mental growth, enlarged livers and spleens, skeletal and joint deformities, airway obstruction, heart disease, reduced endurance and pulmonary function, and impaired hearing and vision. Most children with MPS-I will die from complications associated with the disease before adulthood. Aldurazyme is a specific form of recombinant human (alpha)-L-iduronidase that replaces a genetic deficiency of (alpha)-L-iduronidase in MPS-I patients. The initial clinical trial treated ten patients with MPS-I at five medical centers in the United States. Based on data collected during the initial twelve-month evaluation period, Aldurazyme met the primary endpoints set forth in the investigational new drug application. In addition, Aldurazyme demonstrated efficacy according to various secondary endpoints in each of the patients. In collaboration with Genzyme, we plan to initiate a Phase III Confirmatory Clinical Trial of Aldurazyme in the fourth quarter of 2000 with the intention to file a Biologics License Application (BLA) with the FDA late in 2001, pending the successful outcome of the Phase III Confirmatory Trial. In August 2000, our Galli Drive manufacturing facility and a smaller clinical manufacturing laboratory in our Bel Marin Keys Boulevard facility were both subjected to an extensive inspection by the State of California Food and Drug Branch and were granted licenses to produce clinical product. We have submitted an Investigational New Drug Application for recombinant human N-acetylgalactosamine-4-sulfatase also known as arylsulfatase B or rhASB (formerly referred to as BM102) and received FDA acceptance to begin a Phase I/II clinical trial in enzyme replacement therapy for MPS-VI, which was initiated on October 11, 2000. MPS-VI, also known as Maroteaux-Lamy syndrome, is similar in its clinical symptoms to MPS-I. However, MPS-VI does not appear to have the central nervous system involvement and mental retardation characteristics of the most severe form of MPS-I. We are manufacturing clinical bulk rhASB in the Bel Marin Keys Boulevard facility. RhASB has received fast track and orphan drug designations by the FDA. We have successfully conducted preclinical studies of our burn enzyme, Vibriolysin (formerly referred to as BM202), for use in burn debridement and grafting in pigs and mice. We expect to submit an application to the FDA or a foreign equivalent to begin a clinical trial for Vibriolysin by mid-year 2001. Our principal executive offices are located at 371 Bel Marin Keys Boulevard, Suite 210, Novato, CA 94949 and our telephone number is (415) 884-6700. 1 THE OFFERING Common stock offered in this prospectus...... 4,000,000 shares Common stock outstanding after the offering.. 40,921,966 shares Use of proceeds.............................. For operating costs, capital expenditures and working capital needs, including costs associated with the regulatory approval, manufacturing, and potential commercialization of Aldurazyme; for our research and development activities related to our pipeline products including recombinant human arylsulfatase B (rhASB) and Vibriolysin; and other general corporate purposes. We will receive proceeds from the sale of the shares to Acqua Wellington as described in the Plan of Distribution but we will receive no proceeds from any subsequent sale of the shares by Acqua Wellington. See "Use of Proceeds." Nasdaq National Market and SWX New Market symbol....................... BMRN The number of shares of common stock outstanding after this offering is based on the number of shares outstanding as of December 31, 2000 and assumes that we have issued all of the shares of our common stock offered in this prospectus, but excludes: o 5,103,073 shares subject to options outstanding as of December 31, 2000, at a weighted average exercise price of $10.70 per share; o 1,649,846 additional shares that we could issue under our stock option plans; and o 421,569 additional shares that we could issue under our employee stock purchase plan. 2 RISK FACTORS An investment in our common stock involves a high degree of risk. We operate in a dynamic and rapidly changing industry that involves numerous risks and uncertainties. Before purchasing these securities, you should carefully consider the following risk factors, as well as other information contained in this prospectus or incorporated by reference into this prospectus, in evaluating an investment in the securities offered by this prospectus. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, including those that we do not currently consider material, may impair our business. If any of the risks discussed below actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected. This could cause the trading price of our common stock to decline, and you may lose all or part of your investment. If we continue to incur operating losses for a period longer than anticipated, we may be unable to continue our operations at planned levels and be forced to reduce or discontinue operations. We are in an early stage of development and have operated at a net loss since we were formed. Since we began operations in March 1997, we have been engaged primarily in research and development. We have no sales revenues from any of our drug products. As of September 30, 2000, we had an accumulated deficit of approximately $70.1 million. We expect to continue to operate at a net loss at least through 2002. Our future profitability depends on our receiving regulatory approval of our drug candidates and our ability to successfully manufacture and market any approved drugs, either by ourselves or jointly with others. The extent of our future losses and the timing of profitability are highly uncertain. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations. Because of the relative small size and scale of our wholly-owned subsidiary, Glyko, Inc., profits from its products and services will be insufficient to offset the expenses associated with our pharmaceutical business. As a result, we expect that operating losses will continue and increase for the foreseeable future. If we fail to obtain the capital necessary to fund our operations, we will be unable to complete our product development programs. In the future, we may need to raise substantial additional capital to fund operations. We cannot be certain that any financing will be available when needed. If we fail to raise additional financing as we need it, we will have to delay or terminate some or all of our product development programs. We expect to continue to spend substantial amounts of capital for our operations for the foreseeable future. Activities which will require additional expenditures include: o Research and development programs o Preclinical studies and clinical trials o Process development, including quality systems for product manufacture o Regulatory processes in the United States and international jurisdictions o Commercial scale manufacturing capabilities o Expansion of sales and marketing activities The amount of capital we will need depends on many factors, including: o The progress, timing and scope of our research and development programs o The progress, timing and scope of our preclinical studies and clinical trials o The time and cost necessary to obtain regulatory approvals 3 o The time and cost necessary to develop commercial processes, including quality systems o The time and cost necessary to build our manufacturing facilities and obtain the necessary regulatory approvals for those facilities o The time and cost necessary to respond to technological and market developments o Any changes made or new developments in our existing collaborative, licensing and other commercial relationships o Any new collaborative, licensing and other commercial relationships that we may establish Moreover, our fixed expenses such as rent, license payments and other contractual commitments are substantial and will increase in the future. These fixed expenses will increase because we may enter into: o Additional leases for new facilities and capital equipment o Additional licenses and collaborative agreements o Additional contracts for consulting, maintenance and administrative services o Additional contracts for product manufacturing We believe that the cash, cash equivalents and short-term investment securities balances at September 30, 2000 will be sufficient to meet our operating and capital requirements through mid-year 2001. This estimate is based on assumptions and estimates, which may prove to be wrong. As a result, we may need or choose to obtain additional financing during that time. If we fail to obtain regulatory approval to commercially manufacture or sell any of our future drug products, or if approval is delayed, we will be unable to generate revenue from the sale of our products. We must obtain regulatory approval to market our products in the U.S. and foreign jurisdictions. We must obtain regulatory approval before marketing or selling our drug products. In the United States, we must obtain FDA approval for each drug that we intend to commercialize. The FDA approval process is typically lengthy and expensive, and approval is never certain. Products distributed abroad are also subject to foreign government regulation. None of our drug products has received regulatory approval to be commercially marketed and sold. If we fail to obtain regulatory approval, we will be unable to market and sell our drug products. Because of the risks and uncertainties in biopharmaceutical development, our drug candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval. If regulatory approval is delayed, our management's credibility, the value of our Company and our operating results will be adversely affected. To obtain regulatory approval to market our products, preclinical studies and costly and lengthy clinical trials may be required and the results of the studies and trials are highly uncertain. As part of the FDA approval process, we must conduct, at our own expense, preclinical studies in the laboratory on animals, and clinical trials on humans for each drug candidate. We expect the number of preclinical studies and clinical trials that the FDA will require will vary depending on the drug product, the disease or condition the drug is being developed to address and regulations applicable to the particular drug. We may need to perform multiple preclinical studies using various doses and formulations before we can begin clinical trials, which could result in delays in our ability to market any of our drug products. Furthermore, even if we obtain favorable results in preclinical studies on animals, the results in humans may be significantly different. After we have conducted preclinical studies in animals, we must demonstrate that our drug products are safe and efficacious for use on the target human patients in order to receive regulatory approval for commercial sale. Adverse or inconclusive clinical results would stop us from filing for regulatory approval of our products. Additional factors that can cause delay or termination of our clinical trials include: 4 o Slow patient enrollment o Longer treatment time required to demonstrate efficacy o Lack of sufficient supplies of the drug candidate o Adverse medical events or side effects in treated patients o Lack of effectiveness of the drug candidate being tested o Regulatory requests for additional clinical trials Typically, if a drug product is intended to treat a chronic disease, safety and efficacy data must be gathered over an extended period of time, which can range from six months to three years or more. In addition, clinical trials on humans are typically conducted in three phases. The FDA generally requires two pivotal clinical trials that demonstrate substantial evidence of safety and efficacy and appropriate dosing in a broad patient population at multiple sites to support an application for regulatory approval. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, fewer clinical trials may be sufficient to prove safety and efficacy under the FDA's Modernization Act of 1997. In April 1999, we completed a twelve-month patient evaluation for the initial clinical trial of our lead drug product, Aldurazyme, for the treatment of MPS-I. The results were presented at the American Society for Human Genetics in October 1999. We continue to collect data from the ongoing treatment of these original patients. The initial clinical trial treated ten patients with MPS-I at five medical centers in the United States. Two of the original ten patients enrolled in the first clinical trial of Aldurazyme died in 2000. Based on medical data collected from clinical investigative sites, neither case directly implicated treatment with Aldurazyme as the cause of death. The data suggest that one patient died due to a combination of systemic viral illness, residual MPS I coronary disease, and external factors. This patient had received 103 weeks of Aldurazyme administration. For the other patient, the data suggest that the patient died due to complications following posterior spinal fusion for scoliosis. This patient had received 127 weeks of Aldurazyme administration. The fast track designation for Aldurazyme may not actually lead to a faster review process. Although Aldurazyme has obtained a fast track designation, we cannot guarantee a faster review process or faster approval compared to the normal FDA procedures. We will not be able to sell our products if we fail to comply with manufacturing regulations. Before we can begin commercial manufacture of our products, we must obtain regulatory approval of our manufacturing facility and process. In addition, manufacture of our drug products must comply with the FDA's current Good Manufacturing Practices regulations, commonly known as cGMP. The cGMP regulations govern quality control and documentation policies and procedures. Our manufacturing facilities are continuously subject to inspection by the FDA, the State of California and foreign regulatory authorities, before and after product approval. Our Galli Drive and our Bel Marin Keys Boulevard manufacturing facilities have been inspected and licensed by the State of California for clinical pharmaceutical manufacture. We cannot guarantee that these facilities will pass federal or international regulatory inspection. We cannot guarantee that we, or any potential third-party manufacturer of our drug products, will be able to comply with cGMP regulations. We must pass Federal, state and European regulatory inspections, and we must manufacture three process qualification batches (five process qualification batches for Europe) to final specifications under cGMP controls before the Aldurazyme BLA can be approved. We cannot ensure that we will manufacture the process qualification batches or pass the inspections in a timely manner, if at all. If we fail to obtain orphan drug exclusivity for our products, our competitors may sell products to treat the same conditions and our revenues may be reduced. As part of our business strategy, we intend to develop drugs that may be eligible for FDA orphan drug designation. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined as a patient population of less than 200,000 in 5 the United States. The company that obtains the first FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that drug for the stated condition for a period of seven years. However, different drugs can be approved for the same condition. Similar regulations are available in the European Union with a ten-year period of market exclusivity. Because the extent and scope of patent protection for our drug products is limited, orphan drug designation is particularly important for our products that are eligible for orphan drug designation. We plan to rely on the exclusivity period under the orphan drug designation to maintain a competitive position. If we do not obtain orphan drug exclusivity for our drug products which do not have patent protection, our competitors may then sell the same drug to treat the same condition. We received orphan drug designation from the FDA for Aldurazyme in September 1997. In February 1999, we received orphan drug designation from the FDA for rhASB for the treatment of MPS-VI. Even though we have obtained orphan drug designation for these drugs and even if we obtain orphan drug designation for other products we develop, we cannot guarantee that we will be the first to obtain marketing approval for any orphan indication or that exclusivity would effectively protect the product from competition. Orphan drug designation neither shortens the development time or FDA review time of a drug so designated nor gives the drug any advantage in the FDA review or approval process. Because the target patient populations for our products are small we must achieve significant market share and obtain high per patient prices for our products to achieve profitability. Our initial drug candidates target disorders with small patient populations. As a result, our per patient prices must be high enough to recover our development costs and achieve profitability. For example, two of our initial drug products in genetic disorders, Aldurazyme and rhASB, target patients with MPS-I and MPS-VI, respectively. We estimate that there are approximately 3,400 patients with MPS-I and 1,100 patients with MPS-VI in the developed world. We believe that we will need to market worldwide to achieve significant market share. In addition, we are developing other drug candidates to treat conditions, such as other genetic diseases and serious burn wounds, with small patient populations. We cannot be certain that we will be able to obtain sufficient market share for our drug products at a price high enough to justify our product development efforts. If we fail to obtain an adequate level of reimbursement for our drug products by third-party payors, there would be no commercially viable markets for our products. The course of treatment for patients with MPS-I using Aldurazyme is expected to be expensive. We expect patients to need treatment throughout their lifetimes. We expect that most families of patients will not be capable of paying for this treatment themselves. There will be no commercially viable market for Aldurazyme without reimbursement from third-party payors. Third-party payors, such as government or private health care insurers, carefully review and increasingly challenge the price charged for drugs. Reimbursement rates from private companies vary depending on the third-party payor, the insurance plan and other factors. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. We cannot be certain that third-party payors will pay for the costs of our drugs and the courses of treatment. Even if we are able to obtain reimbursement from third-party payors, we cannot be certain that reimbursement rates will be enough to allow us to profit from sales of our drugs or to justify our product development expenses. We currently have no expertise obtaining reimbursement. We expect to rely on the expertise of our joint venture partner Genzyme to obtain reimbursement for the costs of Aldurazyme. We cannot predict what the reimbursement rates will be. In addition, we will need to develop our own reimbursement expertise for future drug candidates unless we enter into collaborations with other companies with the necessary expertise. We expect that in the future, reimbursement will be increasingly restricted both in the United States and internationally. The escalating cost of health care has led to increased pressure on the health care industry to reduce costs. Governmental and private third-party payors have proposed health care reforms and cost reductions. A number of federal and state proposals to control the cost of health care, including the cost of drug treatments have been made in the United States. In some foreign markets, the government controls the pricing which would affect the profitability of drugs. Current government regulations 6 and possible future legislation regarding health care may affect our future revenues from sales of our drugs and may adversely affect our business and prospects. If we are unable to protect our proprietary technology, we may not be able to compete as effectively. Where appropriate, we seek patent protection for certain aspects of our technology. Meaningful patent protection may not be available for some of the enzymes we are developing, including Aldurazyme and rhASB. If we must spend significant time and money protecting our patents, designing around patents held by others or licensing, for large fees, patents or other proprietary rights held by others, our business and financial prospects may be harmed. The patent positions of biotechnology products are complex and uncertain. The scope and extent of patent protection for some of our products are particularly uncertain because key information on some of the enzymes we are developing has existed in the public domain for many years. Other parties have published the structure of the enzymes, the methods for purifying or producing the enzymes or the methods of treatment. The composition and genetic sequences of animal and/or human versions of many of our enzymes, including those for Aldurazyme and rhASB, have been published and are believed to be in the public domain. The composition and genetic sequences of other MPS enzymes which we intend to develop as products have also been published. Publication of this information may prevent us from obtaining composition-of-matter patents, which are generally believed to offer the strongest patent protection. For enzymes with no prospect of composition-of-matter patents, we will depend on orphan drug status to provide us a competitive advantage. In addition, our owned and licensed patents and patent applications do not ensure the protection of our intellectual property for a number of other reasons: o We do not know whether our patent applications will result in actual patents. For example, we may not have developed a method for treating a disease before others developed similar methods. o Competitors may interfere with our patent process in a variety of ways. Competitors may claim that they invented the claimed invention prior to us. Competitors may also claim that we are infringing on their patents and therefore cannot practice our technology as claimed under our patent. Competitors may also contest our patents by showing the patent examiner that the invention was not original, was not novel or was obvious. As a Company, we have no meaningful experience with competitors interfering with our patents or patent applications. o Enforcing patents is expensive and may absorb significant time of our management. In litigation, a competitor could claim that our issued patents are not valid for a number of reasons. If the court agrees, we would lose that patent. o Even if we receive a patent, it may not provide much practical protection. If we receive a patent with a narrow scope, then it will be easier for competitors to design products that do not infringe on our patent. In addition, competitors also seek patent protection for their technology. There are many patents in our field of technology, and we cannot guarantee that we do not infringe on those patents or that we will not infringe on patents granted in the future. If a patent holder believes our product infringes on their patent, the patent holder may sue us even if we have received patent protection for our technology. If someone else claims we infringe on their technology, we would face a number of issues, including: o Defending a lawsuit takes significant time and can be very expensive. o If the court decides that our product infringes on the competitor's patent, we may have to pay substantial damages for past infringement. o The court may prohibit us from selling or licensing the product unless the patent holder licenses the patent to us. The patent holder is not required to grant us a license. If a license is available, we may have to pay substantial royalties or grant cross-licenses to our patents. o Redesigning our product so it does not infringe may not be possible or could require substantial funds and time. 7 It is also unclear whether our trade secrets will provide useful protection. While we use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our information to competitors. Enforcing a claim that someone else illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent knowledge, methods and know-how. We may also support and collaborate in research conducted by government organizations or by universities. We cannot guarantee that we will be able to acquire any exclusive rights to technology or products derived from these collaborations. If we do not obtain required licenses or rights, we could encounter delays in product development while we attempt to design around other patents or even be prohibited from developing, manufacturing or selling products requiring these licenses. There is also a risk that disputes may arise as to the rights to technology or products developed in collaboration with other parties. The United States Patent and Trademark Office recently issued a patent which related to (alpha)-L-iduronidase. If Aldurazyme infringes on this patent and we are not able to successfully challenge it, we may be prevented from producing Aldurazyme unless and until we obtain a license. The United States Patent and Trademark Office recently issued a patent which includes claims related to (alpha)-L-iduronidase. Our lead drug product, Aldurazyme, may infringe on this patent. We believe that this patent is invalid and intend to challenge it on a number of grounds. Our challenges may be unsuccessful. Even if we are successful, challenging the patent may be expensive, require our management to devote significant time to this effort and may delay commercialization of our product in the United States. The patent holder has granted an exclusive license for products relating to this patent to one of our competitors. If we are unable to successfully challenge the patent, we may be unable to produce Aldurazyme in the United States unless we can obtain a sub-license from the current licensee. The current licensee is not required to grant us a license and even if a license is available, we may have to pay substantial license fees which could adversely affect our business and operating results. If our joint venture with Genzyme were terminated, we could be barred from commercializing Aldurazyme or our ability to commercialize Aldurazyme would be delayed or diminished. We are relying on Genzyme to apply the expertise it has developed through the launch and sale of Ceredase(R) and Cerezyme(R) enzymes for Gaucher disease, a rare genetic disorder, to the marketing of our initial drug product, Aldurazyme. Because it is our initial product, our operations are substantially dependent upon the development of Aldurazyme. We have no experience selling, marketing or obtaining reimbursement for pharmaceutical products. In addition, without Genzyme we would be required to pursue foreign regulatory approvals. We have no experience in seeking foreign regulatory approvals. We cannot guarantee that Genzyme will devote the resources necessary to successfully market Aldurazyme. In addition, either party may terminate the joint venture for specified reasons, including if the other party is in material breach of the agreement or has experienced a change of control or has declared bankruptcy and also is in breach of the agreement. Either party may also terminate the agreement upon one-year prior written notice for any reason. Furthermore, we may terminate the joint venture if Genzyme fails to fulfill its contractual obligation to pay us $12.1 million in cash upon the approval of the BLA for Aldurazyme. Upon termination of the joint venture one party must buy out the other party's interest in the joint venture. The party who buys out the other will then also obtain, exclusively, all rights to Aldurazyme and any related intellectual property and regulatory approvals. If the joint venture is terminated by Genzyme for a breach on our part, Genzyme would be granted, exclusively, all of the rights to Aldurazyme and any related intellectual property and regulatory approvals and would be obligated to buy out our interest in the joint venture. We would then effectively be unable to develop and commercialize Aldurazyme. If we terminated the joint venture for a breach by Genzyme, we would be obligated to buy out Genzyme's interest in the joint venture and, we would then be granted all of these rights to Aldurazyme exclusively. While we could then continue to develop Aldurazyme, that development would be slowed because we would have to divert substantial capital to buy out Genzyme's interest in the joint venture. We would then either have to search for a new partner to commercialize the product and to obtain foreign regulatory approvals or have to develop these capabilities ourselves. 8 If the joint venture is terminated by us without cause, Genzyme would have the option, exercisable for one year, to immediately buy out our interest in the joint venture and obtain all rights to Aldurazyme exclusively. If the agreement is terminated by Genzyme without cause, we would have the option, exercisable for one year, to immediately buy out Genzyme's interest in the joint venture and obtain these exclusive rights. In event of termination of the buy out option without exercise by the non-terminating party as described above, all right and title to Aldurazyme is to be sold to the highest bidder, with the proceeds to be split equally between Genzyme and us. If the joint venture is terminated by us because Genzyme fails to make the $12.1 million payment to us upon FDA approval of the BLA for Aldurazyme, we would be obligated to buy Genzyme's interest in the joint venture and would obtain all rights to Aldurazyme exclusively. If the joint venture is terminated by either party because the other declared bankruptcy and is also in breach of the agreement, the terminating party would be obligated to buy out the other and would obtain all rights to Aldurazyme exclusively. If the joint venture is terminated by a party because the other party experienced a change of control, the terminating party shall notify the other party, the offeree, of its intent to buy out the offeree's interest in the joint venture for a stated amount set by the terminating party at its discretion. The offeree must then either accept this offer or agree to buy the terminating party's interest in the joint venture on those same terms. The party who buys out the other would then have exclusive rights to Aldurazyme. If we were obligated, or given the option, to buy out Genzyme's interest in the joint venture, and gain exclusive rights to Aldurazyme, we may not have sufficient funds to do so and we may not be able to obtain the financing to do so. If we fail to buy out Genzyme's interest we may be held in breach of the agreement and may lose any claim to the rights to Aldurazyme and the related intellectual property and regulatory approvals. We would then effectively be prohibited from developing and commercializing the product. Termination of the joint venture in which we retain the rights to Aldurazyme could cause us significant delays in product launch in the United States, difficulties in obtaining third-party reimbursement and delays or failure to obtain foreign regulatory approval, any of which could hurt our business and results of operations. Since Genzyme funds 50% of the joint venture's operating expenses, the termination of the joint venture would double our financial burden and reduce the funds available to us for other product programs. If we are unable to manufacture our drug products in sufficient quantities and at acceptable cost, we may be unable to meet demand for our products and lose potential revenues or have reduced margins. As an organization, we have no experience manufacturing drug products in volumes that will be necessary to support commercial sales. Our manufacturing process may not meet initial expectations as to schedule, reproducibility, yields, purity, costs, quality, and other measurements of performance. Improvements in manufacturing processes typically are very difficult to achieve and are often very expensive. We cannot know with certainty how long it might take to make improvements if it became necessary to do so. If we contract for manufacturing services with an unproven process, our contractor is subject to the same uncertainties, high standards and regulatory controls. If we are unable to establish and maintain commercial scale manufacturing within our planned time and cost parameters, sales of our products and our financial performance will be adversely affected. We may encounter problems with any of the following if we attempt to increase the scale or size of manufacturing: o Design, construction and qualification of manufacturing facilities that meet regulatory requirements o Production yields o Purity o Quality control and assurance systems o Shortages of qualified personnel o Compliance with regulatory requirements 9 We have constructed and built-out a total of 41,200 square feet at our Novato facilities for manufacturing capability for Aldurazyme and rhASB. We expect to expand the Galli Drive facility in stages over time, which creates additional operational complexity and challenges. We expect that the manufacturing process of all of our new products, including rhASB, will require lengthy significant time and resources before we can begin to manufacture them (or have them manufactured by third parties) in commercial quantity. Even if we can establish the necessary capacity, we cannot be certain that manufacturing costs will be commercially reasonable, especially if third-party reimbursement is substantially lower than expected. In order to achieve our product cost targets we must develop efficient manufacturing processes either by: o Improving the product yield from our current cell lines, colonies of cells which have a common genetic make-up, o Improving the processes licensed from others, or o Developing more efficient, lower cost recombinant cell lines and production processes. A recombinant cell line is a cell line with foreign DNA inserted which is used to produce a protein that it would not have otherwise produced. The development of a stable, high production cell line for any given enzyme is risky, expensive and unpredictable and may not result in adequate yields. In addition, the development of protein purification processes is difficult and may not produce the high purity required with acceptable yield and costs or may not result in adequate shelf-lives of the final products. If we are not able to develop efficient manufacturing processes, the investment in manufacturing capacity sufficient to satisfy market demand will be much greater and will place heavy financial demands upon us. If we do not achieve our manufacturing cost targets, we will have lower margins and reduced profitability in commercial production and larger losses in manufacturing start-up phases. If we are unable to increase our marketing and distribution capabilities or to enter into agreements with third parties to do so, our ability to generate revenues will be diminished. If we cannot increase our marketing capabilities either by developing our sales and marketing organization or by entering into agreements with others, we may be unable to successfully sell our products. If we are unable to effectively sell our drug products, our ability to generate revenues will be diminished. To increase our distribution and marketing for both our drug candidates and our Glyko, Inc. products, we will have to increase our current sales force and/or enter into third-party marketing and distribution agreements. We cannot guarantee that we will be able to hire in a timely manner, the qualified sales and marketing personnel we need, if at all. Nor can we guarantee that we will be able to enter into any marketing or distribution agreements on acceptable terms, if at all. If we cannot increase our marketing capabilities as we intend, either by increasing our sales force or entering into agreements with third parties, sales of our products may be adversely affected. Under our joint venture with Genzyme, Genzyme is responsible for marketing and distributing Aldurazyme. We cannot guarantee that we will be able to establish sales and distribution capabilities or that the joint venture, any future collaborators or we will successfully sell any of our drug candidates. If we fail to compete successfully, our revenues and operating results will be adversely affected. Our competitors may develop, manufacture and market products that are more effective or less expensive than ours. They may also obtain regulatory approvals for their products faster than we can obtain them, including those products with orphan drug designation, or commercialize their products before we do. If our competitors successfully commercialize a product, which treats a given rare genetic disease before we do, we will effectively be precluded from developing a product to treat that disease because the patient populations of the rare genetic diseases are so small. If our competitor gets orphan drug exclusivity, we could be precluded from marketing our version for seven years. However, different drugs can be approved for the same condition. These companies also compete with us to attract qualified personnel and organizations for acquisitions, joint ventures or other collaborations. They also compete with us to attract academic research institutions as partners and to license these institutions' proprietary technology. If our competitors successfully enter into partnering arrangements or license agreements with academic research institutions, we will then be precluded from pursuing those specific opportunities. Since each of these opportunities is unique, we may not be able to find a substitute. Several pharmaceutical and biotechnology companies have 10 already established themselves in the field of enzyme therapeutics, including Genzyme, our joint venture partner. These companies have already begun many drug development programs, some of which may target diseases that we are also targeting, and have already entered into partnering and licensing arrangements with academic research institutions, reducing the pool of available opportunities. Universities and public and private research institutions are also competitors. While these organizations primarily have educational or basic research objectives, they may develop proprietary technology and acquire patents that we may need for the development of our drug products. We will attempt to license this proprietary technology, if available. These licenses may not be available to us on acceptable terms, if at all. We also directly compete with a number of these organizations to recruit personnel, especially scientists and technicians. We believe that established technologies provided by other companies, such as laboratory and testing services firms, compete with Glyko, Inc.'s products and services. For example, Glyko's FACE(R) Imaging System competes with alternative carbohydrate analytical technologies, including capillary electrophoresis, high-pressure liquid chromatography, mass spectrometry and nuclear magnetic resonance spectrometry. These competitive technologies have established customer bases and are more widely used and accepted by scientific and technical personnel because they can be used for non-carbohydrate applications. Companies competing with Glyko may have greater financial, manufacturing and marketing resources and experience. If we fail to manage our growth or fail to recruit and retain personnel, our product development programs may be delayed. Our rapid growth has strained our managerial, operational, financial and other resources. We expect this growth to continue. We have entered into a joint venture with Genzyme. If we receive FDA approval to market Aldurazyme, the joint venture will be required to devote additional resources to support the commercialization of Aldurazyme. To manage expansion effectively, we need to continue to develop and improve our research and development capabilities, manufacturing and quality capacities, sales and marketing capabilities and financial and administrative systems. We cannot guarantee that our staff, financial resources, systems, procedures or controls will be adequate to support our operations or that our management will be able to manage successfully future market opportunities or our relationships with customers and other third parties. Our future growth and success depend on our ability to recruit, retain, manage and motivate our employees. The loss of key scientific, technical and managerial personnel may delay or otherwise harm our product development programs. Any harm to our research and development programs would harm our business and prospects. Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. In particular, the loss of Fredric D. Price, our Chairman and Chief Executive Officer, or Christopher M. Starr, Ph.D., our Vice President for Research and Development, could be detrimental to us if we cannot recruit suitable replacements in a timely manner. While Mr. Price and Dr. Starr are parties to employment agreements with us, we cannot guarantee that they will remain employed with us in the future. In addition, these agreements do not restrict their ability to compete with us after their employment is terminated. The competition for qualified personnel in the biopharmaceutical field is intense. We cannot be certain that we will continue to attract and retain qualified personnel necessary for the development of our business. If product liability lawsuits are successfully brought against us, we may incur substantial liabilities. We are exposed to the potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceuticals. The BioMarin/Genzyme LLC maintains product liability insurance for our clinical trials of Aldurazyme. We have obtained insurance against product liability lawsuits for the clinical trials for rhASB. We may be subject to claims in connection with our current clinical trials for Aldurazyme and rhASB for which the joint venture's or our insurance coverages are not adequate. We cannot be certain that if Aldurazyme receives FDA approval, the product liability insurance the joint venture will need to obtain in connection with the commercial sales of Aldurazyme will be available in meaningful amounts or at a reasonable cost. In addition, we cannot be certain that we can successfully defend any product liability lawsuit brought against us. If we are the subject of a successful product liability claim which exceeds the limits of any insurance coverage we may obtain, we may incur substantial liabilities which would adversely affect our earnings and financial condition. 11 Our stock price may be volatile and an investment in our stock could suffer a decline in value. Our valuation and stock price since the beginning of trading after our initial public offering have had no meaningful relationship to current or historical earnings, asset values, book value or many other criteria based on conventional measures of stock value. The market price of our common stock will fluctuate due to factors including: o Progress of Aldurazyme and our other lead drug products through the regulatory process, especially Aldurazyme regulatory actions in the United States o Results of clinical trials, announcements of technological innovations or new products by us or our competitors o Government regulatory action affecting our drug candidates or our competitors' drug candidates in both the United States and foreign countries o Developments or disputes concerning patent or proprietary rights o General market conditions for emerging growth and biopharmaceutical companies o Economic conditions in the United States or abroad o Actual or anticipated fluctuations in our operating results o Broad market fluctuations in the United States or in Europe may cause the market price of our common stock to fluctuate o Changes in company assessments or financial estimates by securities analysts In addition, the value of our common stock may fluctuate because it is listed on both the Nasdaq National Market and the Swiss Exchange's SWX New Market. Listing on both exchanges may increase stock price volatility due to: o Trading in different time zones o Different ability to buy or sell our stock o Different market conditions in different capital markets o Different trading volume In the past, following periods of large price declines in the public market price of a company's securities, securities class action litigation has often been initiated against that company. Litigation of this type could result in substantial costs and diversion of management's attention and resources, which would hurt our business. Any adverse determination in litigation could also subject us to significant liabilities. Substantial resales of the common stock which may be issued pursuant to this prospectus could adversely affect the price of our common stock. The maximum shares which may be issued pursuant to this prospectus represents a significant portion of our outstanding common stock. If the persons acquiring these shares sell all or a substantial portion of these shares on the public market in a short period of time, the common stock available for sale may exceed the demand and the stock price may be adversely affected. In addition, the mere perception that such sales could occur may depress the price of our common stock. If our officers, directors and largest stockholder elect to act together, they may be able to control our management and operations, acting in their best interests and not necessarily those of other stockholders. Our directors and officers control approximately 46% of the outstanding shares of our common stock. Glyko Biomedical, Ltd. owns 31% of the outstanding shares of our capital stock. The president and chief executive officer of Glyko Biomedical and a significant shareholder of Glyko Biomedical serve as two of our directors. As a result, due to their concentration of stock ownership, directors 12 and officers, if they act together, may be able to control our management and operations, and may be able to prevail on all matters requiring a stockholder vote including: o The election of all directors; o The amendment of charter documents or the approval of a merger, sale of assets or other major corporate transactions; and o The defeat of any non-negotiated takeover attempt that might otherwise benefit the public stockholders. Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to our stockholders, more difficult. BioMarin is incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a change in control of our company more difficult, even if a change in control would be beneficial to the stockholders. Our anti-takeover provisions include provisions in the certificate of incorporation providing that stockholders' meetings may only be called by the board of directors and a provision in the bylaws providing that the stockholders may not take action by written consent. Additionally, our board of directors has the authority to issue 1,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by the stockholders. The rights of holders of our common stock are subject to the rights of the holders of any preferred stock that may be issued. The issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction. Our board of directors may use these provisions to prevent changes in the management and control of our company. Also, under applicable Delaware law, our board of directors may adopt additional anti-takeover measures in the future. 13 FORWARD LOOKING STATEMENTS This prospectus contains forward looking statements. These statements relate to future events or our future financial performance. We have identified forward looking statements in this prospectus using words such as "anticipates", "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should," or "will" or the negative of such terms or other comparable terminology. These statements are based on our beliefs as well as assumptions we made using information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. These risks, uncertainties, assumptions and other factors, including the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from future results, levels of actual activity, performance or achievements expressed or implied by such forward looking statements. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward looking statements after the date of this prospectus to conform such statements to actual results, unless required by law. 14 MATERIAL CHANGES TO OUR COMPANY Effective November 1, 2000, Mr. Fredric D. Price was elected as a member of our board of directors and appointed as our Chairman and Chief Executive Officer. Immediately prior to such appointment, Mr. Grant W. Denison resigned as Chairman and Chief Executive Officer. Mr. Denison continues to serve as one of our directors. From September 1994 until September 2000, Mr. Price was President, Chief Executive Officer and a member of the board of directors of AMBI, Inc., a biotechnology and nutrition company. From July 1991 to September 1994, Mr. Price served as Vice President Finance and Administration and Chief Financial Officer of Regeneron Pharmaceuticals, Inc., a biotechnology company. He is also currently a member of the advisory board of Equity4Life AG, a healthcare investment company based in Zurich, Switzerland. Mr. Price, 55, received his B.A. from Dartmouth College and a M.B.A. from the Wharton School of the University of Pennsylvania. In connection with Mr. Price's employment, we entered into an employment agreement with him which provides for an initial payment to Mr. Price of $357,624, an annual base salary of $400,000 in the first year, $450,000 in the second year, and $500,000 in the third year, and a bonus of $200,000 in the first year and a performance bonus of between 25% and 100% of his respective annual base salary for each of the second and third years. In addition, we granted Mr. Price 25,000 restricted shares of our common stock (which vest in 3 equal annual installments commencing on January 1, 2001), we granted Mr. Price an option to purchase 500,000 shares of our common stock, at a purchase price of $12.50 per share (which vests monthly over 36 months, commencing October 30, 2000) and we further agreed to grant Mr. Price additional options on each anniversary of the agreement, in an amount to be determined by the board. We also agreed to reimburse Mr. Price for all expenses incurred in relocating to the area and to extend him a $1,500,000 interest-deferred loan for the purchase of a house. The agreement has a three-year term which will automatically renew for an additional three year period unless either Mr. Price or we give the other notice of our intent not to renew the agreement. If we decide not to renew the agreement, we must pay Mr. Price an amount such that our net payment after deduction of all payroll taxes and all income taxes at the highest marginal rates applicable to him will equal the base salary and bonus we paid him in the third year of the agreement. Additionally, the exercise for any vested options will be one year from the termination of the agreement and all unvested options will remain unvested and unexercisable. Either party can terminate the agreement on sixty days' notice. However, in the event there is a change in control which results in Mr. Price's actual or constructive termination, he is entitled to a severance payment equal to twice the aggregate of his annual base salary and bonus payable in the year in which termination occurs, forgiveness of all outstanding principal and interest on the interest-deferred loan, acceleration of the full unvested portion of his 25,000 share stock grant and all stock options and an additional payment equal to Mr. Price's maximum total income tax liability applicable to the total severance package. If Mr. Price is terminated other than for cause, he is entitled to receive a severance payment equal to twice his applicable annual base salary and bonus if he is terminated in the first year of the agreement and equal to his applicable annual base salary and bonus of he is terminated in a subsequent year, forgiveness of all outstanding principal and interest on the interest deferred-loan and acceleration of the full unvested portion of his 25,000 share stock grant. Additionally, if he is terminated other than for cause prior to the second anniversary of the agreement, he is entitled to an additional payment equal the maximum income tax liability associated with forgiveness of the loan and such additional payment. 15 USE OF PROCEEDS We cannot guarantee that we will receive any proceeds in connection with this offering. We will receive the proceeds from any sale of the shares to Acqua Wellington as described in the Plan of Distribution but we will receive no proceeds from any subsequent sale of the shares by Acqua Wellington. We intend to use any proceeds of this offering, together with other available funds, for the following purposes: o To fund our share of costs associated with our joint venture with Genzyme for the development and commercialization of Aldurazyme; o To fund research and development including clinical trials, regulatory processes, process development and scale-up and start-up of manufacturing activities for our other pharmaceutical product programs, including rhASB and Vibriolysin; o To fund research, development, clinical and commercial manufacturing facilities, including related equipment; and o To fund general corporate purposes, including working capital. A portion of the proceeds may also be used to acquire or invest in complementary businesses or products or to obtain rights to use complementary technologies. We may require additional funds in the 12-month period following this offering to accelerate product programs or to undertake new initiatives or enter into collaborative arrangements. We have not identified precisely the amounts we plan to spend on each of these areas or the timing of such expenditures. Accordingly, our management will have significant flexibility in applying such proceeds. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including the amount and timing of the proceeds from this offering, progress with the regulatory approval, manufacturing and commercialization of Aldurazyme and rhASB and progress with our other development programs. In addition, expenditures will also depend upon the establishment of additional collaborative arrangements with other companies, the availability of other financing and other factors. Pending use for these or other purposes, we intend to invest the net proceeds of this offering in short-term, investment-grade, interest-bearing securities. We anticipate that we will be required to raise substantial additional capital to continue to accelerate product programs or to undertake new initiatives or enter into collaborative arrangements. Additional capital may be raised through additional public or private financing, as well as collaborative relationships, borrowings and other available sources. See "Risk Factors - if we fail to obtain the capital necessary to fund our operations we will be unable to complete our product development programs." 16 PLAN OF DISTRIBUTION On January 26, 2001, we entered into a common stock purchase agreement with Acqua Wellington North American Equities Fund, Ltd. pursuant to which, subject to the satisfaction of certain conditions, we may issue and sell and Acqua Wellington will be obligated to purchase, from time to time over the next 20 months, up to an aggregate of $50,000,000 of our common stock. At our discretion, we may present Acqua Wellington with draw down notices from time to time, provided that there must be at least five trading days between the end of each pricing period and the next draw down, requiring that Acqua Wellington purchase shares of our common stock. For each draw down, we will determine the minimum sale price per share and the total dollar amount of each draw down, subject to a limit of between $500,000 and $4,000,000 determined by the minimum sale price of the draw down. Over a 20 trading day period, for each trading day the volume weighted average price for our common stock exceeds the minimum purchase price, Acqua Wellington will be obligated to purchase a pro rata portion of the total draw down amount at a price per share equal to the volume weighted average price of our common stock less a discount of between 4% to 6%. Additionally, at our discretion, in connection with each any down we may issue Acqua Wellington call options of up to the amount of the draw down. The call options give Acqua Wellington the right, but not the obligation, to purchase an additional amount of our common stock concurrent with the draw down. Acqua Wellington may exercise all or any unexercised portion of these options at any time during the pricing period of the draw down and for a purchase price equal to the volume weighted average price of our common stock on the day of exercise less a discount of 4% to 6%. All of the shares purchased under a draw down and upon the exercise of any related call options will be settled on the second trading day after the end of the related pricing period. Prior to each settlement, we will file a prospectus supplement that describes the number of shares being purchased and the price per share. The aggregate amount of common stock that Acqua Wellington will be required to purchase from us will not exceed an aggregate of $50,000,000. Additionally, Acqua Wellington will have no obligation to purchase our common stock if the volume weighted average trading price of our common stock is below $7.00 per share. If on the ten month anniversary of the stock purchase agreement, we have not requested draw downs and granted call options in an aggregate amount of $4,500,000 we will be required to either pay Acqua Wellington a fee of not more than $300,000 or to issue to Acqua Wellington warrants to purchase not more than 300,000 shares of our common stock, at Acqua Wellington's discretion. Pursuant to the purchase agreement, Acqua Wellington may resell shares of our common stock at any time, in such manner and at such prices as it may determine. These sales of common stock may occur from time to time in transactions on the Nasdaq National Market (or any exchange where the common stock is then listed), in negotiated transactions, or otherwise, or by a combination of these methods, at fixed prices which may be changed, at market prices at the time of sale, at prices related to market prices or at negotiated prices. Acqua Wellington may effect these transactions by selling the common stock to or through broker-dealers, who may receive compensation in the form of discounts, concessions or commissions from Acqua Wellington or the purchasers of the common stock for whom the broker-dealer may act as an agent or to whom it may sell the common stock as a principal, or both. The compensation to a particular broker-dealer may be in excess of customary commissions. Neither we nor Acqua Wellington can presently estimate the amount of such compensation. Broker-dealers may agree with Acqua Wellington to sell a specified number of shares of our common stock at a stipulated price per share, and, to the extent such a broker-dealer is unable to do so acting as agent for Acqua Wellington, to purchase as principal any unsold common stock at the price required to fulfill the broker-dealer commitment to Acqua Wellington. Broker-dealers who acquire common stock as principal may thereafter resell the common stock from time to time in transactions (which may involve crosses and block transactions and which may involve sales to and through other broker-dealers, including transactions of the nature described above) in the over-the-counter market, in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices, and in connection with such resales may pay to or receive from the purchasers of such common stock commissions computed as described above. Acqua Wellington may be deemed an "underwriter" within the meaning of the Securities Act in connection with the sale of the common stock offered hereby. Broker-dealers who act in connection with the sale of the common stock may also be deemed to be underwriters. Profits on any resale of the common stock as a principal by such broker-dealers and any commissions received by such 17 broker-dealers may be deemed to be underwriting discounts and commissions under the Securities Act. Any broker-dealer participating in such transactions as agent may receive commissions from Acqua Wellington (and, if they act as agent for the purchaser of our common stock, from such purchaser). The common stock offered hereby is being registered pursuant to our contractual obligations with Acqua Wellington, and we have agreed to pay the costs of registering the shares hereunder. We have also agreed to reimburse Acqua Wellington's costs and expenses incurred in connection with the stock purchase agreement, including fees, expenses and disbursements of counsel for Acqua Wellington for the preparation of the stock purchase agreement up to a maximum of $50,000, and all reasonable fees incurred in connection with any amendment, modification or waiver, to or enforcement of the stock purchase agreement. In the stock purchase agreement with Acqua Wellington, we have agreed to indemnify and hold harmless Acqua Wellington and each person who controls Acqua Wellington, against certain liabilities, including liabilities under the Securities Act, which may be based upon, among other things, any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission of a material fact contained in any prospectus or any prospectus supplement, unless made or omitted in reliance upon written information provided to us by Acqua Wellington. LEGAL MATTERS For the purpose of this offering, Paul, Hastings, Janofsky & Walker LLP, Los Angeles, California is giving an opinion of the validity of the issuance of the securities offered in this prospectus. EXPERTS The financial statements included in our Annual report on form 10-K for the year ended December 31, 1999, incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report(s) with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 18 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Securities and Exchange Commission registration fee.............. $ 14,457 Legal fees and expenses.......................................... 35,000 Accountants' fees and expenses................................... 5,000 Miscellaneous.................................................... 3,000 -------- Total............................................................ $ 57,457 The foregoing items, except for the Securities and Exchange Commission registration fee, are estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Reference is made to the Amended and Restated Certificate of Incorporation with the Registrant; the Bylaws of the Registrant; Section 145 of the Delaware General Corporation Law; which, among other things, and subject to certain conditions, authorize the Registrant to indemnify, or indemnify by their terms, as the case may be, the directors and officers of the Registrant against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer. Pursuant to this authority, the Registrant has entered into an indemnification agreement with each director and executive officer, whereby the Registrant has agreed to cover the indemnification obligations. The Registrant maintains director's and officer's insurance providing indemnification against certain liabilities for certain of the Registrant's directors, officers, affiliates, partners or employees. The indemnification provisions in the Registrant's Bylaws, and the indemnification agreements entered into between the Registrant and its directors and executive officers, may be sufficiently broad to permit indemnification of the Registrant's officers and directors for liabilities arising under the Act. Reference is made to the following documents incorporated by reference into this Registration Statement regarding relevant indemnification provisions described above and elsewhere herein: (1) the Amended and Restated Certificate of Incorporation, filed as Exhibit 3.1B to Registrant's Amendment No. 2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 6, 1999; (2) the Bylaws of the Registrant filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on May 4, 1999 and (3) the form of Indemnification Agreement entered into by the Registrant with each of its directors and executive officers filed as Exhibit 10.1 to Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on May 4, 1999, each incorporated by reference into this Registration Statement. II-1 ITEM 16. EXHIBITS EXHIBIT NO. DESCRIPTION OF DOCUMENT - -------------------- ----------------------------------------------------------- 5.1 Opinion of Paul, Hastings, Janofsky & Walker, LLP 10.1 Employment Agreement with Fredric D. Price dated December 22, 2000 10.2* Common Stock Purchase Agreement between BioMarin Pharmaceutical Inc. and Acqua Wellington North American Equities Fund, Ltd., dated January 26, 2001 23.1 Consent of Paul, Hastings, Janofsky & Walker LLP. (consent included in Exhibit 5.1) 23.2 Consent of Arthur Andersen LLP 24.1 Power of Attorney * Filed herewith. All other Exhibits filed previously ITEM 17. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described in Item 15 or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made pursuant to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned Registrant undertakes that: (1) for purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of the registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective; and (2) for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Novato, State of California, this 26th day of January, 2001. BIOMARIN PHARMACEUTICAL INC. By: /s/ Fredric D. Price ---------------------------------------------- Fredric D. Price Chairman, Chief Executive Officer and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated: Signature Title Date /s/ Fredric D. Price Chairman, Chief Executive Officer January 26, 2001 - ------------------------ and Director (Principal Fredric D. Price Executive Officer) /s/ Raymond W. Anderson Chief Financial Officer, Chief January 26, 2001 - ------------------------ Operating Officer, Secretary, and Raymond W. Anderson Vice President Finance and Administration (Principal Financial and Accounting Officer) /s/ * Director January 26, 2001 - ------------------------ Grant W. Denison, Jr. /s/ * Director January 26, 2001 - ------------------------ Ansbert S. Gadicke, M.D. /s/ * Director January 26, 2001 - ------------------------ Erich Sager /s/ * Director January 26, 2001 - ------------------------ Gwynn R. Williams *By: /s/ Raymond W. Anderson --------------------------- Raymond W. Anderson as Attorney-In-Fact II-4 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------------------ ------------------------------------------------------------ 5.1 Opinion of Paul, Hastings, Janofsky & Walker, LLP 10.1 Employment Agreement with Fredric D. Price dated December 22, 2000 10.2* Common Stock Purchase Agreement between BioMarin Pharmaceutical Inc. and Acqua Wellington North American Equities Fund, Ltd., dated January 26, 2001 23.1 Consent of Paul, Hastings, Janofsky & Walker LLP. (consent included in Exhibit 5.1) 23.2 Consent of Arthur Andersen LLP 24.1 Power of Attorney * Filed herewith. All other Exhibits filed previously EX-10 2 0002.txt COMMON STOCK PURCHASE AGREEMENT Exhibit 10.2 COMMON STOCK PURCHASE AGREEMENT Dated as of January 26, 2001 by and between BIOMARIN PHARMACEUTICAL INC. and ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD. TABLE OF CONTENTS ARTICLE I Definitions.......................................................1 Section 1.1 Definitions...............................................1 ARTICLE II Purchase and Sale of Common Stock.................................3 Section 2.1 Purchase and Sale of Stock................................3 Section 2.2 The Shares................................................3 Section 2.3 Closing...................................................3 ARTICLE III Representations and Warranties....................................4 Section 3.1 Representations and Warranties of the Company.............4 Section 3.2 Representations and Warranties of the Purchaser..........10 ARTICLE IV Covenants........................................................12 Section 4.1 Securities Compliance....................................12 Section 4.2 Registration and Listing.................................12 Section 4.3 Registration Statement...................................12 Section 4.4 Compliance with Laws.....................................12 Section 4.5 Keeping of Records and Books of Account..................13 Section 4.6 Reporting Requirements...................................13 Section 4.7 Non-public Information...................................13 Section 4.8 Effective Registration Statement.........................13 Section 4.9 No Stop Orders...........................................13 Section 4.10 Amendments to the Registration Statement.................14 Section 4.11 Prospectus Delivery......................................14 Section 4.12 Other Financing..........................................14 Section 4.13 Notice...................................................15 ARTICLE V Conditions to Closing, Draw Downs and Call Options...............15 Section 5.1 Conditions Precedent to the Obligation of the Company to Issue a Draw Down Notice or Grant a Call Option and Sell the Shares................15 Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close.................................16 Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down or Call Option Grant and Purchase the Shares...................17 ARTICLE VI Draw Down Terms; Call Option.....................................18 Section 6.1 Draw Down Terms..........................................18 Section 6.2 Purchaser's Call Option..................................22 i ARTICLE VII Termination......................................................22 Section 7.1 Termination by Mutual Consent............................22 Section 7.2 Other Termination........................................23 Section 7.3 Termination by Company...................................23 Section 7.4 Effect of Termination....................................23 ARTICLE VIII Indemnification..................................................23 Section 8.1 General Indemnity........................................23 Section 8.2 Indemnification Procedures...............................25 ARTICLE IX Miscellaneous........................................26 Section 9.1 Fees and Expenses........................................26 Section 9.2 Specific Enforcement, Consent to Jurisdiction............26 Section 9.3 Entire Agreement; Amendment..............................27 Section 9.4 Notices..................................................27 Section 9.5 Waivers..................................................28 Section 9.6 Headings.................................................28 Section 9.7 Successors and Assigns...................................28 Section 9.8 Governing Law............................................28 Section 9.9 Survival.................................................29 Section 9.10 Counterparts.............................................29 Section 9.11 Publicity................................................29 Section 9.12 Severability.............................................29 Section 9.13 Further Assurances.......................................29 ii COMMON STOCK PURCHASE AGREEMENT This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of January 26, 2001 by and between BioMarin Pharmaceutical Inc., a Delaware corporation (the "Company"), and Acqua Wellington North American Equities Fund, Ltd., a limited liability company organized under the laws of the Commonwealth of The Bahamas (the "Purchaser"). The parties hereto agree as follows: ARTICLE I Definitions Section 1.1 Definitions. ----------- (a) "Alternate Market" shall mean the Nasdaq Small Cap Market, the American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board, whichever is at the time the principal trading exchange or market for the Common Stock. (b) "Call Option" shall have the meaning assigned to such term in Section 6.2(a) hereof. (c) "Commission" shall mean the Securities and Exchange Commission. (d) "Commission Documents" shall have the meaning assigned to such term in Section 3.1(f) hereof. (e) "Commission Filings" means the Company's Form 10-K for the fiscal year ended December 31, 1999, Forms 10-Q for the periods ended March 31, 2000, June 30, 2000 and September 30, 2000, Registration Statement on Form S-3, No. 333-48800, Form 8-K as filed on November 7, 2000 and all other filings made by the Company after the date hereof pursuant to the Securities Exchange Act of 1934. (f) "Common Stock" shall have the meaning assigned to such term in Section 2.1 hereof. (g) "Draw Down" means the exercise by the Company of its right to request the purchase of shares of Common Stock by the Purchaser. (h) "Draw Down Amount" means the actual amount of a Draw Down up to $4,000,000 or such other amount mutually agreed upon by the Purchaser and the Company. (i) "Draw Down Discount Percentage" means 94% if the Threshold Price is equal to or greater than $7.00 but less than $12.00; provided, however, that for every $5.00 increase in the Threshold Price from $7.00, the draw down discount percentage shall be increased 0.5%, incrementally, up to a maximum draw down discount percentage of 96%. 1 (j) "Draw Down Exercise Date" shall mean the date on which the Company issues a Draw Down Notice. (k) "Draw Down Notice" shall have the meaning assigned to such term in Section 6.1(i) hereof. (l) "Draw Down Pricing Period" shall mean a period of twenty (20) consecutive Trading Days following a Draw Down Notice, or such other period mutually agreed upon by the Purchaser and the Company. (m) "Effective Date" shall mean January 16, 2001, the date the Registration Statement of the Company covering the Shares was declared effective. (n) "Investment Period " shall have the meaning assigned to such term in Section 7.1 hereof. (o) "Material Adverse Effect" shall mean any effect on the business, results of operations, prospects, assets or financial condition of the Company that is material and adverse to the Company and its subsidiaries, taken as a whole and/or any condition, circumstance, or situation that would prohibit the Company from entering into and performing any of its obligations under this Agreement in any material respect. (p) "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, as supplemented by any prospectus supplement filed with the Commission pursuant to Rule 424(b). (q) "Prospectus Supplement" shall mean any prospectus supplement to the Registration Statement filed with the Commission pursuant to Rule 424(b). (r) "Registration Statement" shall mean the registration statement on Form S-3, Commission File Number 333-48800 under the Securities Act, filed with the Commission for the registration of the Shares, as such Registration Statement may be amended from time to time. (s) "Section 6.1(m) Notice" shall have the meaning assigned to such term in Section 6.1(m) hereof. (t) "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder. (u) "Settlement Date" shall have the meaning assigned to such term in Section 6.1(d) hereof. (v) "Shares" shall mean the shares of Common Stock of the Company that may be purchased hereunder. 2 (w) "Threshold Price" is the lowest price at which the Company is willing to sell Shares during a Draw Down Pricing Period (not taking into account the Draw Down Discount Percentage during such Draw Down Pricing Period) as set forth by the Company in each Draw Down Notice. (x) "Trading Day" shall mean a day on which the Common Stock is traded on the Nasdaq National Market or an Alternate Market. (y) "Trading Day Number" shall have the meaning assigned to such term in Section 6.1(m) hereof. (z) "Truncated Pricing Period" shall have the meaning assigned to such term in Section 6.1(m) hereof. (aa) "VWAP" shall mean the daily volume weighted average price (based on a Trading Day from 9:30 a.m. to 4:00 p.m., eastern time) of the Common Stock of the Company on the NASDAQ National Market or an Alternate Market as reported by Bloomberg Financial LP using the AQR function. ARTICLE II Purchase and Sale of Common Stock Section 2.1 Purchase and Sale of Stock. Subject to the terms and conditions of this Agreement, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase from the Company up to $50,000,000 of the Company's common stock, $0.001 par value per share (the "Common Stock"), based on Draw Downs, subject to Section 6.1 hereof, of up to $4,000,000 per Draw Down and Call Options, subject to Section 6.2 hereof, of an additional amount up to the Draw Down Amount for each applicable Draw Down Pricing Period that the Company may grant to the Purchaser in the Company's sole discretion. Section 2.2 The Shares. The Company has authorized and has reserved and covenants to continue to reserve, subject to Section 4.4(b) hereof, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of its Common Stock to cover the Shares to be issued in connection with all Draw Downs and Call Options. Section 2.3 Closing. The closing of the execution and delivery of this Agreement shall occur upon delivery by facsimile of executed signature pages to this Agreement and all other documents, instruments and writings required to be delivered pursuant to this Agreement to the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, NY 10174 (the "Closing") at 10:00 a.m., eastern time, on (i) January 26, 2001, or (ii) such other time and place or on such date as the Purchaser and the Company may agree upon (the "Closing Date"). Each party shall deliver all documents, instruments and writings required to be delivered by such party pursuant to this Agreement at or prior to the Closing. 3 ARTICLE III Representations and Warranties Section 3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchaser: (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. As of the date hereof, the Company does not have any subsidiaries (as defined in Section 3.1(g)) except as set forth in the Registration Statement and in the Company's most recent Form 10-K, including the accompanying financial statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the "Form 10-Q"), or on Schedule 3.1(g) attached hereto. The Company and each such subsidiary is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction in which the failure to be so qualified will not have a Material Adverse Effect. (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement and to issue and sell the Shares in accordance with the terms hereof. The execution, delivery and performance of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and, except as contemplated by Sections 4.4(b) and 4.4(c), no further consent or authorization of the Company or its Board of Directors or stockholders is required. This Agreement has been duly executed and delivered by the Company. This Agreement constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) Capitalization. The authorized capital stock of the Company and the shares thereof issued and outstanding as of the date hereof are set forth on Schedule 3.1(c) attached hereto. All of the outstanding shares of the Company's Common Stock have been duly and validly authorized, and are fully paid and non-assessable. Except as set forth in this Agreement including Schedule 3.1(c), as of the date hereof no shares of Common Stock 4 are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. Furthermore, except as set forth in this Agreement including Schedule 3.1(c), as of the date hereof there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except for customary transfer restrictions contained in agreements entered into by the Company in order to sell restricted securities or as set forth in Schedule 3.1(c), as of the date hereof, the Company is not a party to any agreement granting registration rights to any person with respect to any of its equity or debt securities and the Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable federal and state securities laws, and no stockholder has a right of rescission or damages with respect thereto which would have a Material Adverse Effect. The Company has furnished or made available to the Purchaser true and correct copies of the Company's Certificate of Incorporation as in effect on the date hereof (the "Charter"), and the Company's Bylaws as in effect on the date hereof (the "Bylaws"). (d) Issuance of Shares. The Shares to be issued under this Agreement have been duly authorized by all necessary corporate action and, when paid for and issued in accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid and non-assessable, and the Purchaser shall be entitled to all rights accorded to a holder of Common Stock. (e) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated herein do not (i) violate any provision of the Company's Charter or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, except, in all cases (other than violations pursuant to clauses (i) and (iv) (to the extent of federal securities law)), for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement, or issue and sell the Shares in accordance with the terms hereof (other than any filings which may be required to be made by the Company with the Commission, or the Nasdaq National Market subsequent to the Closing, and, any registration statement which may be filed pursuant hereto); provided that, for purpose of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Purchaser herein. 5 (f) Commission Documents, Financial Statements. The Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and since December 31, 1999 the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the "Commission Documents"). The Company has delivered or made available to the Purchaser true and complete copies of the Commission Documents filed with the Commission since December 31, 1999 and prior to the Closing Date. The Company has not provided to the Purchaser any information which, according to applicable law, rule or regulation, should have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement. The Form 10-K for the year ended December 31, 1999 complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the said Form 10-K did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Commission Documents comply in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). (g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached hereto set forth each subsidiary of the Company as of the date hereof, showing the jurisdiction of its incorporation or organization and showing the percentage of each person's ownership of the outstanding stock or other interests of such subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. Except as set forth in the Commission Documents or the Commission Filings, none of such subsidiaries is a "significant subsidiary" as defined in Regulation S-X. (h) No Material Adverse Effect. Except as disclosed in the Registration Statement or the Commission Documents, since September 30, 2000, the Company has not experienced or suffered any Material Adverse Effect. (i) No Undisclosed Liabilities. The Company has no liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on a balance sheet of the Company or any subsidiary (including the notes thereto) in conformity with GAAP not disclosed in the Commission Documents, other than those incurred in the ordinary course of the Company's or its subsidiaries respective businesses since September 30, 2000 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect. 6 (j) No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed and which, individually or in the aggregate, do not or would not have a Material Adverse Effect. (k) Indebtedness. Schedule 3.1(k) sets forth as of September 30, 2000 all outstanding secured and unsecured Indebtedness of the Company, or for which the Company or any subsidiary has commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company's balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company or any subsidiary is in default with respect to any Indebtedness, except to the extent that any such default would not individually or in the aggregate be expected to cause a Material Adverse Effect. (l) Title to Assets. Each of the Company and its subsidiaries has good and marketable title to all of its real and personal property reflected in the Commission Documents, free of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those indicated in the Commission Documents or the Commission Filings or such that could not reasonably be expected to cause a Material Adverse Effect. All said leases of the Company and each of its subsidiaries are valid and subsisting and in full force and effect in all material respects. (m) Actions Pending. There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto. There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company or any subsidiary, or any of their respective properties or assets which, if adversely determined, is reasonably likely to result in a Material Adverse Effect. (n) Compliance with Law. The business of the Company has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as such that do not cause a Material Adverse Effect. Each of the Company and its subsidiaries has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 7 (o) Certain Fees. No brokers, finders or financial advisory fees or commissions will be payable by the Company with respect to the transactions contemplated by this Agreement. (p) Disclosure. To the Company's knowledge, neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Purchaser by or on behalf of the Company in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading. (q) Operation of Business. To the Company's knowledge, the Company or its subsidiary owns or has a valid right to use all patents, trademarks, service marks, trade names, copyrights, licenses and authorizations as set forth in the Commission Documents or the Commission Filings and all rights with respect to the foregoing, which are necessary for the conduct of its business as now conducted without any conflict with the rights of others, except to the extent set forth in the Commission Documents or the Commission Filings or to the extent that a Material Adverse Effect could not reasonably be expected to result from such conflict. (r) Environmental Compliance. Except as disclosed in the Commission Filings, the Company has obtained all approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other person, that are required under any Environmental Laws except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. "Environmental Laws" shall mean all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature. Except for such instances as would not individually or in the aggregate have a Material Adverse Effect, to the best of the Company's knowledge, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company that violate or could reasonably be expected to violate any Environmental Law after the Closing or that could reasonably be expected to give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance. (s) Material Agreements. Except as set forth in the Commission Documents and this Agreement, the Company is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-3 or 8 applicable form (collectively, "Material Agreements") if the Company was registering securities under the Securities Act. The Company has in all material respects performed all the obligations required to be performed by it to date under the foregoing agreements, has received no notice of default and, to the best of the Company's knowledge is not in default under any Material Agreement now in effect, the result of which could reasonably be expected to cause a Material Adverse Effect. (t) Transactions with Affiliates. Except as disclosed in the Registration Statement or the Commission Documents, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions exceeding $100,000 between (a) the Company, or any of its customers (excluding agreements related to the purchase or lease of the Company's products) or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any person who would be covered by Item 404(a) of Regulation S-K or any corporation or other entity controlled by such officer, employee, consultant, director or person. (u) Securities Act of 1933. The Company has complied in all material respects with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares hereunder. (i) Each Prospectus included as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the provisions of the Securities Act. The Commission has not issued any order preventing or suspending the use of any Prospectus. (ii) The Company meets the requirements for the use of Form S-3 under the Securities Act. The Registration Statement in the form in which it became effective and also in such form as it may be when any post-effective amendment thereto became effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Securities Act, complied in all material respects with the provisions of the Securities Act and did not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they made) not misleading, except that this representation and warranty does not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to the Purchaser furnished to the Company in writing by or on behalf of the Purchaser expressly for use therein. (iii) The Company has not distributed and, prior to the completion of the sale of the Shares to the Purchaser, will not distribute any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Prospectus or other materials, if any, permitted by the Securities Act. (v) Employees. As of the date hereof, the Company has no collective bargaining arrangements or agreements covering any of its employees. Except as disclosed in the Commission Documents or as set forth on Schedule 3.1(v) attached hereto, as of the date hereof the Company has no employment contract or any other similar contract or restrictive covenant, relating to 9 the right of any officer, employee or consultant to be employed or engaged by the Company. Each of the Company and its subsidiaries requires its officers, technical employees and certain consultants to enter into agreements regarding proprietary information and assignment of inventions, or other similar agreements containing restrictive covenants. Except as disclosed in the Registration Statement or the Commission Documents, as of the date hereof, since December 31, 1999, no officer, consultant or key employee of the Company whose termination, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company. (w) Use of Proceeds. The proceeds from the sale of the Shares will be used by the Company and its subsidiaries for the purposes set forth in the Registration Statement or Prospectus. (x) Public Utility Holding Company Act and Investment Company Act Status. The Company is not a "holding company" or a "public utility company" as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result of and immediately upon Closing will not be, an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. (y) ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan (as defined below) by the Company which is or would have a Material Adverse Effect. The execution and delivery of this Agreement and the issue and sale of the Shares will not involve any transaction which would violate the prohibitions of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended ("IRC") or in connection with which a penalty could be imposed pursuant to Section 502 of ERISA or Section 4975 of the IRC, provided that, if the Purchaser, or any person or entity that owns a beneficial interest in the Purchaser, is an "employee pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a "party in interest" (within the meaning of Section 3(14) of ERISA), the requirements of Sections 407 and 408(e) of ERISA (or their IRC counterparts), if applicable, are met. As used in this Section 3.1(y), the term "Plan" shall mean an "employee benefit plan" (as defined in Section 3(2) of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or by any trade or business, whether or not incorporated, which, together with the Company, is under common control, as described in Section 414(b) or (c) of the Code. (z) Acknowledgment Regarding Purchaser's Purchase of Shares. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of arm's length purchaser with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Purchaser or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Purchaser's purchase of the Shares. Section 3.2 Representations and Warranties of the Purchaser. The Purchaser hereby makes the following representations and warranties to the Company: 10 (a) Organization and Standing of the Purchaser. The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the Commonwealth of the Bahamas. (b) Authorization and Power. The Purchaser has the requisite corporate power and authority to enter into and perform this Agreement and to purchase the Shares in accordance with the terms hereof. The execution, delivery and performance of this Agreement by Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Purchaser, its Board of Directors or stockholders is required. This Agreement constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. (c) No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party, (iii) create or impose or lien, charge or encumbrance on any property of the Purchaser under any agreement or any commitment to which the Purchaser is party or by which the Purchaser is on or by which any of its respective properties or assets are bound or (iv) result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to the Purchaser or its properties, except for such conflicts, defaults and violations as would not, individually or in the aggregate, prohibit or otherwise interfere with the ability of the Purchaser to enter into and perform its obligations under this Agreement in any material respect. The Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase the Shares in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, the Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein. (d) Information. The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares which have been requested by the Purchaser. The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares. Purchaser understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement. 11 (e) Selling Restriction. The Purchaser has the right to sell shares of the Company's Common Stock during the Investment Period. The Purchaser covenants, however, that prior to and during the Investment Period, neither the Purchaser nor any of its affiliates nor any entity managed by the Purchaser will ever sell shares of Common Stock of the Company other than what the Purchaser has accumulated under the terms of this Agreement or in any accounts directly or indirectly managed by the Purchaser or any affiliate of the Purchaser or any entity managed by the Purchaser. ARTICLE IV Covenants The Company covenants with the Purchaser as follows, which covenants are for the benefit of the Purchaser and its permitted assignees, that during the term of this Agreement: Section 4.1 Securities Compliance. The Company shall notify the Commission and the Nasdaq National Market or an Alternate Market, if applicable, in accordance with their rules and regulations, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares to the Purchaser. Section 4.2 Registration and Listing. The Company will (i) take all action necessary to cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects with its reporting and filing obligations under the Exchange Act, and (iii) not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein. The Company will use its best efforts to take all action necessary to continue the listing or trading of its Common Stock and the listing of the Shares purchased by Purchaser hereunder on the Nasdaq National Market or an Alternate Market and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Nasdaq National Market or an Alternate Market. Section 4.3 Registration Statement. Before the Company shall issue a Draw Down Notice, the Company shall have caused a sufficient number of shares of Common Stock to be authorized and registered to cover the Shares to be issued in connection with this Agreement. Section 4.4 Compliance with Laws. (a) The Company shall comply with all applicable laws, rules, regulations and orders, noncompliance with which could have a Material Adverse Effect. 12 (b) The Company will not be obligated to issue and the Purchaser will not be obligated to purchase any shares of the Company's Common Stock which would result in the issuance under this Agreement of more than nineteen and nine-tenths percent (19.9%) of the issued and outstanding shares of the Company's Common Stock. (c) Prior to issuing each Draw Down Notice, the Company shall take all necessary corporate action to authorize the issuance of the Shares issuable pursuant to such Draw Down Notice by reason of the Draw Down or upon Purchaser exercising a Call Option. Section 4.5 Keeping of Records and Books of Account. The Company shall keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. Section 4.6 Reporting Requirements. Upon request, the Company shall furnish or make available the following to the Purchaser so long as such Purchaser shall be obligated hereunder to purchase Shares: (a) Quarterly reports filed with the Commission on Form 10-Q as soon as filed, and in any event within forty-five (45) days after the end of each of the first three fiscal quarters of the Company; and (b) Annual reports filed with the Commission on Form 10-K as soon as filed, and in any event within ninety (90) days after the end of each fiscal year of the Company. Section 4.7 Non-public Information. Notwithstanding any other provision of this Agreement to the contrary, neither the Company nor any of its officers or agents shall disclose any material non-public information about the Company to the Purchaser and neither the Purchaser nor any of its affiliates, officers or agents will solicit any material non-public information from the Company. Section 4.8 Effective Registration Statement. If it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the Company will endeavor to cause the Registration Statement or such post-effective amendment to become effective as soon as reasonably practicable and will advise the Purchaser promptly and, if requested by the Purchaser, will confirm such advice in writing, when it receives notice that the Registration Statement or such post-effective amendment has become effective. Section 4.9 No Stop Orders. The Company will advise the Purchaser promptly and, if requested by the Purchaser, will confirm such advice in writing: (i) of its receipt of notice of any request by the Commission for amendment of or a supplement to the Registration Statement, any Prospectus or for additional information; (ii) of its receipt of notice of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of 13 the suspension of qualification of the Shares for offering or sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iii) of its becoming aware of the happening of any event which makes any statement of a material fact made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Securities Act or the regulations thereunder to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Securities Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make all reasonable efforts to obtain the withdrawal of such order at the earliest possible time. Section 4.10 Amendments to the Registration Statement. The Company will not (i) file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus which amends or supplements any information regarding the Purchaser of which the Purchaser shall not previously have been advised or to which the Purchaser shall reasonably object after being so advised; provided, that, if there is any delay in the filing of any amendment to the Registration Statement or any amendment or supplement to the Prospectus in accordance with this clause (i), such delay shall not constitute a breach of this Agreement, or (ii) so long as, in the reasonable opinion of counsel for the Purchaser, a Prospectus is required to be delivered in connection with sales by any Purchaser or dealer, file any information, documents or reports pursuant to the Exchange Act without delivering a copy of such information, documents or reports to the Purchaser, promptly following such filing. Section 4.11 Prospectus Delivery. The Company shall file a prospectus supplement to its Registration Statement on the first business day immediately following the end of each Draw Down Pricing Period, and will deliver to the Purchaser, without charge, in such quantities as reasonably requested by the Purchaser, copies of each form of Prospectus and prospectus supplement on each Settlement Date. The Company consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the Securities Act and with the securities or Blue Sky laws of the jurisdictions in which the Shares may be sold by the Purchaser, in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the Securities Act to be delivered in connection with sales of the Shares. If during such period of time any event shall occur that in the judgment of the Company or in the opinion of counsel for the Purchaser is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus to comply with the Securities Act or any other law, the Company will forthwith prepare and, subject to the provisions of Section 4.10 above, file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Purchaser a reasonable number of copies thereof. Section 4.12 Other Financing. If the Company enters into any other financing agreement, the primary purpose of which would be to obtain equity financing for the Company (an "Other Financing"), during a Draw Down Pricing Period, the Company shall promptly notify the Purchaser of such Other Financing and the Purchaser shall have the options set forth in Section 6.1(k) hereof. If 14 the Company enters into the Other Financing between Draw Down Pricing Periods, the Company shall promptly notify the Purchaser of such Other Financing and the Purchaser shall have the option, which option shall be exercised no later than five (5) Trading Days after receipt by the Purchaser of the notice of the Other Financing, to purchase up to the maximum Draw Down Amount that would be applicable under this Agreement if the Threshold Price were equal to the price per share to be paid for the Common Stock in the Other Financing on the same, absolute terms and conditions contemplated in the Other Financing. If the Purchaser does not exercise its purchase option in writing before 8:00 p.m. (eastern time), the Company shall have the right to close the Other Financing on the scheduled closing date with a third party, provided that all of the terms and conditions of such closing are similar in all material respects to those offered to the Purchaser. As used herein, "Other Financing" shall not include the Company (i) entering into a loan, credit or lease facility with a bank or financing institution (including any equity component thereof), (ii) establishing an employee stock option plan or agreement or finance the acquisition of other companies, equipment, technologies or lines of business, (iii) issuing shares of Common Stock in connection with the Company's current option plans (as the same may be amended from time to time), stock purchase plans, rights plans, currently outstanding warrants or options, or increase the number of shares available under any such plans (the primary purpose of which is not to raise equity), and (iv) issuing shares of Common Stock and/or preferred stock in connection with the formation and maintenance of strategic partnerships, alliances or joint ventures and the acquisition of products, licenses or other assets (each a "Permitted Transaction"). The Company shall not be required to obtain the Purchaser's consent to an Other Financing. If the Company does not obtain the Purchaser's consent in accordance with Section 7.2 hereof, the provisions of Article VII shall apply. Section 4.13 Notices. The Company shall immediately notify the Purchaser that (i) a Material Adverse Effect has occurred or (ii) the Company has entered into an Other Financing (as defined in Section 4.12 hereof). ARTICLE V Conditions to Closing, Draw Downs and Call Options Section 5.1 Conditions Precedent to the Obligation of the Company to Issue a Draw Down Notice or Grant a Call Option and Sell the Shares. The obligation hereunder of the Company to issue a Draw Down Notice or grant a Call Option and sell the Shares to the Purchaser is subject to the satisfaction or waiver, at or before each Draw Down Exercise Date and each Settlement Date, as applicable, of each of the conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchaser in this Agreement shall be true and correct in all material respects as of the date when made and as of each Draw Down Exercise Date and each Settlement Date, as applicable, as though made at that time, except for representations and warranties that are expressly made as of a particular date. 15 (b) Registration Statement. The Company shall have Shares registered under the Registration Statement equal to or in excess of the number of Shares issuable pursuant to such Draw Down Notice. The Registration Statement registering the offer and sale of the Shares shall have been declared effective by the Commission and shall have been amended or supplemented, as required, to disclose the sale of the Shares prior to each Draw Down Exercise Date and Settlement Date, as applicable, and there shall be no stop order suspending the effectiveness of the Registration Statement. (c) Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to each Draw Down Exercise Date and Settlement Date, as applicable. (d) No Injunction. No statute, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (e) No Suspension, Etc. Trading in the Company's Common Stock shall not have been suspended by the Commission or the Nasdaq National Market or an Alternate Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to such Draw Down Exercise Date or Settlement Date, as applicable). (f) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company, or any of the officers, directors or affiliates of the Company seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions. Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close. The obligation hereunder of the Purchaser to enter this Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for the Purchaser's sole benefit and may be waived by the Purchaser at any time in its sole discretion. (a) Accuracy of the Company's Representations and Warranties. Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time, except for representations and warranties that speak as of a particular date. (b) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing. 16 (c) Effective Registration Statement. The Registration Statement registering the offer and sale of the Shares shall have been declared effective by the Commission and there shall be no stop order suspending the effectiveness of the Registration Statement. (d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (e) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company, or any of the officers, directors or affiliates of the Company seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions. (f) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have received an opinion of counsel to the Company, dated the date of Closing, in the form of Exhibit A hereto, a secretary's certificate, dated the date of Closing, substantially in the form of Exhibit B hereto, and such other certificates and documents as the Purchaser or its counsel shall reasonably require incident to the Closing. Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down or Call Option Grant and Purchase the Shares. The obligation hereunder of the Purchaser to accept a Draw Down or Call Option grant and to acquire and pay for the Shares on the Settlement Date is subject to the satisfaction or waiver, at or before each Draw Down Exercise Date and each Settlement Date, as applicable, of each of the conditions set forth below. The conditions are for the Purchaser's sole benefit and may be waived by the Purchaser at any time in its sole discretion. (a) Accuracy of the Company's Representations and Warranties. Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Draw Down Exercise Date and Settlement Date, as applicable, as though made at that time, except for representations and warranties that speak as of a particular date. (b) Registration Statement. The Company shall have Shares registered under the Registration Statement equal to or in excess of the number of Shares issuable pursuant to such Draw Down Notice or Call Option. The Registration Statement registering the offer and sale of the Shares shall have been declared effective by the Commission and shall have been amended or supplemented, as required, to disclose the sale of the Shares prior to each Draw Down Exercise Date or each Settlement Date, as applicable, and there shall be no stop order suspending the effectiveness of the Registration Statement. (c) No Suspension, Etc. Trading in the Company's Common Stock shall not have been suspended by the Commission or the Nasdaq National Market or an Alternate Market (except for any suspension of trading of limited 17 duration agreed to by the Company, which suspension shall be terminated prior to each Draw Down Exercise Date), and, at any time prior to such Draw Down Exercise Date or applicable Settlement Date, trading in securities generally as reported by the Nasdaq National Market or an Alternate Market shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by the Nasdaq National Market or an Alternate Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities, nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity or crisis of such magnitude in its effect on, or any material adverse change in any financial market which, in each case, in the judgment of the Purchaser, makes it impracticable or inadvisable to purchase the Shares. The Common Stock shall be listed on Nasdaq or an Alternate Market. (d) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Draw Down Exercise Date and the Settlement Date and shall have delivered the Compliance Certificate substantially in the form attached hereto as Exhibit C. (e) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (f) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company, or any of the officers, directors or affiliates of the Company seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions. (g) No Material Adverse Effect. No Material Adverse Effect shall have occurred. (h) Board Authorization. The Company shall have taken all necessary corporate action to authorize the issuance of the Shares issuable pursuant to each Draw Down Notice. ARTICLE VI Draw Down Terms; Call Option Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions set forth in this Agreement, the parties agree as follows: (a) The Company, may, from time to time during the term of this Agreement and in its sole discretion, issue a Draw Down Notice with respect to a Draw Down during each Draw Down Pricing Period of up to (i) $500,000 18 if the Threshold Price is equal to or greater than $7.00 but less than $12.00 and (ii) up to an additional $500,000 for every $5.00 increase in the Threshold Price from $7.00 up to and including $42.00, for a maximum Draw Down Amount during each Draw Down Pricing Period of $4,000,000; provided, that the Company may, in its sole discretion, issue a Draw Down Notice with respect to any Draw Down Amount at any Threshold Price or any Draw Down Discount Percentage pursuant to terms mutually agreed upon by the Purchaser and the Company, which Draw Down the Purchaser will be obligated to accept. Prior to issuing any Draw Down Notice, the Company shall have Shares registered under the Registration Statement which are equal to or in excess of the number of Shares issuable pursuant to the Draw Down Notice. (b) The number of Shares to be issued in connection with each Draw Down shall be equal to the sum of the quotients (for each Trading Day of the Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of (x) 1/20th (or such other fraction the denominator of which equals the number of Trading Days during the Draw Down Pricing Period) of the Draw Down Amount divided by (y) the applicable Draw Down Discount Percentage multiplied by the VWAP of the Common Stock for such Trading Day. (c) Only one Draw Down shall be allowed in each Draw Down Pricing Period. (d) The number of Shares purchased by the Purchaser with respect to each Draw Down shall be determined on a daily basis during each Draw Down Pricing Period and settled on the second business day following the end of such Draw Down Pricing Period (the "Settlement Date"). (e) There shall be a minimum of five (5) Trading Days between Draw Downs, unless otherwise mutually agreed upon between the Purchaser and the Company. (f) There shall be a maximum of eighteen (18) Draw Downs during the term of this Agreement. (g) Each Draw Down will commence on the first Trading Day of the Draw Down Pricing Period and will expire on the end of the last Trading Day of each Draw Down Pricing Period. (h) If the VWAP on a given Trading Day is less than the Threshold Price, then the total amount of the Draw Down for the relevant Draw Down Pricing Period will be reduced by 1/20th (or such other fraction based on the denominator of which equals the number of Trading Days during the Draw Down Pricing Period). At no time shall the Threshold Price be set below $7.00, unless mutually agreed upon by the Company and the Purchaser. If trading in the Company's Common Stock is suspended for any reason for more than three (3) hours in any Trading Day, at the Purchaser's option, the VWAP shall be deemed to be below the Threshold Price for that Trading Day and the Draw Down for the relevant Draw Down Pricing Period shall be 19 reduced by 1/20th (or such other fraction the denominator of which equals the number of Trading Days during the Draw Down Pricing Period). Notwithstanding anything in the foregoing to the contrary, for each Trading Day during the Draw Down Pricing Period that the VWAP is less than the Threshold Price or is deemed to be below the Threshold Price pursuant to the immediately preceding sentence, the Purchaser may elect in its sole discretion to purchase Shares at a price equal to the Threshold Price multiplied by the Draw Down Discount Percentage at the end of such Draw Down Pricing Period. The Purchaser will inform the Company via facsimile transmission no later than 8:00 p.m. (eastern time) on the last Trading Day of such Draw Down Pricing Period as to the number of Shares, if any, the Purchaser chooses to purchase under such circumstances set forth in this Section 6.1(h). (i) The Company must inform the Purchaser via facsimile transmission as to the Draw Down Amount the Company wishes to exercise before commencement of trading on the first Trading Day of the Draw Down Pricing Period (the "Draw Down Notice"), substantially in the form attached hereto as Exhibit D. In addition to the Draw Down Amount, the Company shall set the Threshold Price with each Draw Down Notice and shall designate the first Trading Day of the Draw Down Pricing Period. Notwithstanding anything in the foregoing to the contrary, if the Company wishes the date of the Draw Down Notice to be the first day of the Draw Down Pricing Period, the Draw Down Notice must be delivered to the Purchaser and receipt of such Draw Down Notice confirmed by the Purchaser prior to the commencement of trading on the date of such Draw Down Notice. (j) On each Settlement Date, the Company shall deliver the Shares purchased by the Purchaser to the Purchaser or to The Depositary Trust Company ("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause payment therefor to be made to the account designated by the Company by wire transfer of immediately available funds provided that the Shares are received no later than 1:00 p.m., eastern time, or next day available funds if the Shares are received thereafter. (k) If during any Draw Down Pricing Period the Company shall enter into an Other Financing (other than shares of Common Stock issued under this Agreement or pursuant to a Permitted Transaction), the Purchaser may in its sole discretion (i) purchase the Draw Down Amount of shares of Common Stock and/or exercise Call Options granted during such Draw Down Pricing Period on the terms at which the Company issued shares of Common Stock in the Other Financing during such Draw Down Pricing Period, net of any third party's discount and fees, (ii) purchase the Draw Down Amount of shares of Common Stock and/or exercise Call Options granted during such Draw Down Pricing Period at the applicable Draw Down Discount Percentage times the VWAP for such Draw Down Pricing Period, or (iii) elect not to purchase any Shares during such Draw Down Pricing Period. The Purchaser shall notify the Company of its election on the business day preceding the Settlement Date. (l) If on the Settlement Date, the Company fails to deliver the Shares to be purchased by the Purchaser as required hereunder, and such failure continues for ten (10) Trading Days, the Company shall pay, in cash or restricted shares of Common Stock, at the option of the Purchaser, as liquidated damages and not as a penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down Amount for the initial thirty (30) days and each additional thirty (30) day period thereafter until such failure has been cured, which shall be pro rated for such periods less than thirty (30) days (the "Periodic Amount"). Cash payments to be made pursuant to this clause (1) shall be due and payable immediately upon demand in 20 immediately available cash funds. Certificates evidencing the restricted shares of Common Stock shall be delivered immediately upon demand. The parties agree that the Periodic Amount represents a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of damages that may be incurred by the Purchaser if the Company fails to deliver the Shares on the Settlement Date. If the Purchaser elects to receive shares of Common Stock instead of cash, the Purchaser shall have the right to demand registration once within twelve (12) months of the date of issuance of such shares of Common Stock and piggyback registration rights if the Company files a separate registration statement. (m) If during any Draw Down Pricing Period the Company reasonably believes an event may occur which would result in or require the suspension of the effectiveness of the Registration Statement, the Company shall notify the Purchaser before 9:30 a.m. (eastern time) on any Trading Day (a "Section 6.1(m) Notice") and reduce the number of Trading Days in such Draw Down Pricing Period (a "Truncated Pricing Period"). If the Company delivers the Section 6.1(m) Notice (i) before 9:30 a.m. (eastern time) on a Trading Day, the last Trading Day of such Truncated Pricing Period shall be the Trading Day preceding the receipt of the Section 6.1(m) Notice or (ii) between 9:30 a.m. and 4:00 p.m. (eastern time) on a Trading Day, then the last Trading Day of such Truncated Pricing Period shall be the Trading Day on which the Section 6.1(m) Notice was received by the Purchaser. The Purchaser will purchase Shares in an aggregate dollar amount (the "Truncated Draw Down Allocation Amount") equal to the product of the Draw Down Amount times a fraction the numerator of which equals the number of Trading Days in the Truncated Pricing Period and the denominator of which equals twenty (20) or such other number of Trading Days in such Draw Down Pricing Period as the parties may have mutually agreed upon with respect to such Draw Down Pricing Period (such number of days referred to herein as the "Trading Day Number") in an amount and price for each of the Trading Days in a Truncated Pricing Period as determined in accordance with Section 6.1(b) and Section 6.1(h). In addition, the Purchaser may, at its option, elect to purchase Shares in an additional dollar amount equal to the product of the Draw Down Amount requested in the applicable Draw Down Notice, first multiplied by (x) a fraction, the numerator of which equals one (1) and the denominator of which equals the Trading Day Number and next multiplied by (y) that number that is equal to the Trading Day Number minus the number of Trading Days in the Truncated Pricing Period. The price per share for such additional dollar amount shall equal (i) the aggregate total of Truncated Draw Down Allocation Amounts during the Truncated Pricing Period divided by (ii) the number of Shares to be purchased during such Truncated Pricing Period. Upon receipt of the Section 6.1(m) Notice, the Purchaser may (x) elect to purchase Common Stock at the Threshold Price for any Trading Day that the VWAP was below the Threshold Price during the Truncated Pricing Period in accordance with Section 6.1(i) hereof, (y) elect to purchase Common Stock in the additional amount as set forth in the preceding paragraph of this Section 6.1(m), and (z) elect to exercise any unexercised Call Options (for a Call Option Amount not to exceed $1,000,000) by issuing a Call Option Notice to the Company, in each such case, no later than 10:00 a.m. 21 (eastern time) on the first Trading Day after the end of the Truncated Pricing Period. The exercise price of the Call Option shall be based on the VWAP on the last Trading Day of the Truncated Pricing Period (in lieu of the VWAP as specified in clause (A) of Section 6.2(b) hereof) and otherwise determined in accordance with Section 6.2(b) hereof. (n) The Settlement Date for any Truncated Pricing Period shall be the second Trading Day after receipt of the Section 6.1(m) Notice. Section 6.2 Purchaser's Call Option. (a) During each Draw Down Pricing Period, the Company at its sole discretion may grant to the Purchaser the right to exercise multiple call options of up to the applicable Draw Down Amount (a "Call Option"). The amount of the Call Option shall be set forth in the Draw Down Notice. For each Trading Day during a Draw Down Pricing Period, the Purchaser may exercise all or any part of a Call Option by providing notice to the Company of such exercise (the "Call Option Notice"), substantially in the form attached hereto as Exhibit E. (b) The number of shares of Common Stock to be issued in connection with each Call Option Notice shall equal (i) the dollar amount of the Call Option exercised divided by (ii) the product of the applicable Draw Down Discount Percentage and the greater of (A) the VWAP for the Common Stock on the day the Purchaser issues its Call Option Notice or (B) the Threshold Price. (c) Each Call Option exercised shall be settled on the applicable Settlement Date. (d) The Threshold Price designated by the Company in its Draw Down Notice shall apply to each respective Call Option. (e) For each Trading Day on which the Purchaser wishes to exercise all or any portion of a Call Option pursuant to this Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to the Company no later than 8:00 p.m. (eastern time) on the day of such exercise. To the extent the Purchaser does not exercise any portion of a Call Option by 8:00 p.m. (eastern time) on the last day of the applicable Draw Down Pricing Period, the Purchaser's Call Option with respect to that Draw Down Pricing Period shall terminate. ARTICLE VII Termination Section 7.1 Termination by Mutual Consent. The term of this Agreement shall be the earlier of (i) twenty (20) consecutive months from the date of execution of this Agreement (the "Investment Period"), (ii) the date that all of the shares of Common Stock registered under the Registration Statement have been issued and sold and (iii) the date that the Purchaser has purchased in the aggregate $50,000,000 of Shares pursuant to all Draw Downs issued and Call Options granted and exercised. This Agreement may be terminated at any time by mutual consent of the parties. 22 Section 7.2 Other Termination. The Company shall inform the Purchaser, and the Purchaser shall have the right to terminate this Agreement within the subsequent thirty (30) days (the "Event Period"), if (x) the Company enters into an Other Financing without the prior consent of the Purchaser, which consent will not be unreasonably delayed, conditioned or withheld, which provides for (i) the issuance of Common Stock or securities convertible, exercisable or exchangeable into Common Stock at a discount to the then current market price of the Common Stock, including equity lines of credit, (ii) a mechanism for the reset of the purchase price of the Common Stock to below the then current market price of the Common Stock, or (iii) the issuance of Common Stock with warrants, which have an exercise price such that together with the price of the Common Stock would result in the issuance of shares of Common Stock at a per share price below the then current market price of the Common Stock, or (y) an event resulting in a Material Adverse Effect has occurred. The Purchaser may terminate this Agreement upon one (1) day's notice during the Event Period. Section 7.3 Termination by Company. The Company may terminate this Agreement at any time upon thirty (30) days notice to the Purchaser; provided, that, (i) such termination shall not occur during a Draw Down Pricing Period and the applicable Settlement Date, (ii) receipt by Purchaser of such notice shall trigger an Event Period for purposes of Section 7.2 hereof and (iii) the Company shall have paid the Purchaser the fee provided in Section 9.1(b) unless the Company shall have requested Draw Downs and granted Call Options in an aggregate amount of $4,500,000. Section 7.4 Effect of Termination. In the event of termination by the Company or the Purchaser, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated without further action by either party. If this Agreement is terminated as provided in Section 7.1, 7.2 or 7.3 herein, this Agreement shall be of no further force and effect, except as provided in Section 9.9 hereof. Nothing in this Section 7.4 shall be deemed to release the Company or the Purchaser from any liability for any breach under this Agreement, or to impair the rights of the Company and the Purchaser to compel specific performance by the other party of its obligations under this Agreement. ARTICLE VIII Indemnification Section 8.1 General Indemnity. (a) Indemnification by the Company. The Company will indemnify and hold harmless the Purchaser, each of its directors, fund managers and officers, and each person, if any, who controls the Purchaser within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from and against any losses, claims, damages, liabilities and expenses (including reasonable costs of defense and investigation and all reasonable attorneys' fees) to which the Purchaser, each of its directors, fund managers and officers, and each person, if any, who controls the 23 Purchaser may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained, or incorporated by reference, in the Registration Statement relating to Common Stock being sold to the Purchaser (including the Prospectus Supplement filed in connection with the transactions contemplated hereunder which are a part of it), or any amendment or supplement to it, or (ii) the omission or alleged omission to state in that Registration Statement or any document incorporated by reference in the Registration Statement, a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that the Company shall not be liable under this Section 8.1(a) to the extent that a court of competent jurisdiction shall have determined by a final judgment (with no appeals available) that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act, undertaken or omitted to be taken by the Purchaser or such person through its bad faith or willful misconduct; provided, however, that the foregoing indemnity shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); and provided, further, that with respect to the Prospectus, the foregoing indemnity shall not inure to the benefit of the Purchaser or any such person from whom the person asserting any loss, claim, damage, liability or expense purchased Common Stock, if copies of the Prospectus were timely delivered to the Purchaser pursuant hereto and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of the Purchaser or any such person to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Common Stock to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or expense. The Company will reimburse the Purchaser and each such controlling person promptly upon demand for any legal or other costs or expenses reasonably incurred by the Purchaser or any controlling person in investigating, defending against, or preparing to defend against any such claim, action, suit or proceeding, except that the Company will not be liable to the extent a claim or action which results in a loss, claim, damage, liability or expense arises out of, or is based upon, an untrue statement, alleged untrue statement, omission or alleged omission, included in any Registration Statement, Prospectus or Prospectus Supplement or any amendment or supplement to the thereto in reliance upon, and in conformity with, written information furnished by the Purchaser to the Company for inclusion in the Registration Statement, Prospectus or Prospectus Supplement. (b) Indemnification by the Purchaser. The Purchaser will indemnify and hold harmless the Company, each of its directors and officers, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from and against any expenses (including reasonable costs of defense and investigation and 24 all attorneys' fees) to which the Company and each director, officer and person, if any, who controls the Company may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any Prospectus or Prospectus Supplement or any amendment or supplement to it or (ii) the omission or alleged omission to state in the Registration Statement or any Prospectus or Prospectus Supplement or any amendment or supplement to it a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, the untrue statement, alleged untrue statement, omission or alleged omission was made in reliance upon, and in conformity with, written information furnished by the Purchaser to the Company for inclusion in the Registration Statement, the Prospectus or Prospectus Supplement or an amendment or supplement thereto, and the Purchaser will reimburse the Company and each such director, officer or controlling person promptly upon demand for any legal or other costs or expenses reasonably incurred by the Company or the other person in investigating, defending against, or preparing to defend against any such claim, action, suit or proceeding. Section 8.2 Indemnification Procedures. Promptly after a person receives notice of a claim or the commencement of an action for which the person intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the person will notify the indemnifying party in writing of the claim or commencement of the action, suit or proceeding, but failure to notify the indemnifying party will not relieve the indemnifying party from liability under paragraph (a) or (b) of Section 8.1, except to the extent it has been materially prejudiced by the failure to give notice. The indemnifying party will be entitled to participate in the defense of any claim, action, suit or proceeding as to which indemnification is being sought, and if the indemnifying party acknowledges in writing the obligation to indemnify the party against whom the claim or action is brought, the indemnifying party may (but will not be required to) assume the defense against the claim, action, suit or proceeding with counsel satisfactory to it. After an indemnifying party notifies an indemnified party that the indemnifying party wishes to assume the defense of a claim, action, suit or proceeding the indemnifying party will not be liable for any legal or other expenses incurred by the indemnified party in connection with the defense against the claim, action, suit or proceeding except that if, in the opinion of counsel to the indemnifying party, one or more of the indemnified parties should be separately represented in connection with a claim, action, suit or proceeding the indemnifying party will pay the reasonable fees and expenses of one separate counsel for the indemnified parties. Each indemnified party, as a condition to receiving indemnification as provided in Paragraph (a) or (b) or Section 8.1, will cooperate in all reasonable respects with the indemnifying party in the defense of any action or claim as to which indemnification is sought. No indemnifying party will be liable for any settlement of any action effected without its prior written consent. No indemnifying party will, without the prior written consent of the indemnified party, effect any settlement of a pending or threatened action with respect to which an indemnified party is, or is informed that it may be, made a party and for which it would be entitled to indemnification, unless the settlement includes an unconditional release of the indemnified party from all liability and claims which are the subject matter of the pending or threatened action. If for any reason the indemnification provided for in this Agreement is not available to, or is not sufficient to hold harmless, an indemnified party in respect of any loss or liability referred to in paragraph (a) or (b) of Section 8.1, each indemnifying party will, in lieu of indemnifying the indemnified party, contribute to the amount paid or payable by the indemnified party as a 25 result of the loss or liability, (i) in the proportion which is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and by the indemnified party on the other from the sale of stock which is the subject of the claim, action, suit or proceeding which resulted in the loss or liability or (ii) if that allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits of the sale of stock, but also the relative fault of the indemnifying party and the indemnified party with respect to the statements or omissions which are the subject of the claim, action, suit or proceeding that resulted in the loss or liability, as well as any other relevant equitable considerations. To the extent that either party reimburses the other as required by Section 8.1 and it is later determined by a court of competent jurisdiction that such party was not entitled to indemnification, such party shall promptly return all such funds. ARTICLE IX Miscellaneous Section 9.1 Fees and Expenses. (a) The Company shall pay all reasonable fees and expenses related to the transactions contemplated by this Agreement; provided, that the Company shall pay, at the Closing, all reasonable attorneys fees and expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the Purchaser of up to $50,000 in connection with the preparation, negotiation, execution and delivery of this Agreement. In addition, the Company shall pay all reasonable fees and expenses incurred by the Purchaser in connection with any amendments, modifications or waivers of this Agreement or incurred in connection with the successful enforcement of this Agreement, including, without limitation, all reasonable attorneys' fees and expenses. (b) If on the ten (10) month anniversary of this Agreement, the Company has not requested Draw Downs and granted Call Options in an aggregate amount of $4,500,000, provided that such amount shall be reduced by the dollar value of any securities purchased by Purchaser in an Other Financing, and further provided that such amount shall also be reduced by $500,000 for each calendar month in which the VWAP is less than $7.00 for more than 10 Trading Days, the Company shall pay the Purchaser, at the option of the Purchaser, a fee in (i) cash equal to (x) 4,500,000 less the aggregate amount of all Draw Downs purchased by the Purchaser, Call Options accepted by the Purchaser and the value of securities purchased by Purchaser in any Other Financings divided by (y) 15 (the "Fee Amount"), or (ii) warrants to purchase shares of Common Stock equal to the Fee Amount at an exercise price per share of 110% of the VWAP of the Common Stock on the date of execution of this Agreement and exercisable at any time from the date of issuance until one year thereafter. The Purchaser shall have the right to demand registration once within twelve (12) months of the date of issuance of such warrants and piggyback registration rights if the Company files a separate registration statement. Section 9.2 Specific Enforcement, Consent to Jurisdiction. (a) The Company and the Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms 26 or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. (b) Each of the Company and the Purchaser (i) hereby irrevocably submits to the jurisdiction of the United States District Court and other courts of the United States sitting in the State of New York for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Purchaser consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law. Section 9.3 Entire Agreement; Amendment. This Agreement contains the entire understanding of the parties with respect to the matters covered hereby and, except as specifically set forth herein, neither the Company nor the Purchaser makes any representations, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought. Section 9.4 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery, by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: BioMarin Pharmaceutical Inc. 371 Bel Marin Keys Boulevard, Suite 210 Novato, California 94949 Tel. No.: (415) 884-6700 Fax No.: (415) 382-7889 Attention: Bill Anderson / Kim Tsuchimoto With copies to: Paul, Hastings, Janofsky & Walker LLP 555 South Flower Street, 23rd Floor Los Angeles, California 90071-2371 Tel. No.: (213) 683-6000 Fax No.: (213) 627-0705 Attention: Siobhan McBreen Burke 27 If to the Purchaser: Acqua Wellington North American Equities Fund, Ltd. c/o Fortis Fund Services (Bahamas) Ltd. Montague Sterling Centre East Bay Street, P. O. Box SS-6238 Nassau, Bahamas Tel. No: (242) 394-2700 Fax No.: (242) 394-9667 Attention: Anthony L.M. Inder Rieden With copies to: Jenkens & Gilchrist Parker Chapin LLP The Chrysler Building 405 Lexington Avenue New York, NY 10174 Tel. No: (212) 704-6000 Fax No: (212)704-6288 Attention: Christopher S. Auguste Any party hereto may from time to time change its address for notices by giving at least ten (10) days written notice of such changed address to the other party hereto. Section 9.5 Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 9.6 Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Section 9.7 Successors and Assigns. The Purchaser may not assign this Agreement to any person without the prior consent of the Company, provided, however, that the Purchaser may assign this Agreement to any of its affiliated funds, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The parties hereto may not amend this Agreement or any rights or obligations hereunder without the prior written consent of the Company and each Purchaser to be affected by the amendment. After Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement. Section 9.8 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without 28 giving effect to the choice of law provisions. Section 9.9 Survival. The representations and warranties of the Company and the Purchaser contained in Article III and the covenants contained in Article IV shall survive the execution and delivery hereof and the Closing until the termination of this Agreement, and the agreements and covenants set forth in Article VIII of this Agreement shall survive the execution and delivery hereof and the termination of this Agreement hereunder. Section 9.10 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event any signature is delivered by facsimile transmission, the party using such means of delivery shall cause four additional executed signature pages to be physically delivered to the other parties within five days of the execution and delivery hereof. Section 9.11 Publicity. The Company shall not issue any press release or otherwise make any public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement without the prior written consent of the Purchaser, which shall not be unreasonably withheld. Notwithstanding the foregoing, in the event the Company is required by law or regulation to issue a press release or otherwise make a public statement or announcement with respect to this Agreement or the transaction contemplated hereby prior to or after the Closing, the Company shall consult with the Purchaser on the form and substance of such press release or other disclosure. Section 9.12 Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement, and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. Section 9.13 Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, each of the Company and the Purchaser shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. [END OF PAGE] 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of the date first above written. BIOMARIN PHARMACEUTICAL INC. By: /s/ Fredric D. Price --------------------------------------- Name: Fredric D. Price Title: Chief Executive Officer and Chairman ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD. By: /s/ Isser Elishis --------------------------------------- Name: Isser Elishis Title: Managing Partner and Chief Investment Officer EXHIBIT A TO THE COMMON STOCK PURCHASE AGREEMENT OPINION OF COUNSEL [LETTERHEAD OF _______________________] [FORM OF COMPANY'S COUNSEL OPINION] 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power to own and operate its properties and assets, and to carry on its business as presently conducted. Each of the Company and each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in the State of California. 2. The Company has the requisite corporate power and authority to enter into and perform its obligations under the Purchase Agreement and to issue and sell the Shares. Except as contemplated in Sections 4.4(b) and 4.4(c) of the Purchase Agreement, the execution, delivery and performance of the Purchase Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action on the part of the Company and no further consent or authorization of the Company or its Board of Directors or stockholders is required. The Purchase Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The Common Stock is not subject to preemptive rights under the Company's Certificate of Incorporation as filed with the Delaware Secretary of State or the Company's By-Laws as each is in effect as of the date hereof (the "Charter" and "By-Laws" respectively). 3. The Shares have been duly authorized and, when delivered against payment in full as provided in the Purchase Agreement, will be validly issued, fully paid and nonassessable. 4. The execution, delivery and performance of and compliance with the terms of the Purchase Agreement and the consummation by the Company of the transactions contemplated thereby (i) do not violate any provision of the Company's Charter or By-Laws, (ii) do not cause the Company to violate, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party and which is listed on Exhibit A hereto, (iii) do not create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party and which is listed on Exhibit A hereto, and (iv) do not cause the Company to violate any New York state, California state or federal statute, rule or regulation or order, judgment or decree known to us (excluding federal and state securities laws, rules and regulations except as specifically provided in paragraph 7 below) that is specifically applicable to the Company or any of the Subsidiaries, except for such violations, defaults, terminations, amendments, acceleration, cancellations, liens, charges, encumbrances and violations as would not, individually or in the aggregate, have a Material Adverse Effect. 5. To our knowledge, there is no action, suit, claim, investigation or proceeding pending or threatened against the Company or any Subsidiary which questions the validity of the Purchase Agreement or the transactions contemplated hereby. To our knowledge, there is no action, suit, claim, investigation or proceeding pending or threatened against or by the Company or any Subsidiary which, if adversely determined, is reasonably likely to result in a Material Adverse Effect. 6. No consent, approval or authorization of or designation, declaration or filing with any federal governmental authority on the part of the Company is required in connection with the valid execution and delivery of the Purchase Agreement, or the offer, sale or issuance of the Shares (other than any filings which may be required to be made by the Company with the Commission, or the Nasdaq Stock Market subsequent to the Closing, and any registration statement which may be filed under the Securities Act pursuant to the Purchase Agreement). 7. The Registration Statement has been declared effective under the Securities Act, and, to our knowledge, no stop order suspending its effectiveness has been issued and, to our knowledge, no proceedings for that purpose have been instituted or are pending before or contemplated by the Commission. EXHIBIT B TO THE COMMON STOCK PURCHASE AGREEMENT SECRETARY'S CERTIFICATE ___________, 2001 The undersigned, ______________________, Secretary of BioMarin Pharmaceutical Inc., a Delaware corporation (the "Company"), delivers this certificate in connection with the issuance and sale of shares of common stock of the Company in an aggregate amount of $__________ to Acqua Wellington North American Equities Fund, Ltd. (the "Purchaser") pursuant to the Common Stock Purchase Agreement, dated January 26, 2001 (the "Agreement"), by and among the Company and the Purchaser, and hereby certifies on the date hereof, that (capitalized terms used herein without definition have the meanings assigned to them in the Agreement): 1. Attached hereto as Exhibit A is a true, complete and correct copy of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware. The Certificate of Incorporation of the Company has not been further amended or restated, and no document with respect to any amendment to the Certificate of Incorporation of the Company has been filed in the office of the Secretary of State of the State of Delaware since ______ __, 2001, the date shown on the face of the state certification relating to the Company's Certificate of Incorporation, which is in full force and effect on the date hereof, and no action has been taken by the Company in contemplation of any such amendment or the dissolution, merger or consolidation of the Company. 2. Attached hereto as Exhibit B is a true and complete copy of the By-laws of the Company, as amended and restated through, and as in full force and effect on, the date hereof, and no proposal for any amendment, repeal or other modification to the By-laws of the Company has taken or is currently pending before the Board of Directors or stockholders of the Company. 3. Attached hereto as Exhibit C is a true and correct copy of all written actions and resolutions of the Board of Directors (including any committees thereof) of the Company relating to the transactions contemplated by the Agreement; said actions and resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said actions and resolutions are the only resolutions adopted by the Board of Directors of the Company, or any committee thereof, pertaining to (A) the offering of the Common Stock to be sold by the Company pursuant to the Agreement, (B) the execution and delivery of the Agreement and (C) all other transactions in connection with the foregoing. 4. Each person who, as an officer of the Company, or as attorney-in-fact of an officer of the Company, signed (A) the Agreement, (B) the Registration Statement and (C) any other document delivered prior hereto or on the date hereof in connection with the transactions contemplated by the Agreement, was duly elected, qualified and acting as such officer or duly appointed and acting as such attorney-in-fact, and the signature of each such person appearing on any such document is his genuine signature. 5. The Agreement as executed and delivered on behalf of the Company has been approved by the Company. 6. The actions, resolutions and other records of the Company relating to all of the proceedings of the Stockholders of the Company, the Board of Directors of the Company and any committees thereof made available to the Purchasers and their counsel are the true, correct and complete copies thereof, with respect to all proceedings of said Stockholders, Board of Directors and committees thereof. Such records and other documents of the Company made available to the Purchasers and their counsel were true and complete in all respects. There have been no material changes, additions or alterations in said records and other documents that have not been disclosed to the Purchasers. IN WITNESS WHEREOF, I have signed my name as of the date first above written. By: ---------------------------------------- Name: Title: Secretary I, __________________, Chief Executive Officer of ___________________., do hereby certify that ______________________ is the duly elected, qualified and acting Secretary of the above mentioned company, and that the signature set forth above is her true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the date first above written. By: ---------------------------------------- Name: Title: Chief Executive Officer EXHIBIT C TO THE COMMON STOCK PURCHASE AGREEMENT COMPLIANCE CERTIFICATE In connection with the issuance of shares of common stock of BioMarin Pharmaceutical Inc. (the "Company") pursuant to the Draw Down Notice, dated ___________ delivered by the Company to Acqua Wellington North American Equities Fund, Ltd. (the "Purchaser") pursuant to Article VI of the Common Stock Purchase Agreement dated January 26, 2001, by and between the Company and Acqua Wellington North American Equities Fund, Ltd. (the "Agreement"), the undersigned hereby certifies as follows: 1. The undersigned is the duly elected Chief [Executive/Financial] Officer of the Company. 2. Except as set forth on Schedule A attached hereto, the representations and warranties of the Company set forth in Section 3.1 of the Agreement are true and correct in all material respects as though made on and as of the date hereof, except for representations and warranties that speak as of a particular date. 3. The Company has performed in all material respects all covenants and agreements to be performed by the Company on or prior to the Draw Down Exercise Date and the Settlement Date related to the Draw Down Notice and has complied in all material respects with all obligations and conditions contained in Section 5.3 of the Agreement. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Agreement. The undersigned has executed this Certificate this _____ day of _________, 20__. By:___________________________________________ Name:_________________________________________ Title:________________________________________ EXHIBIT D TO THE COMMON STOCK PURCHASE AGREEMENT FORM OF DRAW DOWN NOTICE Reference is made to the Common Stock Purchase Agreement dated as of January 26, 2001 (the "Purchase Agreement") between BioMarin Pharmaceutical Inc., a Delaware corporation (the "Company"), and Acqua Wellington North American Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. The Company has taken all necessary corporate action to authorize the issuance of the Shares pursuant to this Draw Down Notice. In accordance with and pursuant to Section 6.1 of the Purchase Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw Down request for the Draw Down Amount indicated below. Draw Down Amount: -------------------------------------------- Call Option Amount: ----------------------------------------- Draw Down Pricing Period start date: -------------------------- Draw Down Pricing Period end date: ---------------------------- Settlement Dates: --------------------------------------------- Threshold Price: ---------------------------------------------- Minimum Threshold Price: $7.00 -------------------------------------- Number of Shares of Common Stock Currently Unissued under the Registration Statement: -------------------------------------- Dated: ----------------------------- -------------------------------- By:______________________________ Name: Title: Address: Facsimile No.: Wire Instructions:_________________ Contact Name:______________________ Receipt Acknowledged: Acqua Wellington North American Equities Fund, Ltd. By: ------------------------------- Name: Title: EXHIBIT E TO THE COMMON STOCK PURCHASE AGREEMENT FORM OF CALL OPTION NOTICE To: ______________ Fax #: Reference is made to the Common Stock Purchase Agreement dated as of January 26, 2001 (the "Purchase Agreement") between BioMarin Pharmaceutical Inc., a Delaware corporation (the "Company"), and Acqua Wellington North American Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. In accordance with and pursuant to Section 6.2 of the Purchase Agreement, the Purchaser hereby issues this Call Option Notice to exercise a Call Option for the Call Option Amount indicated below. Call Option Amount Exercised: ------------------------------------------ Number of Shares to be purchased: -------------------------------------- VWAP on the date hereof: ----------------------------------------------- Draw Down Discount Percentage: ----------------------------------------- Settlement Date: ------------------------------------------------------- Threshold Price: ------------------------------------------------------- Minimum Threshold Price: $7.00 ---------------------------------------------- Dated: -------------------- Acqua Wellington North American Equities Fund, Ltd. By: --------------------------------- Name: Title: DISCLOSURE SCHEDULES RELATING TO THE COMMON STOCK PURCHASE AGREEMENT, DATED AS OF JANUARY 26, 2001 BETWEEN BIOMARIN PHARMACEUTICAL INC. AND ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD. ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH NUMBERS AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT (THE "AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE AGREEMENT. ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED IN THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN THESE DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE DISCLOSURES SHALL BE READ TOGETHER. Schedule 3.1(c) Capitalization As of the date hereof: - - The authorized capital stock of the Company consists of 75,000,000 shares of common stock, $0.001 par value per share, of which not more than 37,000,000 shares are issued and outstanding, and 1,000,000 shares of preferred stock, $0.001 par value per share, none of which is issued or outstanding. - - The Company has granted options to purchase not more than 6,700,000 shares of Common Stock to various employees, directors and consultants of the Company. - - The Company may be obligated to issue not more than 450,000 shares of Common Stock pursuant to the Company's Employee Stock Purchase Plan. - - BB Bio Ventures Ltd., Grant W. Denison, Genzyme Corporation and Glyko Biomedical Ltd. each have the right to require the Company to register certain shares of Common Stock held by such entities pursuant to that certain Amended and Restated Registration Rights Agreement filed as exhibit 4.1 to the Company's Registration Statement on Form S-1. Schedule 3.1(g) Subsidiaries The Company has the following Subsidiaries, as defined in the Agreement Name Of Entity Jurisdiction of Incorporation Percent Owned by Company Glyko, Inc. Delaware 100% BioMarin Genetics Delaware 100% Schedule 3.1(k) Indebtedness None. Schedule 3.1(c) List of Additional Employment/Consulting Contracts Name Term of Contract Type of Engagement Integrated Marketa nd Tech. March 26, 1999 to July 31, 1999, Consultant automatically renews for three month periods - cancel with two months notice Dr. Peter Brown April 5, 1999 to termination by Consultant 14-day written notice Steven L. Kent Consulting, July 18, 2000 to May 31, 2001 Consultant Inc. Wyatt CytoConsulting February 7, 2000 to termination Consultant by 60-day written notice Investor Awareness, Inc. January 3, 2001 to July 3, 2001 Consultant Fred Reno, Ph.D. September 20, 2000 to September 20, Consultant 2001 Clinical Research Consulting, November 17, 2000 to June 17, 2001 Consultant Inc. WinPharm Associates, LLC August 24, 2000 to August 23, 2002 Consultant Judy Breed, RN July 6, 2000 to April 6, 2001 Consultant ProTrials Research Inc. January 18, 2001 to December 31, 2001 Consultant Ann Lowe January 19, 2001 to December 31, 2001 Consultant Patrick Trown July 17, 2000 to March 30, 2001 Consultant Mary Levins January 11, 2001 to December 31, 2001 Consultant Daniel Kim January 18, 2001 to December 31, 2001 Consultant Bulrush Basket January 18, 2001 to July 18, 2001 Consultant Schedule 3.1(c) List of Additional Employment/Consulting Contracts Name Term of Contract Type of Engagement Thomas Bruderman January 3, 2001 to July 3, 2001 Consultant SmallCaps OnLine Group LLC January 17, 2001 to July 17, 2001 Consultant Statistics Collaborative, Inc. January 17, 2001 to December 31, 2001 Consultant San Diego Burn Research January 1, 2001 to December 31, 2002 Consultant Foundation Robert Baffi Terminable on 6 months notice Employee -----END PRIVACY-ENHANCED MESSAGE-----